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If a recruiter only marks up 15% over what you are being paid, there's
little or nothing in it for the agency. The agency is responsible for
your employer-paid payroll taxes, which are right at about 15% in CA.
That's not the amount that is withheld from your check for your taxes.
This is completely separate.
The agency also has costs associated with preparing your payroll, filing
paperwork for the employer- and employee-paid taxes, and depositing all
funds with the appropriate institution.
You have to be paid within 7 days of your payroll period end, while the
agency has to bill the client you are working for, and may not receive
payment until 6 weeks later (so the agency is actually out weeks of
upfront money to you before they are paid - it all evens out later, but
it means they have to have adequate cash flow to cover, and in a worst
case situation, will sell their receivables in order to pay you, cutting
Sometimes, an agency may be trying to get established as a preferred
vendor in that company, so is willing to do what is basically a
"pass-through" and not making any money off your placement. Then later,
they make negotiate adjustments with the client as to bill rate.
Otherwise, to survive, a mark-up of 25-30% is very fair (that's only
10-15% before agency costs, not net profit) to you both. I'd think 20%
is still too low, and anything at 40% or above, they are definitely
making money off you.
BTW, I didn't even mention the upfront recruiting costs, which also
subtracts from the agency's bottom line.
(A technical writer who used to work at a technical writing agency, and
knows a bit about the behind-the-scene costs)
>snip> Joe Mulligan said> Isn't 15% markup the industry std.?