There are IT contracting companies that are reputable and only take a small percentage of the total they are billing the client. Then there are those companies that take advantage of both the contractor and the client, charging exorbitant rates and then taking a lion's share of the revenue for themselves, without doing any real work.
Recently, I came across a perfect example of what's wrong with the contracting game. A developer saw a job advertised online and sent in her resume. She received a call and was offered the position. She turned up at the client site and started to work at the agreed rate. It was only when her contract was up for renewal that she found out that the contracting company was charging a high hourly rate and taking a 38% cut off of the top.
This wouldn't have been so bad, except she conferred with other contractors performing the same job and found that the companies they were working for only took 10-15% off of the rate they charged the client.
Why is there such a wide discrepancy in rates? To start with, regulation of contracting companies is weak at best. There are no regulated guidelines on fees for the industry to follow and no transparency about what fees are being charged and who gets what share of the money billed to clients. And they often don't disclose this information, even when asked.
What is more frightening is the contracts that are required to be signed by both the contractor and the client, including clauses that violate the basic tenets of Australian employment law and put "scare tactics" into play in order to ensure that the contractor or client doesn't wise up and cut them out of the picture. Often contractors can not afford a lengthy legal battle and clients don't have the time or inclination to challenge these contracts and their terms, so the contractor is the one who loses out.
At this point, it is time for the government to step in and ensure transparency throughout the employment process and fair working conditions. You wouldn't go to a bank where they won't disclose the fees they are charging you, so why should you contract for a company that won't disclose their own fees?
As for the legal contracts, government regulation is also required to ensure that the contracts are fair and adhere to Australian employment law. Unfortunately, with contractors unable to foot the bill for lengthy legal battles, this will remain the status quo until someone steps in to do something to clean up the industry. It's obvious from talking to a number of contractors that they won't do it on their own.