President’s Message

Disclosing Mark Ups

Introduction

Recruitment agencies should disclose their mark-up on a consultant’s hourly rate.  In this article, I will explain why a consultant has the right to know this information.

The Problem

Why do some recruitment firms resist disclosing their mark-up on a contractor’s hourly rate?  Why are they afraid to be open and honest?  Have you ever tried asking your recruiter what the mark-up is on your personal rate and, consequently, what the client is being billed for your services?  Did you get an answer?

The truth is that most firms don’t want you to know what their mark-up is.  This is because in many cases, mark-ups are high – sometimes obnoxiously high.

Annex receives regular complaints from consultants working through other recruitment agencies who find out what mark-up is being added to their hourly rate.  We often hear examples of 100% mark-ups and sometimes higher.

During the economic downturn, mark-ups were skinny for most recruitment agencies.  This was simply a matter of supply and demand.  There were few opportunities so mark-ups decreased to be more competitive.

Now that the economy is recovering, we are seeing both consultant rates and mark-ups increase.  The difference between what various firms charge as a mark-up can be substantial.

Examples

So how does the mark-up charged by a recruitment firm impact you, the consultant?  Let’s say that you are a Business Analyst and you bill $70 per hour.  You may not be interested in what a recruitment firm charges as a mark-up.  As long as you are being paid your preferred hourly rate and staying busy, who cares? 

The challenge, of course, is that the client must pay the combined rate of the consultant plus the mark-up.  Your $70 per hour personal rate may be charged out at $90-100 per hour if you work through a national recruitment firm.  But a regional recruitment agency with lower overhead may offer similar consultants to the client for $80-85 per hour.  So you may lose out on a contract because the recruiter you are working with is charging too much, making your application less competitive compared to candidates from other firms.

On the other side of the coin, let’s instead assume that a client’s budget for a Senior BA is $80 per hour and they cannot pay above that rate.  With a ceiling of $80, a national recruitment firm may only offer the consultant $60 per hour (or less).  By working instead with a regional recruitment agency, the consultant could make as high as $70 per hour.  The $10 per hour difference translates to $10,000 extra in the consultant’s pocket for a 6-month contract, and $20,000 extra for a 1-year contract.

The Solution

Annex fully discloses our mark-ups to both clients and consultants.  This policy is actually a differentiator for Annex.  Money is often the most sensitive issue in a contract negotiation, so why not be open and honest about it right from the start?  There is nothing to hide if mark-ups are fair.

Annex’s rates have been the same since the company was founded in 1998.  Our standard mark-ups have remained flat, regardless of whether the economy is soft or strong.

One of Annex’s core values is providing value for services offered.  This means that we charge a fair price – fair to the client, fair to the consultant, and fair to Annex.  Our competitive mark-ups help us to (a) maximize the rate we pay the consultant, meaning you may earn more by working through Annex, and (b) minimize the rate we charge the client, meaning you may be more competitive compared to candidates from other firms, resulting in you getting more work.

Don’t misunderstand my message – I do not want to differentiate Annex based on price.  We prefer to differentiate ourselves on quality.  After all, we have an industry-leading 97% customer satisfaction rating across 1,300 completed projects since 1998.  However, price is always one of the main constraints of any project.  So it is important to understand how you, the consultant, are being positioned and what recruitment firm gives you the best chance to win a project.

Another Annex core value is integrity.  We will be open with you.  We have worked hard for many years to build a reputation of being fair and honest.  This has helped us to develop our leadership position in the IT consulting and recruitment industry in British Columbia.  Nice guys don’t necessarily finish last.

If you are unsure whether you are being treated fairly by another firm or if you are best positioned to be competitive on a project, call us.  There are good reasons why consultants call Annex after being contacted by another firm to check if we are working on the same opportunity.  There are also good reasons why Annex generates more IT opportunities than any other firm in the province and has done so for many years.

Conclusion

If you are an independent consultant working through a recruitment firm, what mark-up is being added on to your hourly rate?  Ask your recruitment firm and see if you get an open and honest answer. 

We are collecting stories.  If you are experiencing an unfair mark-up or are not getting an answer from your recruitment firm, email info@annexgroup.com and let us know.