Agency Cut – How much should they take from an IT Contractor

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Agency Cut - how much
Agency Cut - how much

Agency Cut of Contractor’s Money

How much should the agency cut be?

Every so often we get an email from someone asking us what should they expect an agency to take as their split from the client.

Many contractors, especially new contractors, often find that the agency is taking some outrageous amount.

I‘ve seen agencies take more than 50% before.

I think it would be a good idea to look at different cut percentages to see whether they are good or bad.

Agencies Taking More Than 30%

If an agency takes more than 30% then that is completely outrageous.

It cannot be justified.

That‘s the equivalent of the contractor working 1.5 days just for the agency.

The contractor wouldn‘t start earning his or her own money till the Tuesday afternoon.

If you find that is happening, kick up one hell of a stink.

Agencies Taking Under 20%

Agencies like to take 20%.

They see that as a nice figure.

However, they are usually willing to compromise.

If the agency is taking anywhere between 14% and 20% that‘s pretty normal – although you would prefer to be at the lower end.

Agencies Taking Less than 14%

If the agency is taking less than 14% you are doing pretty well.

If there is a PSL sometimes the agencies will only get something like 8%.

However, rates are usually low at a company which operates a PSL so it just means that both you and the agency aren‘t doing great.

If there is no PSL and you have got the agency down to 10% or less you are doing well.

Usually 8% is about the bottom an agency will take.

Even when I have found the contract myself and just needed an agency to process it all they have seldom taken less than 8%.

Low Agency Cut

I‘m told that some contractors have got it down to 5%.

However, I don‘t know if this is through a PSL where the company has managed to squeeze the agency or not.

If anyone is getting agencies to just take 5% when there is no PSL then they must be ace negotiators.

In all my career as a contractor I never got it that low and I wasn‘t bad at negotiating.

I don‘t know if readers here have experiences themselves and what they would see as a good or bad percentage for an agency to take.

You try to make the agency cut as little as possible. They will do the opposite.

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