Negotiating New Placements

Thursday, April 5, 2007

Since you are not dealing with changes to existing pay and bill arrangements, the negotiation of new placements may be easier than renegotiating the embedded base of contingent workers. However, the bottom line impact may be just as significant. Your company may or may not have created a Rate Card (ideally based on Pay Rate) for hiring contingent workers using The People Ticker. A Rate Card created with The People Ticker can be a valuable guide during negotiations since you will probably have the same or better market rate information than that possessed by the Staffing Agency. The Rate Card defines competitive parameters relative to engagement rates and such parameters should not be viewed as fixed or unchangeable. Will situations occur when it makes sense to hire out of scope from the Rate Card? Of course, but it is vital to know when and why these occurrences happen to avoid setting expensive precedents.

One thing to keep in mind is having designated individuals with appropriate training in the negotiation of bill rates for contingent workers. The danger in non-centralized negotiations is that Hiring Managers and Agencies tend to rely on past history to dictate pricing for the next placement and that they are not always privy to current market rates. Once a manager engages a contingent worker at a rate of $75/hr, the precedent has been set with that agency and other similar, new placements by that agency tend to follow the same pricing. This may result in enormous costs to your organization.

In order to help control this activity and to insure the maximum opportunity for savings, nextSource recommends the review and negotiation, if applicable, of every new placement even though a Rate Card may be in place. Why? Savings opportunities should be identified and realized whenever possible and skilled users should be aware of all possibilities that may impact the bill rate. For example, the type of contingent worker being placed can greatly affect the final bill rate. Without understanding whether or not the contingent worker being placed is a W-2 employee of the agency or a subcontractor (IC/1099) to the agency, the agreed upon markups may result in additional cost to the user.