Educate yourself about employment agency fees

It's your right as a contractor to know what kind of fee your client pays your agency. Having access to this closely guarded information can help you find out if you are being paid what you are due.

As a consultant, should you have the right to know how much your employment agency is being paid for your services? The employment agency would say that this is privileged information, not to be discussed or shared with the employee. And they’d probably present a very cogent argument in support of that position.

Most clients consider it unethical to discuss the subject with you. Even among contractors at the workplace, the subject is taboo. If you happen to have a good relationship with the manager at the client company, however, he or she may be willing to divulge the rate they pay to the agency. There are other ways in which you may come by this information—sometimes even accidentally. Regardless of whatever means by which you acquire it, once armed with this information, you can have a better sense of understanding as to whether or not you are being properly compensated for your efforts.

Know your rights to information
Until recently, employment agencies operated on a fee basis. They found the position for you, and you paid them a one-time, flat fee for this service. After a probationary period, you became a full-time employee of the client, not the agency. However, with the recent explosive growth in telecommunications and IT, and the overwhelming need for outsourcing by companies, it is often more advantageous for the employer to pay an agency for your services than to hire you full-time. Today, you are hired as an employee of the agency and “contracted” to the client. The contracting agency now receives a continuous stream of income for you and others like you—hence the proliferation of high-tech recruiting agencies today.

Keep in mind that you are the cash cow being bartered here. You are the moneymaker for both the client and the contractor. Knowing this, then, what exactly are your rights? Do you have the right to know what your “employer” is receiving for your services? Is it any of your business? Of course it is.

The employment agencies, however, don’t want you to know how much of a percentage they receive from the client. What they like to do is to separate their income from yours, even though you’re both paid from a single rate denoted by the client for a single commodity—you. You actually perform the service that enables both sides to receive that income.

What exactly is fair compensation to the contracting agency for your services? The general rule of thumb in the industry is no more than 50 percent of your wage. Some, for obvious reasons, will argue this figure. Any more than that is outrageous. After all, let’s not forget who’s actually generating the income.

Negotiating pay increases
When a recruiter for an open position initially contacts you, the discussion inevitably turns to money. They want to know what your wage requirements are. My immediate response to this is to ask what the position pays. Some recruiters will tell you immediately. Keep in mind that the figure quoted is their offer to you, not what the client is paying them. I’ve had others steadfastly refuse to disclose what a position pays. This is a game they play to see if you will commit to a lower wage than what they were initially willing to pay. As an experiment, I once asked a recruiter who had called with a “fabulous” opportunity for me what their client was paying to fill the position and what their percentage was. It was a very short conversation.

If you do accept a job through an agency and later decide that you are not being compensated properly, be prepared for an uphill climb. The agency will argue that if you accepted the position at an agreed-upon wage, then you have the responsibility to honor that agreement. And there is a certain amount of truth to that. But any consultant who tries to accept a position and initially stipulates an open-ended wage clause will never get an offer.

Additionally, there are many factors that will come into play only after your first day on the job. If your new position is out of state, then you may find the cost of living to be more than you expected. Your expenses may be greater than anticipated. If you’re not coming out ahead after all is said and done, then why continue? I have successfully renegotiated my wage in the past for this very reason—albeit the agency was not very happy and only reluctantly agreed.

If you choose to confront the agency about your compensation, be diplomatic but firm. Ask to speak to the manager, who may be more receptive to your needs. Determine beforehand what you are expecting. This amount should be within a few dollars of your current wage. If you’re aiming for anything near a 25 percent increase, you might as well start looking for another job. You really have two choices at this point. You can inform your agent that you’re aware of their percentage and you feel it’s unrealistic, or you can use an alternate approach and inform them that you just can’t make it work economically under your current wage. Expect an argument. Just remember that the recruiting agency is not so much concerned about ethics on an individual basis as it is in economics on a volume basis. After all, they are in this business to make money.

Timothy Huckabee is a telecommunications/IT consultant, a Certified Cisco Professional, and a Cisco Certified Network Associate. He currently works for ICG Communications.

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