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My questions refer to "consulting companies" in the programming field in the US.

When I work for an end client through such a consulting company, does the end client usually know/care how much the consulting company pays me, i.e if we share it 50/50, or 40/60 etc?

If the end client decides at some point to lower how much they are willing to keep paying to the consulting company, do they usually tell the consulting company to lower accordingly my actual pay, or is it something they leave to the consulting company to decide about?

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    When you buy apples in the shop, do you care/know how much the person who picked the apples got? What about a guy who pruned the tree? The guy who delivered the apples? Huge amount of other people who were involved? Why do you think it is different in your case? – Salvador Dali Jun 20 '17 at 21:56
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    Yes, I care in some way, but do not usually bother to check. If I happened to learn about a huge markup, it would make me think I should do something about it. For example, I recently heard on a progressive Youtube channel that BNP Paribas (a large international bank, headquartered in Paris) had recently been caught manipulating ForEx rates for years, and that many other global banks were also caught doing the same for years. The fines were ridiculous comparing to the damage caused to their victims worldwide, which is hard to estimate. I do care about it and it affected my political views. – rapt Jun 21 '17 at 3:59
  • @SalvadorDali you usually don't meet all these people, do you? And BTW you might not as well care/know if an engagement ring has a blood diamond on it. That doesn't change the reality though. – Stelios Adamantidis Jun 7 '19 at 23:25
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No they usually do not know how much you get paid.

They leave it up to the consulting company to handle a changed rate (higher or lower). The consulting company then handles that with you.

And, if you look in your contract with your consulting company, there is usually a clause which prohibit you discussing this information with your client and visa-versa.

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  • @JoeStrazzere - interesting - in all of the ones that I have had (going on 25+ years), that clause is included so that you cannot play the client against the firm to up your rate. And, my firm does the same. But, then again, that's why I used the term "usually" - I presumed that others do not do the same. – user45269 Jun 21 '17 at 1:37
  • My current company knows how much my agent pays me, and raised the topic with me recently. From experience, though, this is unusual. – Mawg says reinstate Monica Jun 21 '17 at 12:01
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does the end client usually know/care how much the consulting company pays me

If the client wants to know, they will know.

Occasionally a client company will care. Most often they do not.

Clients tend to focus on their cost. You need only focus on your pay. If you get the pay you want, it shouldn't matter at all how much the client ends up paying. Whenever I've been a consultant through a consulting company, I just told the consulting company I worked with "I want $x". It was up to them to figure out how to get it for me. If they wanted to get a huge market, good for them. If they needed to lower their markup, too bad for them.

If you want total control over the client's cost as well as your pay, then become an independent and avoid the consulting companies completely.

If the end client decides at some point to lower how much they are willing to keep paying to the consulting company, do they usually tell the consulting company to lower accordingly my actual pay, or is something they leave to the consulting company to decide about?

If the client wants to lower their cost, they certainly won't target your pay. They just decide what they want, then it's up to the consulting company to decide how to deliver that.

Some consulting companies will lower their markup. Others will just seek out cheaper contractors.

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  • I doubt many serious consultancies disclose the mark up to the client other wise they could not charge top dollar for those new graduates – Neuromancer Jun 20 '17 at 22:50
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    Me too. The sales guy won't tell you but one of the consultans will. Just ask. – acpilot Jun 21 '17 at 2:51
  • @acpilot How does the consultant know how much the consulting company is actually paid for his/her work? – rapt Jun 21 '17 at 17:12
  • The consultant knows what he makes. Add about 30% to that number to estimate his full burden rate and subtract that result from the billing rate you are paying. The difference is the approximate margin the consulting company is seeing. – acpilot Jun 21 '17 at 17:14
  • @acpilot Your reply is worded like I am the end client? I am actually the programmer. I do not pay, but being paid. So as the programmer, I do not know exactly how much the end client pays, I can try to guess by probing. I can ask, but consulting companies people often lie. – rapt Jun 21 '17 at 18:57
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It is not (usually) a secret, but often they really don't care. They only care about how much they are paying. If the client is part of HR for the organization the almost always know the markup the different companies charge, so they pretty much know what you are making. A manager hiring directly might not know off hand. In any case, usually people just need to ask.

The client/firm financial relationship is between them and the firm/you financial is separate. The performance/cost relationship is between you and the client. A client will want to reduce the rate for two reasons - overall cost or your performance. If it is performance based the client won't be telling the company to reduce your rate specifically. They will say they want the rate reduced because you aren't performing "at that rate". If you are just not performing they will let you go. If it is overall cost they will tell the company that too.

In either case, it's not necessary that your rates go down. In fact, unless the company has very little markup on you I wouldn't lower my rate purely because of "performance". If the company is billing @ $200/hr. and you only get 100, the client is expecting $200+ performance. If they think you are only worth $180, I'd make the company take the hit - they're still making a lot. If they say $150, then expect to take a cut. And get better...

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For companies that hire a few contract workers here and there, they are not really going to be concerned with the markup. For larger, institutional businesses, they are far more concerned with the markup because:

  • They want to make sure the temporary people are at a comparable (it's never "equal") level of compensation vs their permanent people, because a huge disparity will eventually cause a rift
  • Many public institutions are required by law to take competitive bids from vendors, so the markup has to be disclosed as one of the factors.
  • They hire a staggering amount of temporary people because they're not allowed to increase headcount without lots of internal approvals.

There are more factors, but HR is not my line of work. I've been on the independent consulting side, and this information has actually helped me to make sure I priced my services in the right range.

You can actually find certain organizations' service agreements with the agencies published online, such as here, here, and here. These examples (real documents!) include the markups, and the last one is extremely detailed.

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If you fit in well and do a good job, chances are that some clients will approach you "informally" and see if they could hire you off and how much they could save this way. So some do care, especially if they got more work to do. As the contracts with the consulting-company usually forbid such things, there is usually a buy-out-fee to be paid from the contractor to the consulting-company.

If all works well, everybody wins:

  • You get a raise
  • Contractor gets a good work done at reduced costs
  • Consulting Company gets a big fee

So this happens more often than you think - or as a former boss of mine used to say: Every assignment is also a job interview ...

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  • Not really. If a company wants to convert to full time, they may mention it to the consultant but the "business" part is worked out exclusively with the agency. – Xavier J Jun 21 '17 at 12:56
  • I experienced other myself and colleagues also. That is, working as a programmer as also a friend who is an actuary. – Daniel Jun 21 '17 at 13:00

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