At the recommendation of one of the guys over at Recruiting.com I’ve been reading Gurus, Hired Guns, and Warm Bodies by Stephen R. Barley and Gideon Kunda. I’ve been finding it pretty interesting so far, though I haven’t gotten that deeply into it yet.
Something I noticed, however, as they were talking about their “itinerant experts” who work with staffing companies, was that there were several sort of offhanded digs directed at the markups charged by staffing companies, as though we somehow “hijack” people’s earnings.
To Barley & Kunda’s credit, they do address this question more fully later in the book and do begin to explain exactly what service the agency provides that justifies the markup. Now, realizing that I am biased, it seems to me that they don’t fully understand what it is that the markup pays for, and the comments from some of the workers interviewed for the book indicate that a lot of candidates don’t really understand it, either. That’s regrettable, because it causes a lot of distrust between candidates and recruiters, which isn’t in anyone’s best interests. So let me explain a little bit about markups and staffing generally in hopes of clarifying it.
A word about how pay/bill rates are figured. I generally determine what the pay rate is based approximately on what someone would get to do the same job as a regular full-time employee. Ideally, I’ll base it on what the client would pay per year for that job, but if the client doesn’t know, I’ll use whatever the approximate market salary would be. If it’s a $50,000 per year job, I divide $50,000 by the number of hours worked in a year, and that’s the hourly rate I offer the talent. From there, I have a standard markup that’s based on all the costs I have to cover, and I charge it to everyone. Only rarely do I deviate from it, and then only in special circumstances. It seems to me that if a talent working on a W-2 for me is making approximately the same amount of money that he or she would be making in a full-time position, I’m not “hijacking” anyone’s potential earnings with my markup.
I realize that there are plenty of agencies out there which place less of an emphasis on paying talent a fair rate. That’s generally because they compete with other agencies on price, and my particular company tries not to play that game. If my client gets rate-shock, I’m pretty confident about the value of both the talent as well as my own work, so while I can usually provide a few dollars of wiggle room, I don’t participate in “how low can you go” contests. After all, if I’m paying my talent fairly, there’s less chance of them getting offered significantly more money somewhere else since they’re already being paid well, and talent who feel like I’m taking good care of them aren’t just going to jump the first time someone offers them another $2 an hour. So if you think you’re working with an agency that doesn’t care about paying you fairly, I encourage you to shop around for another agency.
Now let me address the question of how I earn the markup I charge.
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