IT recruiter’s response
I asked a recruiter to check out my blogs about consulting, and his response is below. He had some good points on billling rates and what recruiters do behind the scenes:
I really enjoyed reading over your blog you have a lot of really good information in there. I especially enjoyed your articles about billing rates, It’s always interesting to see the topic from a consultants perspective. From what I read everything seems to be fairly spot on. The biggest trouble I run into is most consultants don’t realize that recruiting is a gamble of time and money. A good recruiter will fill 1 or 2 positions for every 10 orders they work on which means that 80% percent of the time we are not getting paid for our efforts so we have to make it up somewhere. An example of this is say my company gets a hot new order and puts 3 recruiters on it being conservative say each recruiter makes about $150 a day in a base salary that is $450 a day or $2250 a week a normal job order can stay open for up to 3 weeks or longer doing the math that is almost seven thousand dollars that my company is betting that we can fill the position with no guarantee that we won’t be beat by another firm or that the candidate won’t decide to go with another position. That number is just off of the base salary of 3 recruiters, it doesn’t calculate our other expenses that enables a recruiter to be effective at his or her job, such as paying for access to the job boards and our accounting and HR departments when all is said and done working on that one job order can cost up to 15k for a small firm with no guarantee of a return.
I also found the subject of if an agency should tell their consultants their billing rate or not to be interesting. I started off working for a firm that did primarily full-time placements where we had a fee of about 25-30% of the first year salary so the more money I negotiated for my candidate the more I would make in a commission. Working short-term placements tends to shake things up a bit, most consultants believe that because we are billing them out at $150 that they are worth $150 an hour which is only half-true. We do everything we can to pay market competitive salaries but there has to be some room to make it worth my time and my company’s investment. The other problem is a lot of the time a recruiter may not know what the billing rate is going to be a lot of the time a staffing company will have account managers on staff who do the majority to the salary negotiations, they will meet with the client negotiate the rate then tell the recruiter to go find a data analyst for whatever the predetermined rate was.
In my opinion you can go either way, but what I tell my consultants is that as long as they are happy with their current salary and they don’t feel taken advantage of then they shouldn’t worry about the billing rate. If they feel taken advantage of then they should address the issue and that they are free to seek employment elsewhere. I believe in being as transparent as possible so if asked about the billing rate by a consultant I will tell them, but it’s not something I would fixate about.
I’m for full disclosure. The reason is related to this paragraph:
“In my opinion you can go either way, but what I tell my consultants is that as long as they are happy with their current salary and they don’t feel taken advantage of then they shouldn’t worry about the billing rate.”
Ultimately an employee cannot determine whether they are being taken advantage of unless they know the full price being paid. I’ve read horror stories of $100/hour DBAs where one probably does not immediately feel taken advantage of until they discover their services were hired out at the cost of $250/hour (and ridiculously, even higher).
On discussing this in forums a lot of the responses were along the lines that it was extreme but, “If $100 was okay then why isn’t $100 okay now?” This is entirely reasonable and leads me to believe that personal feelings about the issue are irrelevant and misdirection from real issues.
Where I see the problem is that your value to the business is not determined by your productivity or skills alone but is factored by your full cost to the business (i.e. what is paid to the recruiter, not what ends up in your pocket).
Your value to the business = your productivity / the recruiter’s cost to the business. This goes on to influence their expectations of you, their satisfaction with the end result of your work, and ultimately the longevity of the contract.
Hidden recruiter costs affect the balance of formula to the detriment of employees and businesses, who are calculating the risk and reward of offering and accepting the contract respectively based on now inaccurate information.
That’s why I’m pro-transparency. If there’s a reasonable margin it will be accepted. If it isn’t reasonable everyone has a choice to walk away.