What construction agencies actually charge

Ask a construction agency what their margin is and you will usually get a charge rate instead. One number, quoted per hour or per day, with no indication of how much of it reaches the operative and how much stays with the agency.

That is not an accident. The charge rate is the product, and the split is the part that makes the product look expensive.

What is inside a charge rate

For a self employed operative paid through CIS or their own limited company, a charge rate is usually two things:

• the pay rate the operative actually receives
• the agency’s margin

That is it. There is no employer National Insurance, no holiday pay accrual and no pension contribution, because a genuinely self employed subcontractor is not an employee and those costs do not arise.

For a PAYE worker it is more complicated. Employer National Insurance, pension contributions and the apprenticeship levy all apply, and all of them vary by the individual and what they earn. Any agency quoting you a single flat percentage to cover employment costs is estimating, and estimates in that direction are rarely conservative.

Why the split matters more than the total

If you cannot see the pay rate, you cannot judge what you are buying.

A groundworker at £190 a day and a groundworker at £150 a day are not the same groundworker. They will not have the same experience, they will not have the same choice of sites, and one of them is considerably more likely to still be there in week three. When the charge rate hides that, a low quote looks like a saving right up until the moment it costs you a fortnight.

The problem gets worse when you push on price. Ask a percentage agency to sharpen their number and the easiest place for them to find it is the pay rate, because that is where their margin comes from. You end up paying less and getting less, and nobody tells you which.

Three questions that get you a straight answer

You do not need to become an expert in agency pricing. You need three answers.

1. What is the operative actually being paid? If the answer is vague, that is the answer.
2. What is your margin, in pounds, per person per day? A percentage is not an answer to this question, it is a way of avoiding it.
3. What happens to your margin if I put the pay rate up? This is the revealing one. If their margin rises with the pay rate, their interests and yours are pointing in different directions.

What we do

We work from the agreed pay rate and add £25 per person, per day. It does not change for a labourer or a site manager, it does not change because the site is awkward to get to, and it does not creep up when pay rates rise. Under a sole supply agreement it can step down against a volume matrix agreed in writing, but it never moves quietly.

A day rate covers nine worked hours.

You see both numbers before anybody starts. That is not generosity, it is just the only arrangement where we have nothing to gain from talking you into paying your operatives less.