Agency Ripoff | Agency tried to add on 63% & ended up with 37%

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Agency Ripoff
Agency Ripoff

Agency Ripoff

We received this from Sam about an agency ripoff and what happened to her.

Sam and the Agency Ripoff

Having read your article regarding Top 10 Agency Tricks, I just wanted to know where I stand regarding myself and the client knowing how much the agency is charging them and paying me.

I have been contracting since 2004, developing PHP Web Apps and Managing teams and projects and i have been developing web applications since 2000.

In June 2016 an agent called me. I was first with my rate, £290pd and I was pretty firm at this, knowing how agents work, having contracted with some of the biggest.

Two IT Contracts

The outcome was he had two contracts for me, both paying £160pd, which i said were too low and rejected both his offers.

He called back later that same day and suggested £190pd which, at the time were the only offers I had in the Midlands, (I live in Birmingham).

So before attending the interview we agreed that after 3 months if I get the contract he would increase my rate.

Contract Rate Increase

The client offered me the role and after 3 months I negotiated a £10pd increase and then after another 3 months, another £10pd increase.

I am still with the client, but the agent is no longer with the agency.

The client has requested I stay with them until March 2011, with an extension to October 2011 with a current deadline to March 2012.

So this is good news for me giving me some security for the next 12 months at least.

Asked the Client about Agency Ripoff

I have since discovered by the client actually disclosing the information wilfully, that they are paying the agency £260pd. This is an agency ripoff.

I cannot believe the agent would risk such a huge commission, as their initial offer was £160pd.

I am aware that a 10% commission is fairly acceptable in the industry and I don’t even mind that myself, which would mean I should have been earning around £234pd.

No Rate Increase for IT Contractor

I have attempted to negotiate a rate increase with the new agent, but I am struggling.

I do not want to let him know what I know and the agent keeps suggesting the client will not increase their rate (and rightfully so) and therefore will not offer me rate increase, even though they have been taking £70 initially (27%) and now £50 (20%) for finding me the contract in June and not having done anything for me since!

Dr McLaughlin‘s IT Surgery

While some agencies add on 10% or less the majority add one around 15% to 20% – that’s add-on not as a percentage of the whole.

If you are on £210 now out of £260 that’s getting to the not too bad stage but there’s still some leeway.

Your agency is effectively adding on around 24% which is on the high side of normal.

Good Contract Deal

It’s reckoned that if your agency is taking 10% or less you’re on a very good deal.

If they are adding 30% or more that’s reckoned to be outrageous and sharp practice.

Are you sure that they are still getting £260 a day? Did you find that out before your two rises?

If it was before then the agency could have passed on your increases to the client.

Agency Margin

Don’t worry about letting the agency know that you know about the amount they are getting.

The client didn’t wilfully reveal it to you. They can tell who they want.

All you have to tell the agency is that you know what they are getting for you and you consider it too high.

You don’t have to even quote the amount or say who told you.

It is much better to let the agency know that you know.

In fact it is crucial you let them know.

Buy Out Your Contract

Have you considered buying yourself out of the contract?

Unless you have opted out, which you almost certainly haven’t, of the Agency Regulations Act, rather than take a renewal you can simply offer the agency some compensation which would come to around their commission for the next nine weeks I think it is (which would be well worth it for you).

The very threat would concentrate the agent’s mind.

You could mention that to him.

Agency Commission

I would go for £230 a day but be prepared to be beat down to £220 of £225.

Or you could offer them 9 weeks’ commission and move yourself up to £260 a day.

It would only cost you £2,250 and you‘d soon earn that back.

Good Luck. Let me know how it goes.

If anyone knows of any agency ripoff of freelancers just post it in the comments section below.

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