19 July 2021

Recruitment agencies margin on contractors in Canberra?

| baldilocks
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I’ve been working as a contractor in the finance area (non govt). I’m qualified and experienced with good references and reports. Last 18 mths I’ve had virtually no down time at all.

READ ALSO The best recruitment agencies in Canberra

What is a reasonable margin that could be expected for the recruitment agency to charge on top of my hourly rate? I’ve been a bit surprised to find that they are charging a gross margin of 34% on top of my hourly rate, with protestations by them that they have been cutting their margin on my contracts. A margin of 34% seems on the high side, and leaves me with a sense of being screwed over by the agency.

What is a reasonable margin for a recruitment agency to charge on top of an hourly rate for contractors???

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Clown Killer11:00 am 09 Mar 11

As an almost universal rule a charge out rate will break down in thirds. One third for the contractor, one third to cover costs and admin. and one third as profit.

baldilocks – if you run through your own pty company, you take care of all insurances then at the end of the day 34% is on the high side. I am assuming you are PTE which means payroll tax would not be included in the 34%.
I have been Recruiting in Canberra for 12 years, so if you need any advice please feel free in giving me a buzz – 6198 3369

georgesgenitals8:10 am 09 Mar 11

taninaus said :

If you are being paid a good rate and you are continuing to be employed or are not having trouble getting new jobs then what does it matter? The agency fee is paid by the employer not you, they will balk if it is too much.

From the ’employers’ perspective, they pay a single rate. The don’t care whether it goes to the delivery staff or the pimp. Every dollar the pim p takes is one the resource doesn’t get. I’ve been an employer before.

If you are being paid a good rate and you are continuing to be employed or are not having trouble getting new jobs then what does it matter? The agency fee is paid by the employer not you, they will balk if it is too much.

So long as your hourly rate is reasonable for what you do, it may not feel fair or you may not judge the rate to be reasonable but ultimately that is their business.

Thanks for the feedback

I operate thru my own contracting company and cover all my own insurances – WC, PI & PL. The recruitment agency finds the job, with some of it now repeat business from the same clients. I get paid each week, with the agency being paid on their trading terms of 14 days. Typical contract is 6/8 weeks, with contracts over the last 18 months rolling into each other.

I have a mate who is involved in a recruitment agency whose views was that 34% was a very high rate for what my agency is doing for me – he thought that 12 – 18% would be the market rate band for my situation.

I tend to charge around 12% and less if the job is brought to me.

It’s not the highest margin I’ve heard about (41.6% is the highest I’ve heard about), but it’s certainly high.
As others have said, it depends on the amount of work the recruitment company is doing for you. The figures given by thebiz are pretty close.

Remeber however, recruitment companies aren’t nicknamed “pimps” for nothing.

I agree with george it really depends on the situation, for example did you bring the agency the position, did they find you the role etc.
However, if you are simply a ‘time & materials’ contractor then 34% is certainly on the high side. Often agencies operate on a percentage value rather than a dollar figure, therefore also depends on your rate.
The average margin in the ACT is around 12% -15% (ICT contracts), can be as high as 20% or as low as 5% (if your brought them the position and simply needed to be pay rolled)
But in saying that the finance sector, or non IT, margins are often a little higher, but should not be as high as 34%

It also depends if you are finding the work – or they are finding you the work. And whether they paying you before your contracted workplace pays them.

If you’re good at finding your own work – then there are contracting agencies around which do “no frills” type arrangements (eg a couple of dollars an hour to cover payroll tax, paperwork, you only get paid when they get paid).

If you are having no downtime for over a year, doing longer term gigs, then you should hit them up for lowering the maintenance fee (or go somewhere else).

georgesgenitals9:22 am 08 Mar 11

It depends on the situation. If they are simply putting you up for contracts, which you then deliver as an individual (ie not as part of a consulting team, say), then 34% is heaps.

If you are operating as a consultant working (permanent or contracting) to a larger consulting or services delivery organisation who then send you out to their clients, 34% is bugger all.

I have heard of much higher margins in IT sector…

It’s time to start your own company if you are going to be contracting on a long term basis, there are a lot of benefits.

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