As a 1099 consultant, I usually use a placement firm to find a contract job. I always ask the placement firm what rate they are billing the client. They usually tell me. When they don’t, it’s a sure sign that their markup is excessive (but note sometimes they have an agreement with the client not to disclose the bill rate to the consultant). And in every case when I eventually found out the bill rate, it was excessive. My question to you is, do you think the placement firm should disclose their bill rate to the client? I have heard some say to just worry about your rate, and if they match it, who cares what they bill the client. But the reasons I want them to disclose the rate is: 1) I lose trust with the placement first as I feel they are hiding something from me, 2) Based on my rate I may be thinking I’m at a “mid-level” expert and that is what the client is expecting, but if the markup is very high then the client may be expecting a “super” expert, and that is not fair to me, 3) I don’t want to be taken advantage of. The placement firm certainly deserves a cut for finding the project, but as a 1099 I’m not getting any benefits from them and they are not having to pay employer tax, so their overhead is negligible. A $25/hr markup would be fine but a $50/hr markup is just plain out of line.
Also, should the markup percentage (client bill rate divided by consultant rate minus 1) be the same no matter what the hourly rate is (assuming 1099)? If I’m asking $50/hr and they markup 30%, they are making $15/hr. If they keep the same markup and I’m asking $150/hr, they are making $45/hr. It makes sense to me that the markup should be lower the more hourly rate you are asking. I don’t see why the placement firm should make so much more money on a senior person compared to a junior person.
As for the markup, I found the larger placement firms do a higher market than small shops, since the large firms have more overhead (advertising, more staff, franchise fee, levels of management that take a cut, etc).
Some good Dice discussions on this topic:
hw much commission do contracting companies keep. Mine wants 30% of BR?
w2 rate through staffing companies ?
Recruiters’ Percentage of Bill Rate
Contract Billing Rate: Am I supposed to be STUPID?
How to Get a Better Rate from Consulting Firms