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Having worked for 2 different agencies at 2 points in my career, I can
weigh in on this:
There are 2 common arrangements:
1) Agency is the employer of the writer
2) Agency serves only as a billing service for the writer
For #1:
The Agency is required to withold all applicable state/feederal/local
taxes. They would come out of the employee's hourly pay, not out of the
agency's cut. If the agency is not witholding, then either #2 is in
force or something shady is going on. However, the agency's cut would
have to cover unemployment, employer's share of social security, and
possibly worker's comp.
In the agency business, the writer is not paid a percentage of the
amount billed to the client, rather, a percentage is added on to the
hourly rate (anywhere from 40% to 100%) to cover the overhead. In the
case Christine mentioned, the 'add-on' was probably 80% of the writer's
pay. Commonly, the more work a client gives an agency, the lower the
'add-on' percentage.
For #2
The agency is only serving as a billing mechanism for the writer. This
is common for larger companies where the payee must be on an 'approved'
vendor list. I've heard ranges from 4% to 10% of the writer's hourly
gross for a billing-only service.
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