Talent Development Centre

Tag Archives: rates

All Talent Development Centre posts for Canadian technology contractors relating to pay rates.

Supply Arrangements: What are they and why should they matter to IT contractors?

Morley Surcon By Morley Surcon,
Vice-President, Western Canada at Eagle

Supply Arrangements: What are they and why should they matter to IT contractors?Within the staffing industry there are a dozen or more business models employed by various employment agencies.  There are the smaller staffing agencies who focus their marketing efforts on smaller companies, on very specialized niches, with a handful of very strong relationships they might have, or a combination of these.  There are the huge international recruitment agencies that tend to focus on companies with international operations and may be generalists in the sense that they support multiple lines, from casual labour to general staffing positions to professional positions to technical positions, in an attempt to serve companies that want a single vendor to handle all of their contingent workforce needs.  Between these two extremes, there are the Regional and National staffing agencies that often service or specialize in only one or two different types of hiring needs, but often limit these to provide the level of expertise/focus that means so much to their clients.  Then there are mixtures and blends of the above.

The one thing that most recruitment agencies have in common is that they work to put formalized Supply Arrangements in place with the clients that they service.  A supply arrangement is simply an agreement that defines the relationship between the agency and the company that they serve/support.  Typical to most supply arrangements are the following:

  • Term of Agreement (date range within which the agreement will be valid)
  • Definitions (define the terms used in the agreement)
  • Commercial Terms (concerning insurance, rates, timesheets and invoicing)
  • Performance (defines the service the agency will be providing)
  • Termination (terms under which the agreement might be concluded)
  • Confidential Information (how to manage and keep safe important company data)
  • Indemnity and Limitation of Liability (keeping each party “safe” and legally separate from each other)
  • Signatures/Sign-Offs/Dates/Etc.

If these look familiar, they should!  They are the very same components that incorporated contractors find in any sub-agreement that they would sign with a staffing agency. After all, we jointly enter into a company-to-company relationship, so the terms should include the same content.  In fact, a good number of the terms that a contractor finds in their sub-agreement with their staffing agency are actually “flow-down” terms from the agency’s own supply arrangements with the end client.  That is often the reason why agencies cannot be very flexible with the terms — they have committed contractually to work with their clients in certain ways and must, legally, have their sub-contractors comply to the same terms.

Despite a lot of similarities in the terms between supply arrangements, it is extremely rare that any two supply agreements would be exactly the same.  Employment agencies are required to be chameleons, adapting perfectly to the business requirements of each of their clients.  The best agencies have detailed processes to ensure their compliance across many different agreements. For example, Eagle has tools and processes dedicated to this and is part of our ISO 9001:2008 quality framework.  That big stack of paperwork that we present to contractors at the beginning of each assignment is part of that process.  In this way, we ensure that both Eagle and our sub-contractors stay “on-side” of our supply agreement Terms & Conditions.

So, why should this matter to independent contractors?  Well, that’s a question with many answers. Here are just a few of the reasons why contractors should want to work with agencies that A) create good supply arrangements with their clients and B) have strong mechanisms in place to ensure adherence to the terms (both on their side and by their sub-contractor partners):

  • Legitimacy – Having an official supply agreement in place signifies a deep level of commitment between staffing agencies and their clients. It suggests that the company is committed to using the agency and that there will be a certain level of exclusivity.  If a technology contractor is working with a recruiter that has a supply arrangement in place, you can be confident that the recruitment agency has the right to represent you and that there will be some standardization in place to manage the hiring process.
  • Access to the Best Companies/Jobs – The best staffing agencies have the best relationships. Often there is a barrier to entry for agencies who do not have supply arrangements in place with companies.  By partnering with staffing agencies with many supply arrangements, it means that you will have access to suitable roles that come available at these companies.
  • Confidence in Staffing Agency Rates – Supply arrangements often define what levels of profit are associated with the services provided (also defined), so recruiters are working off a prescribed methodology for setting their rates. Companies agree to pay staffing agencies “X” for their services should they identify, qualify and place top resources into their open roles. For contract work, that means that independent contractors set their rates “Y” and the client is charged “X+Y” (or “X x Y” if “X” is a %).
  • Risk Mitigation – Working for a recruitment agency with a supply arrangement in place ensures that the “rules of engagement” have been set out. Working with recruitment agency who has strong compliance mechanisms in place means that the recruiter will set you up for success and ensure that you are protected against potential missteps.  Be aware of the 2 to 3 page Sub-Agreement contract!  Eagle’s sub-agreements are typically 8 pages at a minimum, but depending on the flow-down terms and requirements, it could add up to 20+ pages for your review.  Ultimately, this all protects you from risk.

Eagle has numerous supply arrangements in place with many of Canada’s largest companies across multiple industry sectors and across all levels of government.  We are national leaders in Oil & Gas, Energy, Telecommunication, Education, Health Care as well as having 3 of Canada’s 5 big banks as our clients.  Our Supply Arrangements with our clients are often 80+ pages long and our sub-agreements to our sub-contractor partners are often 10+ pages long. Although more work to put in place, this is a good thing.  Through this process we ensure our contractors’ success and, in doing so, our own as well.

Next time you’re interviewing recruiters to decide on your preferred staffing agency, remember to ask how many supply arrangements they have. A response to that simple question will speak volumes in terms of their legitimacy, access to opportunities, rates and risk mitigation.

Should You Share Your Compensation History with a Recruiter?

Alison Turnbull By Alison Turnbull,
National Delivery Manager at Eagle

Should You Share Your Compensation History with a Recruiter?I came across an article recently that was quite interesting to me personally, and it certainly seemed to be a contentious topic with 488 comments, 6200 likes and 1364 forwards in a few short weeks.  Apparently, (and previously unbeknownst to me), Massachusetts recently passed a new bill preventing employers from requiring salary histories from job applicants.

As a recruiter with 20 years of experience, most of that in permanent placement (in both retained and contingent firms) I found the commentary very interesting.  Most who commented very passionately agreed that recruiters had no right to ask for compensation history, and felt that the ask was ‘unethical’ and a means to get a candidate to the lowest salary possible.

It is very rare that I have had a candidate flat out refuse to share their compensation information with me, but it has happened on occasion.  It always makes me very reluctant to represent them as I find it difficult to effectively negotiate on their behalf, and it often leads me to wonder whether they are looking for a substantial increase over their current compensation that may be outside of the norm.

I always explain to candidates that the initial compensation conversation is between us, and how I choose to position that to an employer can and will be discussed and agreed upon with their input.  As much as I’m unwilling to just throw out an employer’s ‘range’, I’m as unwilling to invest the time in representing someone to a client without having a full understanding of their motivation, expectations, and employment history (including compensation).

It is not unrealistic to expect a substantial increase in some cases and if it is justified, particularly if there are extenuating circumstances like relocation, being long tenured within one organization, niche areas of expertise, an imminent increase or bonus, or just being a passive job seeker who is completely content where they currently are.  If someone’s expectations are beyond what would be considered standard, I can justify that to an employer if I have a full understanding of all considerations involved.

Obviously, it’s important for a recruiter to understand that your expectations are in line with an employer’s range before time is invested on all sides, but should the history of what you have earned be a factor of consideration?  Or should the market rates, your experience and the employers range be the only criteria?  I welcome your thoughts/input below.

5 Common Rate Negotiation Mistakes Made by IT Contractors (Video)

Every independent contractor wants to secure the best rate for before going into a technology project. Especially since the ethical professionals know that once a rate is agreed upon, it can’t be changed, you want to ensure you’ve done everything you can to get the highest pay.

Recruiters at staffing agencies understand that and work hard to get you a fair, market-value compensation. At the same time, it’s also their job to ensure the client is getting the best deal possible. In the end, your final rate may come down to your negotiating and when it’s done well, everyone is satisfied.

Unfortunately, all too often we see independent contractors make some mistakes while negotiating, which, at best, can see them not get the rates they want, and at worst, can see a contract get cancelled or relationships get damaged. Here are 5 common mistakes we see that can help you improve in this area.

5 Rate Negotiation Mistakes Independent Contractors Sometimes Make

Cameron McCallum By Cameron McCallum,
Branch Manager at Eagle

5 Negotiation Mistakes Independent Contractors Sometimes MakeAs an independent contractor, you have the opportunity to interact with any number of recruiters in your local market or, if your skills are in demand, agents from all over the world. You probably find that it is not uncommon to have conversations with recruiters that you’ve never spoken to before, never mind worked with on a contract together. And more often than not, the initial conversation you are having with a complete stranger, involves a career decision with financial implications. Negotiations are difficult enough without having to enter into a rate discussion with a total stranger. Money is personal and the questions that are sometimes asked to establish parameters around rate can be uncomfortable. But rate is key to any contract discussion and you need to be prepared to enter into these discussions with Recruiters in an open and forthright manner.

Part of being prepared for these discussions is to understand myths surrounding staffing agencies and how to negotiate with them. The following are some common mistakes I’ve seen independent contractors make when negotiating with recruiters.

  1. More is better: Wrong! Trying to always increase your rate can affect your career negatively. I’ve seen candidates who play hard ball on rate and ignore the advice of the Recruiter end up pricing themselves out of the running due strictly to price. Professional recruiters will have client and market knowledge and apply that knowledge to price their candidates competitively. Every position is unique and market conditions can change rapidly (Hello Calgary!). Don’t forget as well that rate is a reflection of your seniority and professional standing. If you do manage to hit a home run and boost your rate, don’t forget that the client’s expectations can and most likely will be tied to the rate you negotiated. If you can’t deliver to those expectations, the results can be serious.
  2. I’m getting ripped off: There is no denying that contractors have developed a level of caution when dealing with Recruiters. Some recruiters in an effort to pad their commissions have unscrupulously negotiated with candidates with no concern for building mutual trust or delivering a quality service to the contractor community. I can say confidently that the staffing industry has matured and the level of professionalism has grown. But if you do find yourself with concerns about the Recruiter you are talking to, remember, you are not obligated to work with that person. If you want to perform a quick test, ask the recruiter what their philosophy around margin looks like and see if they are able to give you a satisfactory response. If the Recruiter is not comfortable disclosing this or mumbles their way through an explanation, maybe it’s time to end the conversation.
  3. They don’t need that information: If you are dealing with a Recruiter for the first time, they may be interested in what you have earned in previous contracts. The simple reason for this is to try and establish at what level you have been working and what your skillset has been paying in the market. Remember that if you exaggerate your numbers, you may be creating a set of perceptions around who and what you are and the Recruiter may make a decision that you aren’t a fit for the role they are working on. Again, a good recruiter will be able to offer you insight on the rate you have been earning and how it fits their client’s present needs. And a really good recruiter will identify when a market is ready to offer you a higher rate or conversely, when it is time to bring your number down to remain competitive.
  4. I’ll agree now but will secretly wait for a better offer: Once you’ve negotiated a rate and you have agreed to be represented by a particular recruiter that you feel comfortable with, DO NOT attempt to renegotiate days later after another Recruiter calls and offers $5/hr more. You’ve already entered into an agreement with one Recruiter who has likely submitted your resume to the client. Any Recruiter who tries to convince you to go with them for a bit more money is putting your candidacy for that role in jeopardy. Professional staffing firms and their clients want to work with contractors who exhibit honesty and integrity. Demonstrating that you are unable to commit to an agreement is a direct reflection on your business practices.
  5. Every situation is the same: Finally, as already mentioned, every situation is not the same. What one client is willing to pay for a specific skillset is not the same as another. And market conditions can change from one day to the next and impact rates. Listen carefully to the Recruiter and gauge what they are saying. Do they have a lot of knowledge of the position, the client, the market in which the contract exists and your skillset? Ask questions and if you don’t like the approach or the answers, it’s simple. Nothing is forcing you to work with that individual.

Have you made any mistakes while negotiating that you later regretted? Please share your experiences with our readers so we can all learn from each other.

How to Calculate Your Rate as a Freelancer (Infographic)

A few weeks ago, Alison Turnbull posted some fantastic advice for anybody getting into contracting and trying to determine how much to charge. This is a common question heard here at Eagle, especially since there are so many factors to consider.  You want to continue living the life that you’re used to, but you know that there will also be new expenses that surprise you at every corner in your contracting business.

If you’ve been struggling with this topic and looking for a visual to help wrap your head around it all, have a look at this infographic from Creativelive. It does include some variables for the US that wouldn’t be applicable to Canadian contractors, and nothing replaces the advice of a good accountant, but this will definitely get you on your way.

How to Calculate Your Rates as a Freelancer

 

What Should You Charge as an Independent Contractor?

Alison Turnbull By Alison Turnbull,
National Delivery Manager at Eagle

What Should You Charge as an Independent Contractor?At Eagle, we work with several candidates who are making the move from permanent employment to independent contracting.

One of the questions most commonly asked is “What should I charge for an hourly rate?”

There are several factors to take into consideration, and simply calculating what your hourly rate was as a permanent employee is definitely not a recommended practice.

As an independent contractor, there are many added benefits, one of the most significant being tax savings.  Self-employment allows you to claim any valid expense needed to operate your business, which might include telephone, internet, equipment costs and even meals (considered entertainment).

On the other side of the coin, as an independent you can only bill for the hours that you work, so you have to factor in the cost of unpaid vacation days, sick days, benefits, statutory holidays and any time off between contracts.  There are also administrative costs to take into consideration, including registering a business, and potentially paying for ongoing accounting and legal services.

A basic rule of thumb that most people suggest would be to determine your hourly rate as a permanent employee, and then add 50-75%.  If you were earning $65,000/year, that equates to $31.25/hr.  By adding 50%, your rate would be $47/hr, and at 75%, your rate would be $55/hr.  Working with a range in mind allows you to have some flexibility depending on length of contract, industry and location.

If you choose to incorporate rather than working as a sole proprietor, you can typically charge a higher rate (as your agency does not have to pay the employer portion of federal taxes) and you will pay less tax, but you will also experience higher up front and ongoing costs.

When discussing rates with an agency, it’s best to ask for guidance and advice.  A good agency will be honest with you about the client’s maximum rate, but also how your experience stacks up against others in the market and what rate you should ideally target to remain competitive.  The ability to have some level of flexibility with your rate is your best bet at breaking into the contracting market.

Most candidates that we work with who transition to work as independents thoroughly enjoy the benefits that consulting have to offer and never look back, but contracting is not for everybody.  Seek advice from contractors that you know and do your research to ensure that contracting is right for you.