What is the real value for my work?

July 12, 2006 9:54 PM

Freelance filter: How much of a cut do temp agencies like Aquent get?

I'm a freelancer using an intermediary staffing agnecy (like Aquent) for creative work. The company they've placed me in is interested in hiring me, and now I need to negotiate a salary. I figured a good leveraging point for negotiation would be to compare the salary I want versus what they would pay me if they had to continue using an intermediary. Thus I would like to have a ballpark understanding of what the intermediary makes off of my services. Are they taking 25%, 40%, more?

posted by slogger to work & money (23 comments total)

The last temp agency I worked got 45%.
posted by solid-one-love at 9:56 PM on July 12, 2006

Whatever number you come up with, keep in mind that a chunk of that overhead goes to payroll taxes (not to be confused with the withholding that comes out of your paycheck). I think it's something in the neighborhood of 10% of your gross pay.
posted by Good Brain at 10:05 PM on July 12, 2006

BTW, the tech temp agency we used at the small software company I used to work at used got something like a 35% markup from us. I worked for the same agency a few years later, on contract to a very large software company. They were paying a much smaller markup, probably closer to 15%.

You should also try and come up with some reasonable estimate of benefits. An extra week of vacation is worth 2%, etc, etc.
posted by Good Brain at 10:11 PM on July 12, 2006

(With Aquent) if you are hired as an employee at a company that you have been working with as a contractor via the agency, the agency gets a percentage of your first years' salary as compensation for you shifting from being a contractor on their books, to an employee. (this is how it works in NZ anyway) Aquent also wants to arrange the transfer between roles. YMMV, depending on the agency you're with, but for the first year at least it's not as clear cut.
posted by slightlybewildered at 10:44 PM on July 12, 2006

I see you're in the U.S. If you have a contract with the agency, read it before going any further. Every agency contract I have ever signed specifically prohibits what you want to do, without the agency's permission. The prohibition is usually in force for a year after the end of the contract. To give that permission, the agency will demand money from either you or the client. The agency may not give permission in any event.
posted by Kirth Gerson at 4:57 AM on July 13, 2006

"may not"
as in "might not"
posted by Kirth Gerson at 4:58 AM on July 13, 2006

Oh, and the amount that agencies get above what you get varies wildly - from 15% to 100%, in my experience. If you work for the agency (they pay you on a W-2 basis), it's negotiable, though they'll never tell you it is, and may insist it isn't
posted by Kirth Gerson at 5:02 AM on July 13, 2006

The sky's the limit. They will pay you as little as you'll take and charge as much as they can get, and they don't want you to know what the latter is.
posted by JamesMessick at 6:07 AM on July 13, 2006

I see that I stated the case backwards. The agency charges the client a fixed rate (often, there's a standard rate). From that amount, they pay you some smaller amount. As James says, they'll make the amount as small as they can get away with, and they will never, ever, tell you how much they're billing the client.

If you do manage to get a freelance position, set your rate a little lower than the agency's bill rate for that kind of work. Sometimes a hiring manager who uses that agency will tell you what the agency bills. This information is confidential; don't let the agency know where you learned it, or your source may be discomforted. (By "confidential," I mean the agency tries to keep it secret; they may have a non-disclosure clause in their client contracts. It is not illegal for you to have the information, but a client's disclosure of the rate might make them liable.)
posted by Kirth Gerson at 6:44 AM on July 13, 2006

You can search Lifehacker for some reasonably informative posts on valuing yourself.
posted by Mr. Gunn at 6:49 AM on July 13, 2006

Don't just read the contract, take it to a lawyer. In some states, such clauses are easily dismissed in court (if you're sued, which isn't likely unless you're worth millions to the staffing firm).
posted by Merdryn at 6:58 AM on July 13, 2006

You could just call your temp agency posing as a prospective customer and say "I need someone who can do [slogger's job] for a period of [some time]. How much will that cost me? I've never done this before."
posted by adamrice at 7:19 AM on July 13, 2006

Last time I temped (IT desktop support, about 11 years ago) I was being billed at $47/hr, of which I received $15. No medical, no paid vacation, just $15/hr.

I figure the agency's markup on me, after payroll taxes/etc, was somewhere in the neighborhood of 100-120%.
posted by deadmessenger at 8:23 AM on July 13, 2006

Too friggin much is my answer. We pay between 30% and 40% extra, negotiated per temp worker. How much extra seems to be dictated by their supply.
posted by bonehead at 8:24 AM on July 13, 2006

WHy don't companies that need temps just hire them for $20/hour instead of hiring $10/hour employees and paying an agency $40/hour? Higher quality workers for less money. Seems like a slam-dunk to me.
posted by Optimus Chyme at 8:55 AM on July 13, 2006

They have their reasons. One is so they don't have to rely so much on their own HR people (or themselves) to weed out unqualified workers. The agencies usually have a pool of workers they have screened, at least superficially, and they are loathe to send a clinker to their clients. Using an agency contractor gives some assurance that the worker can do the work. If he can't, the agency will scramble to find one who can.
posted by Kirth Gerson at 9:13 AM on July 13, 2006

In many cases, it's an accounting dodge. Sometimes a department will have only X budget for payroll, but will have money they weren't using in GS&A or something like that.

On a grander scale, some companies have their own "hostage" temp agencies that exist solely to dispatch temp workers to the parent company. Again, this is an accounting trick, and I can't explain all the ins and outs and why it actually makes sense. It also makes it possible for the company to promise its own employees a certain plush level of benefits and still hire downtrodden wage-slaves with none of those benefits.

It's also worth pointing out that a full-time employee's non-wage costs can be equal to the wage costs (insurance, FICA contribution, blah blah blah), so the temp agency might be a better deal than it looks like at first glance.
posted by adamrice at 9:42 AM on July 13, 2006

@Kirth: He's working on "how much should I ask for"; I see no indication in his posting that he's trying to slide under the temp agency's radar on taking the job in the first place.

For more on this, check the two MetaTalk thread from the other day whose titles start "Hi, I'm..."

They're both enlightening, and incredibly funny.
posted by baylink at 10:14 AM on July 13, 2006

baylink, his contract with the agency probably has a clause concerning his taking work with the client, and they will want compensation. Nothing I wrote implied that slogger is necessarily attempting to evade the contract, but nothing he wrote indicates that he has cleared it with the agency, either. My warning was just that; if slogger was unaware that the agency will have something to say about his new job, his future could include some unpleasantness as a result.
posted by Kirth Gerson at 10:38 AM on July 13, 2006

I think it's highly likely that slogger's contract with the staffing agency makes it "against the rules" for him to negotiate his salary directly. Most likely, Aquent has to do it for him, and he has to talk to Aquent about what salary to request.
posted by Sprout the Vulgarian at 11:17 AM on July 13, 2006

@kirth: you're right; I over-read your reply; sorry.

@Sprout: really? Wow. That would suck. :-)
posted by baylink at 11:23 AM on July 13, 2006

Thanks for all the great answers. I've been trying to do everything by the books--I've read the contract, been keeping all parties informed, etc. I'm not looking to evade the contract, I just want to cut the agency out of the picture while playing by the rules all along the way.

The company in question will have to pay the agency a percentage of projected earnings. The company is trying to offload the agency's fee onto me through a pro-rated rate (work for long at $X, then they'll bump up my rate). For what it's worth, I'm looking to continue being an independent contractor. I just want to negotiate a deal that 1) pays me a fair rate for my services; 2) takes into account my costs of business working as an independent contractor; 3) presents a fair offer to the company; and 4) makes everybody happy and keeps me employed.

Everything everyone has said here falls in line with my situation and obligations. I was just wondering what the agency's markup is so I can say "I guess you're paying $X/hr for me right now. By contracting with me directly at $X - 5, I get more money and you pay less, so we both win."
posted by slogger at 7:21 PM on July 13, 2006

As a possibly irrelevant data point, when a staffing agency places a fulltime employee, they usually take 25% of the employee's yearly salary as a fee.
posted by Kirth Gerson at 8:06 AM on July 14, 2006