Do contract role recruiters generally work on an open percentage basis?

Question

I'm looking at IT contracting roles at present, based on a day rate, for a set duration, usually between 3 to 12 months. At least here in the UK, these roles are only available through recruitment agencies, and it seems sensible for me to understand the pricing model they use.

My understanding is that a recruiter will take a percentage of the day rate, calculated on the same frequency as the contractor, which is usually weekly. The client pays the recruiter, and the recruiter pays the contractor.

I have been told that since I have not contracted before, it is sensible to reduce my target day rate for reasons of 'competitiveness' (there are allegedly several agencies handling the same role). However, I am minded to think that the recruiter will not pass the savings onto the client unless I can check they have done so. I have asked one recruiter contact how this works, and he was rather non-specific and said that it's not his business area. I asked if the client was aware of the contractor day rate - I would rather they were - and he "didn't know" this either.

Do experienced contractors have an approach to check that they are not being exploited by a recruitment company, or is the best (and least satisfying) approach to decide my value and not worry further about it? Is it generally considered acceptable to discuss these figures with the client, given they would not be happy with recruiters inflating their cut either?

Answer 1

To be honest, I started out much lower than my going rate... Started at $14/hr for contracting work, even though I charged my own clients $20 to start. The recruiter wants the best people for the least amount of money as quickly as possible for their client.

I know that because I lowered my rate for this one company, I also got more work out of them. I ended my term with the company as a site lead for IMAC projects, and was at just over $30/hr, which is still higher than I was charging normal clients at that time.

After a few years of this, I am now able to charge $60/hour for most work, and $120/hr for my premium services (night work). I don't work with a recruiter anymore, but they helped me get a foot in the door to other job opportunities (mainly, experience), and get used to different invoicing practices.

Remember, everything you do is experience, but only if you learn from it.

Having said all that, every contract the recruiter has had me sign includes clauses about not talking directly to the client about how much we are making, and not to solicit the clients we do work for with that recruiter for at least a year. So, given that, do not discuss with the client what you are getting paid.

Answer 2

Having now dipped my toe into the waters of contracting, I thought it would be beneficial to provide an answer to my younger self! as well as for future readers.

From what I can tell, IT contracting in the UK tends to operate very much through recruiters, and I've heard anecdotal stories of contract seekers finding a position directly via LinkedIn and then being assigned a recruiter! I hear this is often to simplify the processes of payment, as well perhaps as to insulate the client from being an employer, possibly for reasons of tax liability.

I have experience of a couple of recruiters. One operates on a very standard advertise-and-place model, and charges an open-book percentage of 15% to the client. Where a rate increase is secured, they stick to their original cut i.e. 15% of the old rate.

Another recruiter I have dealt with use a consultative model: they scout for talent in a particular skill and then keep in touch with the top 100 contractors for that skill in specific geographic areas. By determining when their preferred contractors are due to finish a contract, they hope to match them with roles becoming available. This firm charges 30% on top to the client. I sense it is rather slower, which explains the increased price, but it is much less sales-oriented, and as a contractor I prefer it (even if clients won't!).

I found the existence of open-book recruiters a pleasant surprise: in a telephone interview I was asked about my day rate, and I was initially reticent because of the reasons Canadian Luke gives in his answer. However I was assured it was above board: open-book makes life easier for everyone.

As a related aside, I imagined that in contractor roles, contractors would be forever discussing their rate with each other, in order to equip themselves with the best information to negotiate with. However in my current experience - at least in the UK where we're somewhat bashful when it comes to money - this does not seem to happen at all. I wonder if we're balancing out the desire to negotiate with not wanting to set up a competitive hierarchy that could damage professional relationships.