I an in an interesting contract where I am employed by a recruiter, who was hired by an intermediate company...that was hired by the client. I recently learned that the client is paying over 100% more for my services than what I am actually billing the first guy. Obviously the recruiter and middle guy get a margin but should it be to this degree and there are a few issues I should have learned in the beginning before taking this contract...such as what will be your margin...but is there anything I can do at this point? I see two issues. 1)I am doing 95% of the billable hours and making less money 2)the client is considering a less effective product because the estimate is outside their budget.

Is this just a lesson learned situation or should something be said to the recruiter or intermediate guy (who may or may not know my billable rate)?

Thoughts?

Are you getting more than the consulting fee? In some arrangements the intermediaries pay FICA, among other things and then pay on a W-2. When I was an employee of various companies my work was billed out at much more than I got. I did get a desk and benefits, though.

Just to make this easy, let's say I'm getting $50/hr and the client is paying $110/hr. I pay my own taxes...not w-2.

Grover,

As uncomfortable or as unreasonable as it may appear, your only obligation is to entity that hired you. You entered into an agreement to provide a service for a specific fee. Excessive fees are not uncommon.

To your specific questions:

Yes, you can ask to revisit the financial arrangement. Also check into how the fee billed to client stacks up to current market rates. Remember, they to made an agreement for a service at a given fee (buyer beware). It could well be your actual fee (what you are receiving) is way under market.

Yes, lesson learned. Check out your contractual agreement to see what sort of constraints it places on you in terms of duration, and no-compete...etc. It would be inappropriate for you to discuss the $$ structure of your agreement with the client. It is perfectly appropriate for you to offer services to this client which are outside the specific constraints of your existing contract.

Going forward, the best client consultant relationships have no layers between them at all. Organizations have more than enough layers on their own.

Jeff

This is not atypical. Most recruiters get assets to market (your skills), and then they get paid a percent (15%, 20%, etc...) based on the margin they can mark up to the client. Thus, it is in their best interest to optimize the margin (get you at the lowest possible acceptable cost, sell you at the highest possible). A % goes to the recruiter, the balance goes to the overhead for the recruiting business.

I agree with Jeff. You agreed to provide your services to the recruiter at a certain cost, whatever they sell it for, is really between them and the client.

If you can at some point go direct, without hurting relationships (you-client, client-recruiter, you-recruiter), it is the best option (remove middle man)- but this is not likely. If you have a great relationship with the recruiter, you can discuss a pay increase, but I would base this on merit.

My wife performed Financial Services recruiting for years, and yes, markups were a minimum of 70% (some up to 250%). The key thing is that rules are clear:
- You are the product, and the recruiter should work to make you happy, or they don't have product to sell (my wife often reduced margin slightly to keep best workers loyal- they were very easy to market on new projects)
- The buyer has an arrangement with the recruiting firm, as do you. Even if you could get out of a contract doesn't mean the client can as well (often, the recruiting firm has "dibs" to refill the spot)
- Industry is small- if recruiters mistreat consultants or overcharge clients, it gets known quickly, but if consultants don't honor agreements, it usually damages relations with both the recruiter(s) and client(s) - word gets around quickly

It's truly about the relationship. If it is good, and the risk is worth what potential gain you feel you can make, it might be worth the discussion, but seeing some consultants and recruiters try to "change the deal"- it is a slippery slope. Measure and consider all responses and both short- and longer- term consequences.

Good luck.