contract rates and disclosure (long)

[John Gough <John_Gough -at- CCMAIL -dot- BMC -dot- COM>]

There have been a couple of posts about rates and contracting agencies
lately, with the implied question, "How do I know what my agency charges?"

The answer: ASK them before letting them submit you. VERIFY what they tell
you with the client. Then you can decide whether they are taking a fair
cut. (Don't forget to ask with a tone of polite but assured authority.) If
they ask you why you want to know, tell them that it's just good business
and professionalism to understand all of the details of your business
relationship. It is.

If you don't like their cut, negotiate.  If they won't budge and you need
the work, take it, but when you leave and they give you the standard "how
did we do as employers" form, state that you were unhappy with how much
their cut was. Ask at least once a month to renegotiate the cut, especially
at contract extension time. Stay active in the market and take another
contract from someone who does play fair.

A fair cut, by the way, is probably 20%. (I know one low-volume
high-quality agency that charges 18%) They probably spend about 10%
directly on you (employer portion of Social Security taxes + paperwork
processing). The remaining 10% goes to overhead and profit. It should be a
reasonable profit, if they run an efficient operation. If someone wants to
run a high-profile agency from an expensive office park with expensive
executives, that's their business, but they had best pay for it in
efficiency and volume--I don't care to fund them out of my hourly rate.

BTW, I have done all of the above (politely and professionally) with an
agency that charged 28%. I haven't encountered the situation where they
absolutely refuse to tell me.
(I'm currently permanently employed, so haven't been active on the market
lately.) If I did in the future, I might refuse to let them submit me.
There are usually multiple agencies chasing the same contract, and I'll be
registered with all of them.

I support a free, efficient, competitive market. That requires that ALL
parties know exactly who gets what. Witholding information at least slows
down the efficiency of the market, and in some cases can restrain it
outright (as in the case of bid-rigging in the construction industry). The
20% number I quoted above isn't an absolute, nor is it to be applied to all
businesses--it just represents what I think is a reasonable profit on an
hourly rate in contract technical writing.  I think temp shops for
low-paying jobs (like word-processing, $4-7/hr) get more like 33-45%.

There have been substantial abuses of fairness in this business. I have
several friends who once took work around $25/hr from agencies that were
getting $75 from the client (neither the client nor the writer found out
until later). It is appropriate to quote knowledge that you have of unfair
practices to an agency that doesn't want to tell you what their cut is. If
they're being fair, why are they reluctant to prove it?

If agencies are unwilling to deal fairly, we should support 'Truth in
Employment Conditions' legislation that is similar to truth-in-lending and
seller-disclosure legislation.

These are my opinions. Sorry for the length. Feedback is welcome.

John Gough
john_gough -at- bmc -dot- com