Margin Increase – Agency wants to increase its cut

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Margin Increase for Agency

This tale of a requested margin increase was sent in to us by Joanne.

I am coming up for renewal shortly.

I called up my agent and asked him if there is to be a renewal and whether there would be a rise.

He got back to me the next day and said that there would be a renewal.

However, it was what he said next that knocked me sideways.

He said that the agency‘s cut was below their standard. His boss has told him that it needed to return to the standard cut of 20%. It is only around 12% at the moment.

No Increase In Contract Rate

I spoke to my client and they said that there would be no increase from them because of current market conditions.

They also said that it was a matter between me and the agency as to the split of what they pay.

This is a truly astonishing situation.

The agency said, therefore, they will send me out a contract with the new lower rate.

Have you any suggestions Dr McLaughlin?

Dr McLaughlin‘s IT Surgery

Yes I have.

Just say no!

This is sheer cheek and greed by the agency.

They are chancing their arm.

If they paid you a certain rate for your first contract then they can pay that rate for your second contract.

They are at it.

Be Firm in Dealing with Agency

So, tell them in no uncertain terms that you will want exactly the same amount for your second contract as the first. That was what was negotiated.

Tell them that you have spoken to the client who wants to keep you on.

Tell them also that, if they don‘t agree the old rate, that you‘ll talk to the client about going direct.

This may or may not be smart in terms of actually doing it but you can‘t lose anything by threatening it.

Agency Chancing Their Arm

The chances are that they are just chancing their arm. Once they realise that you will not back down they will not want to risk losing a fee. They will also not want to jeopardise their relationship with the client.

It could be that the agent‘s boss doesn‘t even know about this, It is maybe the agent who is trying to increase his margins and commission.

You are unlikely to lose this battle so hold firm.

So, don’t just sign this reduced rate contract with the margin increase for the agency.

Good luck!

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