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>> Google pays the staffing agency, the staffing agency pays the "contractor" a salary (significantly less than what Google pays the staffing agency), and all i

• Galacta7 3y ago
  I used to work for a temp agency (clerical, not in tech) and I remember once seeing what my agency was getting paid for me on an hourly basis. Iirc, it was something like 3-4x what I was getting paid hourly. It was kind of sickening tbh. Plus many agencies forbid temps from being hired away without paying an outrageously hire fee to do so. It felt like being an indentured servant in many ways. The only upside was that if you hated the place you worked, you could always ask to be reassigned someplace else. But that's the only major plus I can think of.
  • ethbr1 3y ago
    Afaicr, 3x was pretty standard in consultant salary vs billable rate. The idea is that covers 70-80% utilization, unprofitable engagements, HR, benefits, etc. Plus profit to the company.
  • intended 3y ago
    I’m assuming Profit margins are about 14-25%, so a 4x multiplier would be what it takes. 3 would mean your firm had sources of revenue other than services/consulting.
    • dchftcs 3y ago
      The most profitable consulting-type businesses have profit margins >=50%, before distributing profits to equity holders. But either way I'm not sure about your implicit assumption here that the profits should be comparable to the pay of the employees.
      • intended 3y ago
        Hey, you began your comparison with the most profitable consulting firms… 2 things - 1) Accenture has an EBIT of 20%. 2) The tippy top of the consulting pyramid plays on branding in a way that the average firm does not. The VAST majority of service driven firms will not become McKinsey etc. making this a poor comparison Finally - I doubt that the top firms have those margins, I would most definitely like to be corrected though. If you could clarify or share your source, I’d appreciate it.
        • tchvil 3y ago
          In my previous service company, we aimed for 10%, which was considered the norm. However, we were particularly bad at achieving this, with only 8-9%, though we did have a good atmosphere and happy employees
          • intended 3y ago
            Sounds correct. Getting to profit through pure people power is hard. Every next person you add doesnt double your output. It’s maybe increases it by some %. (This includes overhead costs)
        • dchftcs 3y ago
          Note I mention profit before distributing to equity holders. The highest prestige and therefore most profitable consulting companies are all partnerships. Some highly profitable consulting companies that are partnerships have very high margins, if you don't include the profit sharing component of the pay of equity partners (but do include bonus and fixed salary). The primary public source I can point to is that many top law firms publish their margins to be >=50%. As for McKinsey, according to Google, McKinsey has 10k consultants and 2700 partners. There are 30k employees, so I give you that the overhead rate is higher than law firms. But given how different pay is between partners and non-partners, and there is still a relatively large portion of partners compared to other employees, the margins, if calculated this way, is probably still pretty high. Now is this the right way of considering profit margin? There are some good reasons to disagree with it. But in the same way people can like or dislike EBITDA. At least, it's like nobody discounts Larry and Sergey's cut from Google's profit. In this context, I would argue it is indeed a good way, especially for the purposes of discussing the discrepancy between grunt pay and hourly charge. It tells us that a very large part of that discrepancy goes to equity partners (who aren't those doing the execution work), rather than "overhead" as it's being argued. This is very different from big-corp type public companies where, even though executive pay is a lot, the bulk of the pay goes to shareholders ans a large number of rank and file and moderately paid middle-managers, which I suspect to be closer to accenture's profile.
• scottru 3y ago
  FWIW, this isn't the case at Google (or many other large technology companies). Google dictates the staffing agency markup (which is very limited) and audits for compliance. This, among many other processes, has significant negative impacts on the quality of the agency that will work with Google on this sort of work - but it does help with cost control. (Source: I ran one of these agencies, and Google was a past client.)
  • ClumsyPilot 3y ago
    With that level of control by Goofle, the entire thing comes across as a legal charade at best, or fraudulent at worst.
• meheleventyone 3y ago
  Contractors should cost more than a FTE you’re buying expertise and the contractor is shouldering the risk and burdens of not being a FTE.
  • saagarjha 3y ago
    Yeah, except the contractor sees none of that money if they go through a staffing agency.
    • eru 3y ago
      Yes, but that market is not exactly a monopoly.