With more and more companies looking at ways to improve and save on their contingent labour I often wonder how this has affected agency’s attitudes towards margin. I have seen many agencies forced to reduce their margins when working with higher volume clients. I have also seen agencies refuse to work with clients because they are being forced into using a smaller margin. When does it stop making sense for you to be with a client? How many refuse to walk away and how many people keep their margins higher because they believe they draw the best talent? When giving your response I would also be interested in knowing which country you are in.

 

Thank you

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We are in the Northeast region of the U.S. and have cut our margins to stay in the game. Very frustrating, but we have a lot of competition. When dealing with the MSPs, and Vendor Management companies, I just do not see a way around it, unfortunately.
I am wondering how many recruiters work the large corporate accounts.
Hi Rebecca,

Thank you for taking the time to reply to my post. I have spoken to many recruiters and they have the same problem with working with the larger accounts, however looking at larger accounts they are usually gaurnteed to pay and many candidates dont take too much convincing to move over. With less payout comes less effort and risk. Now I have seen companies reduce their margins down to four to five dollars an hour for a contractor. Is this something you have seen?
A staffing company who would look at their margin in terms of an actual dollar amount (the $4-$5 example) is clearly looking at the wrong number. I'd happily go with a $4/margin depending on what I'm paying. Now - realistically I am not hiring many $8/hr people - but given the opportunity to pay 8 and bill 12 or 13 I'd do it all day.

But regarding the real topic - no. I am not lowering my margin. I can't. I've never overbilled my clients. To suddenly be able to lower my rates a great deal would have them wondering how much they have overpaid in the past.

I'm in IT Staffing - Midwest USA.
Good Morning,
To be perfectly honest, yes we have cut margings to $4-5 an hour in some cases, not by choice. Sometimes I still find myself explaining to candidates the cost of doing business. $4-5 an hour are on the lower level positions, all of our clients require that our candidates become our W2 employees and there is a tremendous burden cost as well.
Since we're dissecting an actual scenario here - I need some more specifics. On this 4 or 5/hr margin - what is the W2 pay rate? Like I said - in some cases that may be fine. It is more important to look at the percentage of markup combined with payment terms. How long is your cash tied up waiting on a low return?

If you have a long pay cycle with a low margin client - and continue to build upon that - it's only a matter of time before you go out of business.

Staffing companies don't normally go out of business because they aren't "doing" business. The close the doors because of cash flow.

If your money is tied up with a low margin client then you have no cash flow to fund new employees paychecks regardless of the type of margin it may be.
No, I try not to disclose the bill rate, but the candidates talk once they have been placed. The people that have been contracting for awhile have a pretty good idea, what the bill rates are. In some cases, though, I have had to, inorderto make the candidate realize that I am not taking advantage, the client has set the bar, not me. How about you..do you disclose the bill rate?
Most of our clients, btw, do not tell us the bill rate...

Rebecca Griffin said:
We are in the Northeast region of the U.S. and have cut our margins to stay in the game. Very frustrating, but we have a lot of competition. When dealing with the MSPs, and Vendor Management companies, I just do not see a way around it, unfortunately.
I am wondering how many recruiters work the large corporate accounts.
"Most of our clients, BTW, do not tell us the bill rate" - I'm not understanding this one.

Rebecca Griffin said:
No, I try not to disclose the bill rate, but the candidates talk once they have been placed. The people that have been contracting for awhile have a pretty good idea, what the bill rates are. In some cases, though, I have had to, inorderto make the candidate realize that I am not taking advantage, the client has set the bar, not me. How about you..do you disclose the bill rate?
Most of our clients, btw, do not tell us the bill rate...

Rebecca Griffin said:
We are in the Northeast region of the U.S. and have cut our margins to stay in the game. Very frustrating, but we have a lot of competition. When dealing with the MSPs, and Vendor Management companies, I just do not see a way around it, unfortunately.
I am wondering how many recruiters work the large corporate accounts.
We do primarily agnecy recruiting for large corporate accounts, all of whom have MSPs, vendor management companies that administrate the contract positions. To encourage a competitive bidding process amongst the agencies, they do not provide rate information.

Jerry Albright said:
"Most of our clients, BTW, do not tell us the bill rate" - I'm not understanding this one.

Rebecca Griffin said:
No, I try not to disclose the bill rate, but the candidates talk once they have been placed. The people that have been contracting for awhile have a pretty good idea, what the bill rates are. In some cases, though, I have had to, inorderto make the candidate realize that I am not taking advantage, the client has set the bar, not me. How about you..do you disclose the bill rate?
Most of our clients, btw, do not tell us the bill rate...

Rebecca Griffin said:
We are in the Northeast region of the U.S. and have cut our margins to stay in the game. Very frustrating, but we have a lot of competition. When dealing with the MSPs, and Vendor Management companies, I just do not see a way around it, unfortunately.
I am wondering how many recruiters work the large corporate accounts.
Sounds like a nightmare. Good luck! :0)
Thanks Jerry! I need all the luck I can get! Crazy?

Jerry Albright said:
Sounds like a nightmare. Good luck! :0)
I would not be able to work in that type of scenario. I hope you've figured out a way to succeed - but I need to be a little more hands-on with the client.

Rebecca Griffin said:
Thanks Jerry! I need all the luck I can get! Crazy?

Jerry Albright said:
Sounds like a nightmare. Good luck! :0)
Hi Miles, Thank you for that article it was an intereseting read. I have worked at large organizations with the manpower used to services these accounts and I have worked at smaller companies only 5 to 7 recruiters. What was interesting was that at the smaller company we had a client we serviced with the low margin hovering around $5. However there were always jobs where as we did not receive as many jobs from the clients willing to pay higher margins.

I believe there is another factor that played into the some of the success there - They were not picky. If you have a client you can send your C skilled candidates too and they will most likely hire them you are going to have recruiters always willing to work on that account.

Miles Jennings said:
Holy cow, $4-5? Yikes. Margins really are tough and they are the lifeblood of staffing. It's hard to draw the line because both ways of business work (high volume, low margin + low volume, high margin.) I guess in the end it's knowing your capacity. If you have very light recruiting staff, you need high margin, good repeat clients. If you have the luxury of manpower, it's probably a good time to grab marketshare with some of these larger clients.

Here's an interesting article that I came across on keeping profit margins at staffing companies.

Chuck Summerland said:
Hi Rebecca,

Thank you for taking the time to reply to my post. I have spoken to many recruiters and they have the same problem with working with the larger accounts, however looking at larger accounts they are usually gaurnteed to pay and many candidates dont take too much convincing to move over. With less payout comes less effort and risk. Now I have seen companies reduce their margins down to four to five dollars an hour for a contractor. Is this something you have seen?

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