Replies to This Discussion

Permalink Reply by Joshua Letourneau on February 19, 2009 at 3:39pm

Jason, is there a reason not to hire them from a W-2 standpoint?

You might save a few $ on taxes through a 1099 consultant relationship, but you'll take on considerable risk (i.e opening your ATS, Candidate DB, etc.)

Just a thought . . .

Permalink Reply by Jason Childs on February 19, 2009 at 3:44pm

There is some risk for sure in opening up our resources to someone, that is why we have to try to hire a very trusworthy person. During these more challenging times I am trying to stay lean and would like to pay people well for their performance, but if they don't perform then I am not carrying that overhead.

Joshua Letourneau said:

Jason, is there a reason not to hire them from a W-2 standpoint?

You might save a few $ on taxes through a 1099 consultant relationship, but you'll take on considerable risk (i.e opening your ATS, Candidate DB, etc.)

Just a thought . . .

Permalink Reply by Jason Childs on February 19, 2009 at 4:49pm

Sandra,

I really appreciate you taking the time to share all of this information. This is very helpful. Do you mind if I call you some time in the near future to discuss this further? If so please send your phone number to my e-mail at jason.childs@onoragroup.com

Thanks very much and best of luck to you,

Jason Childs

Sandra McCartt said:

If they are experienced recruiters it will be the way they want to go if they fade the financial heat until something closes. Top sales people are interested in comish.

I had 8 working on this basis. Supplied exactly what you are talking about. Paid them 50% of fees collected. They had a non compete not to work for another recruiting firm or as a virtual recruiter for a period of six months after they left ,in the specialties they worked here and not to contact any candidate or client they had worked with while employed under our umbrella without our agreement. Had two who decided they wanted to work for themselves after a year or two. That was fine with me as long as they didn't contact our existing clients. They still do splits with us on certain positions if they need help.

We shared job orders with all recruiters if they were call ins. Recruiters who generated their own listings kept them exclusive unless they wanted to split their part with another recruiter. All candidates go into the ATS, one recruiter does not move forward with a candidate that another recruiter has in play until the recruiter working with the candidate releases them.

I tried the W-2 route , paid a lot of salaries to people who sat around ,did their nails, played on the net and bitched about each other. Called them all in one day , put them on comish and raised their comish to 50%. That crop fell out fast. The experienced recruiters were and are a success. Several have been around for more years than i care to count. they come and go as they wish, work from home when they wish. My attitude is their desk is their business, i am the landlord and supplier of tools and will assist any way they wish to obtain candidates or close a placement to earn my half of what they produce. there is no boss employee relationship which by the by is a requirement in some states for a 1099 or contract employee to be sure you don't end up getting hit for workman's comp coverage on these people.

My caveat is don't hire baby recruiters in this market on a 1099 basis or wannabes who think they always wanted to be a recruiter because they came from a sales background. Be sure they have the resources to cover their personal obligations for a period of at least 90 days or they will fail.

Permalink Reply by Victoria on February 19, 2009 at 5:07pm

Oh I have some stories for you!!! Call me and I can fill you in. Thanks!

Permalink Reply by Chernee Vitello on February 19, 2009 at 5:29pm

Jason -

I have worked with this model before. I had one good experience and a couple of bad ones. The key is to really know the person, understand what they are looking for, and what your expectations are. Commisions I have pd were anywhere from 30 to 50%. If you would like to speak about this real-time send me an email at cvitello@whitingconsulting.com.

Best -
Chernee

Permalink Reply by Robert Brennan on February 19, 2009 at 7:05pm

Hey Jason -

AgentHR has been employing this model since 1998 and we call it Agent Recruiting (www.AgentRecruiting.com). We refer to our model as a "progressive agency" because we provide all the tools, resources and support of a traditional agency while providing the freedom (working virtually) and profitability (we split 50% of the first $55K only each year) that an independent recruiter would enjoy without having to buy a franchise. We feel it's the best of all worlds for the right recruiter and we consider it a partnership.

Our 50+ virtual Agent Recruiters work exclusively under our national brand with no non compete as they keep all client and candidate relationships. Either party can terminate the contract at anytime and (of course) we do not charge recruiters setup fees or monthly fees. Our new Agent Recruiters must qualify to join our team and attend our monthly orientation in Tampa. The AgentHR corporate office does not run a desk for we feel that would be a conflict of interest for the Agent Recruiters we support every day.

After working in the model you're describing for over ten years, it's a lot harder than it looks but if you understand your market, manage expectations, control costs and love what you do, it can be very rewarding.

Best of luck!

Permalink Reply by Anthony on February 19, 2009 at 7:05pm

Hi Jason,

I appreciate, if you could shoot me your contact info, I would like to discuss about the same.

Thanks
Anthony
240-793-9268

Permalink Reply by Joshua Letourneau on February 20, 2009 at 10:20am

Sandra, you bring up some very interesting points. I am in 110% agreement with the fact that top salespeople are interested in commissions (as they trade security for greater potential reward). In fact, it's why I run my own firm (much like yourself). Could there be a better example? :) In fact, and this would be another topic, but I have no idea how someone could recruit me to work on a 1099 and provide them 50% of my billings. Anyway, I digress.

Let me ask a question for a point of not really understanding how this could play out . . . while not being completely in the dark, either. (What I mean is that I am not, nor have zero aspirations to be, an attorney . . . however, I have sat through classes on top of classes regarding law [unfortunately, I might add - lol.] I have only seen one case in which a non-compete was enforced within our industry, and it was a former W-2 employee (not a 1099 contractor.)

Here is my question: Do you believe, or do you have relevant examples, of whether a true Non-Compete is enforceable with a 1099 contractor that is not actually a mis-classified *employee*?

I very well may be incorrect, but my instincts tell me that this arrangement would be quite difficult to enforce, given the fact that the Client (or engaging party of the 1099 contractor) is not withholding taxes.

I may be incorrect here as well, but I have a hard time believing that such a case would be ruled in favor of the Client or engaging party . . . however I do believe it would be quite a deterrent for recruiters who do not wish to sink thousands of dollars into defending themselves (and/or recruiters who have little knowledge about what makes a non-compete enforceable in the first place.)

In the end, I agree with your premise and I truly wish things were so simple (that we could hire 1099, avoid taxes withheld, be under no obligation to pay any form of benefits, be able to lay the 1099 off 'at will' with no recourse to unemployment insurance, etc.). However, my better judgment tells me that when the chips fall, we would be at a significant disadvantage legally.

To your statement, "I tried the W-2 route , paid a lot of salaries to people who sat around, did their nails, played on the net and bitched about each other", you are very well describing the risks associated with hiring Production Recruiters on a W-2 basis. However, there are risks with hiring 1099 contractors as well, namely protecting yourself and more importantly, enforcing a Non-Compete. It's quite difficult to find that balance.

Just my $.02 and I look forward to responses.

P.S. I'll start a new discussion, because much like many topics on RBC, discussions lead to new discussions, thereby reinforcing the value of community :)

Sandra McCartt said:

If they are experienced recruiters it will be the way they want to go if they fade the financial heat until something closes. Top sales people are interested in comish.

I had 8 working on this basis. Supplied exactly what you are talking about. Paid them 50% of fees collected. They had a non compete not to work for another recruiting firm or as a virtual recruiter for a period of six months after they left ,in the specialties they worked here and not to contact any candidate or client they had worked with while employed under our umbrella without our agreement. Had two who decided they wanted to work for themselves after a year or two. That was fine with me as long as they didn't contact our existing clients. They still do splits with us on certain positions if they need help.

Permalink Reply by Matthew Kazmierczak on February 20, 2009 at 12:26pm

I am a partner in an Attorney search firm and we pay our recruiters on commission 1099. Our recruiters are former practicing attorney's that are looking for a more flexible schedule. They start off without recruiting experience we give them training, access to our database, all attorney lists that we purchase etc.. We then have a progessive commission structure based on how much they bring in once they hit the target number they get to top pay which is 50% of all placements. We also will throw in incentives for profit sharing based on certain numbers they hit in a year. This has worked out great for us so far but the key is to treat the situation no different than if they were W2 and work as a team with trust. Another key to this model is to get the recruiters vested so they don't want to go on their own.

Permalink Reply by pam claughton on February 20, 2009 at 12:58pm

Yes, Karen is 100% right on this. Unfortunately, you cannot have someone work 'for' you, and only for you, and pay them on a 1099 basis. Even if you're paying them 100% commission, which is standard with agencies, it should be on a W2 basis, and at least offer a draw against commission. If you want a top performer and only plan to pay them up to 50% of what they bill, you need to offer a draw. Otherwise, what do you really have to offer them? If they don't get a draw, then they're really working for themselves and it should be a normal split scenario.

Bottom line is anyone who is really good, can either go to just about any agency and be hired with a draw and benefits, or will work on their own.

Believe me, I've thought quite a bit about this, and the scenario mentioned with a team of virtual recruiters that work on a 1099 basis and only get paid 50% of billings is very tempting....but not worth the risk.

Permalink Reply by Matthew Kazmierczak on February 20, 2009 at 1:59pm

Karen,

I agree with and reviewed all that info before entering into these agreements with our recruiters. They run their own business and we have a consulting relationship. It really is the alternative to starting their own business but without the major expenses. We are also not worried about noncompetes. They have their own people they recruit and everyone agrees to share our database as to not double contact candidates. There are no mandaotory meetings or conference calls. We are hear as a resource and send out open jobs they fill them on their own time and at their own pace. My partner and I are the account manager for the business and make the final decision on submittals while the recruiters present candidates to us. They are free to bring in new clients to the network but it is not mandatory. They find that they would rather have the other recruiters working on it for a better chance at filling it.

Permalink Reply by Joshua Letourneau on February 20, 2009 at 2:02pm

Karen, wow, you seriously bring up an amazing point about unemployment benefits. Just yesterday, I read that our current jobless claims (i.e. current number of those receiving unemployment) jumped to an all-time high of approximately 5 million Americans.

It didn't dawn on me that I know several former 'Contract Recruiters' (who were 1099'ing through contracting firms) who are actually ineligible to collect unemployment benefits and are in serious financial trouble. I hate to say this, but a good friend of mine (formerly a Contract Recruiter at one of the Big-4), can't find a new contract and is now facing foreclosure. In the State of GA, you can currently only collect around $330 a week in unemployment benefits, but for many, that might help keep their roof over their heads.

I also have to say that coming from the Big-4 as a Contract Recruiter used to be a 'halo' - even if you weren't that great, having the Big-4 brand on your resume was enough to get you hired.

Anyway, thanks for bringing the unemployment angle to light. I really hadn't considered this and it puts things in better perspective for me.

KarenM / Hirecentrix.com said:

Please Everyone, there are too many of us Not receiving Unemployment benefits today! I know of recruiters who have Lost Homes, due to not having any money from unemployment or SSI because they were misclassified. This is a Pervasive problem in our industry, and one that has me completely horrified that we In the HUMAN Resource field have continued to perpetuate, especially through ignorance.

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