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information about consulting companies

percentage of the pay taken

gbger
post 14.Feb.2018, 04:42 PM
Post #1
Joined: 14.Feb.2018

Hello,

I am employed by a consultant company to be working at a customer site.
The customer pays me an hourly rate of about 750 SEK.

The consulting company, where I am employed takes approximately 30% of the pay on the gross.
I have the option of setting my salary, based on the amount I have in my 'salary' account.

I have to then pay, the 'Employer' tax; income tax, other social security expenses and pensions on my own.

Is this common here in Sweden where the consultant company take such a large slice of the pie, without much 'work' done by their part?
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nicola4444
post 15.Feb.2018, 10:12 PM
Post #2
Joined: 4.Oct.2015

Not sure if it's common but I know a few consultancies that do it - their justification is probably that they found the assignment for you.

The cut they take varies though, I have seen 5%-30%.

Not sure if there is room for negotiation for the cut they take?
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yet another brit
post 17.Feb.2018, 12:30 PM
Post #3
Joined: 5.Jan.2013

Normally (or normal for life sciences), an agency will charge approximately gross personal salary x 2 for the services of a contractor.

The actual cost of employing someone is approximately salary x 1.5. The 1.5 come from the employers tax, 0.32 (about half of which goes to the state pension fund) and - usually - a non-contrib occupational pension, say 0.15 (employee benefit) + 0.03 (pension tax on benefit). As a contractor, you must always include these in an hourly rate - it is expected.

The difference, say 0.25 of gross salary, is what the employer is paying for i) the agency having sourced the contractor ii) the agency being responsible for employing the contractor. This means the contractor becomes effectively hire-and-fire-at-will to the client, without any of that socialist nonsense about employment rights cool.gif This is a big part of what is being paid for.

If there is a bridging period - for example the project that the contractor is working on is unexpectedly terminated, it could well be that the contractor is immediately let go by the employer, but still has a notice period with the agency - then the agency assumes the risk, again this is what the agency being paid for.

So I would say 30% is at the upper end, especially as you are sorting out the employment piece yourself. An employer with buying power (lots of consultants from a single agency) will be able to, and do, negotiate the overhead down significantly from that.

I have seen contracts where the overhead is stepped (reducing after a while), and also where there are buy-out clauses for the employer to take on the person directly as an employee or a direct consultant (typically one or two months salary depending on the amount of time that has passed).
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