A contractor recently queried how much his client was paying the recruitment company for his services. He wanted to know whether his services at £20 per hour were being charged at £25 per hour, giving the agency a 20% return. There is nothing in law to prevent a contractor, asking the question of the end client. Although agencies always have a “can’t deal direct with the client” clause in their contract to prevent the client and contractor cutting out the agency and working directly together, this clause would usually not be strong enough to prevent the request of and disclosure of rates.
Contract rates vary can from a very low margin, say 4%, to a extortionate margin, say 50%, but they are generally in the range of 10% to 20%. An agencies margin can differ however, depending on the contract terms, the duration of the contract and so on. Contractors might feel that sometimes the margins are too high and hence profit to the agency may seem large when looked at on an individual basis. But the agency will have fixed overheads that need to be paid, including staff salaries, business rent or rates, and insurance.
However, although it may seem like hard work, if you were to find your next contract yourself using tips we have suggested in previous articles, you could reap the benefits of knowing you would be paid the full contract rate. Recruitment agencies take a lot of the hassle out of finding your next contract, but if you are really determined, you may succeed in finding your next contract yourself.
ICS can offer accountancy and administration services to UK contractors. For more information on how they could help you, please visit their website or alternatively telephone, 0800 195 3750.
