Recruitment Agency and Contractor situation

Recruitment Agency and Contractor situation

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LayZ

Original Poster:

1,619 posts

241 months

Sunday 4th October 2015
quotequote all
All,

Have a situation at work and could do with some advice. We have a developer contractor under contract with us for 4 months, coming to the end of his term. We were referred him by a agency, let's call them ABC. Currently ABC are charging £360/day, and £300/day goes to him. I want to take him on directly for a 12 month contract, where we handle the payroll etc. To me it seems like after this contract is up, ABC have no claim on what he does or does not do, and surely we are free to employ him directly?

Here's the pertinent bits from the (anonymised) contract: http://pastebin.com/TSJFLmcj

ABC are suggesting that to do this we need to pay them a one-off fee of £10k, which seems frankly ridiculous to me.

I need to keep the relationship with ABC good, but to me this demand seems OTT. We've put a lot of work their way and will continue to do so.

Virtual beer for any help.

Ian Geary

4,462 posts

191 months

Sunday 4th October 2015
quotequote all
Hi,

First off, I couldn't see what the "relevant period" is defined as in that contract, but I'll assume it's more than a token period like 24 hours.

When I first managed staff, I faced a situation like this, except their fee was 26 weeks pay.

The way to think about it is:

- agencies make money by identifying good candidates and matching supply up with demand
- they recover initial costs (selection, getting, research, networking and advertising) and overheads via a margin on their placement's earning.

Now, how would their model look if every decent worker got recruited immediately by their clients?

This fee is there to guard against the loss of revenue, and to recognise that the agency have effectively saved you all the costs and risks of a recruitment,selection and induction period.

Of course, you don't have to look at it this way.

The other way is to just accept its in the contract you agreed.

I don't work for a recruitment agency, but I do support the inclusion of these placement fees ( despite being on the receiving end).

Also, is the agency worker worth it? Would you save more cash by trying to recruit from scratch?

I do recall the contract I had let me serve notice if I wanted to poach the agency worker, but this too was something like 26 weeks ( so again letting the agency recoup a decent chunk of profit from their placement)

Hth


Ian

Drumroll

3,737 posts

119 months

Sunday 4th October 2015
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The company I work for have stopped using agencies for the very reason the OP states.

Rovinghawk

13,300 posts

157 months

Sunday 4th October 2015
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LayZ said:
Have a situation at work and could do with some advice.
Advice: you have a contract. You should abide by it. If you don't & they choose to come after you, expect to pay lots including legal bills.

Simples.

bigandclever

13,750 posts

237 months

Sunday 4th October 2015
quotequote all
You have sight of one contract. What about the contractor's, er, contract? Can he (sorry, HisCo Ltd) drop the agency too?

LayZ

Original Poster:

1,619 posts

241 months

Sunday 4th October 2015
quotequote all
Ok thanks guys, just wanted to understand if this was standard practice or not.

Guess I'll have to negotiate and see how far I get. It struck me that the wording in the contract was not clear in this situation - but then legalese rarely is!

Frankthered

1,619 posts

179 months

Sunday 4th October 2015
quotequote all
It doesn't seem unreasonable to me. If you paid a recruiter to find you somebody for either a staff or contract position whom you would pay directly, would you expect them to do it for free?

On one occasion, I was taken on as a contractor and transferred to staff within a few weeks - the management team with the employer manipulated the situation to get me to switch.

I do remember the agent being rather disappointed. I don't know if they were given some form of compensation by the employer, but wouldn't be surprised if they had received something.

£10k seems a little high, but why not just continue with the current arrangement?

All that jazz

7,632 posts

145 months

Sunday 4th October 2015
quotequote all
LayZ said:
All,

Have a situation at work and could do with some advice. We have a developer contractor under contract with us for 4 months, coming to the end of his term. We were referred him by a agency, let's call them ABC. Currently ABC are charging £360/day, and £300/day goes to him. I want to take him on directly for a 12 month contract, where we handle the payroll etc. To me it seems like after this contract is up, ABC have no claim on what he does or does not do, and surely we are free to employ him directly?

Here's the pertinent bits from the (anonymised) contract: http://pastebin.com/TSJFLmcj

ABC are suggesting that to do this we need to pay them a one-off fee of £10k, which seems frankly ridiculous to me.

I need to keep the relationship with ABC good, but to me this demand seems OTT. We've put a lot of work their way and will continue to do so.

Virtual beer for any help.
I've highlighted the key part to how this will pan out. What the agency does if you take on the guy will depend on the value of business you continue to give them. If you have other temps from them on a daily basis and they're making £60/each per day then the likelihood is nothing will come of it as they'll be looking at the bigger picture, ie. if they take you to court then you will drop them like a hot rock and that's the end of their income stream from you.

I've experienced this first hand from both sides of the fence and it is annoying depending which side of the fence you happen to be on at the time but at the end of the day a contract is a contract and if that's what you signed and agreed to then morally you should be sticking to the T&Cs of it.

TankRizzo

7,246 posts

192 months

Sunday 4th October 2015
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Clause 8.1.1 says this:

8.1. The Client shall be liable to pay a Transfer Fee if the Client Engages a Contractors Introduced by ABC Recruitment Ltd, either directly or through another employment business, or introduces the Contractor to a third party and such introduction results in an Engagement of the Contractors by the third party including a local authority or in the case of a school, another school or another local authority and:

8.1.1. where the Contractors has been supplied by ABC Recruitment Ltd, such Engagement takes place during the Assignment or
within the Relevant Period;

What's the relevant period? My idiot's reading of that says that if you approach the contractor with a view to engage once the period is up, they can't demand a transfer fee.

Pannywagon

1,042 posts

185 months

Sunday 4th October 2015
quotequote all
I am a recruiter but work retained contracts, so am not up to date on the temp world: are ABC recruitment REC registered? If so you should be able to request an extended booking in lieu of transfer fee - normally 12 weeks notice after which the contractor transfers to you without fee. If they're not REC registered, they will probably still come to an arrangement, but you will need to part with cash, either as a lump sum or over a few weeks.

You are going to have to negotiate with them because if you steal their candidate (and that is what it is) without recompense, you are doing the same as a shoplifter. Harsh way to put it, but the contractor is their bread and butter, they found them and their business is built on supplying their services to you for a fee.

Would you appreciate a client who signed a contract with you, took your product/used your services and then didn't want to pay you?

Pannywagon

1,042 posts

185 months

Sunday 4th October 2015
quotequote all
TankRizzo said:
Clause 8.1.1 says this:

8.1. The Client shall be liable to pay a Transfer Fee if the Client Engages a Contractors Introduced by ABC Recruitment Ltd, either directly or through another employment business, or introduces the Contractor to a third party and such introduction results in an Engagement of the Contractors by the third party including a local authority or in the case of a school, another school or another local authority and:

8.1.1. where the Contractors has been supplied by ABC Recruitment Ltd, such Engagement takes place during the Assignment or
within the Relevant Period;

What's the relevant period? My idiot's reading of that says that if you approach the contractor with a view to engage once the period is up, they can't demand a transfer fee.
The relevant period is normally defined in the definitions section at the start of contract but REC rules state:

You can only charge transfer fees if the transfer takes place within whichever is later out of:

14 weeks from the start of the first assignment with the hirer
8 weeks from the end of any assignment

ETA: The clock normally resets 8 weeks from the end of an assignment, and any further assignment is counted as a first assignment. Don't ask me how that works, but every temp contract I've ever seen has had a clause to that affect. (Obviously, if you as a client bypass the agency after the 8 week period, no fee is chargeable)


Edited by Pannywagon on Sunday 4th October 20:36

LayZ

Original Poster:

1,619 posts

241 months

Sunday 4th October 2015
quotequote all
Frankthered said:
£10k seems a little high, but why not just continue with the current arrangement?
If we keep the current arrangement for the next 12 months they stand to make approx. 11k in fees.

Pannywagon

1,042 posts

185 months

Sunday 4th October 2015
quotequote all
LayZ said:
If we keep the current arrangement for the next 12 months they stand to make approx. 11k in fees.
Have you seen my post above?

It was a direct quote from here: Gov.uk Rules

mondeoman

11,430 posts

265 months

Sunday 4th October 2015
quotequote all
More info required.

8.8 could also apply, as the original term was less than 12 months

Cooperman

4,428 posts

249 months

Sunday 4th October 2015
quotequote all
To hire a sub-contract worker without paying a recruitment fee is commonly known as 'poaching' for obvious reasons.
An employment business had to find the sub-contractor, recruit him, prepare the contracts for both parties, handle all invoicing to the client after receipt of time-sheets, run the payroll and manage the contract. This had to come from the gross profit and after just a few months the employment business may have made a small profit. Why then should a fee not be payable should the sub-contracted person joining the staff of the client? In fact, a transfer fee of around 20% to 25% of the transferred employee's first year's salary in fairly normal.
I ran an employment business in high-end engineering recruitment for over 25 years covering sub-contracted and permanent staff and we guarded against 'poaching' very strongly.
There were strict time limits after which re-engagement was not subject to a fee, but this was spelled out in the contract. In my company we used a sliding scale relating to the length of sub-contract engagement before transfer. and after 3 years of sub-contract engagement a transfer resulted in no fee.

Frankthered

1,619 posts

179 months

Sunday 4th October 2015
quotequote all
LayZ said:
Frankthered said:
£10k seems a little high, but why not just continue with the current arrangement?
If we keep the current arrangement for the next 12 months they stand to make approx. 11k in fees.
So? You get another 12 months work, your contractor gets another 12 months pay at £300 per day and the agent gets their cut.

I've been contracting on and off since 1999 and other than the time I transferred to staff, I've never had an issue with the agency taking their cut. If somebody wants to change the terms to exclude the agent, then I'd expect either a break or compensation for the agent. To be honest, I would have expected to be longer than eight weeks, but that seems to be the legal requirement.

Like I said, £10k seems high, will the agent negotiate?

JonRB

74,389 posts

271 months

Monday 5th October 2015
quotequote all
bigandclever said:
You have sight of one contract. What about the contractor's, er, contract? Can he (sorry, HisCo Ltd) drop the agency too?
It's very common for a contractor to have a lock-in with an agency. In almost all non-direct (ie. agency involved) contracts I have operated under, you cannot supply services to a client, either direct or via another agency, for between 6 and 12 months (it varies by contract).

Of course, contracts have to be enforced and if you wanted to risk legal action against you by the agency (and were confident they would back down before you did) then you could just enter into a direct contract with your Contractor.

Edit: As "All that jazz" said yesterday. Sorry.


Edited by JonRB on Monday 5th October 12:50

ralphrj

3,507 posts

190 months

Monday 5th October 2015
quotequote all
Frankthered said:
Like I said, £10k seems high, will the agent negotiate?
^This. I think that it is usual to negotiate a lower fee even though something bigger may be written in black and white in the contract.

I've just joined a client on a 12 month fixed term contract after 7 months as a daily rate contractor through an agency. The agency originally tried to claim a £18k fee but settled for 6 more weeks on the daily rate (earning them another £3k) plus a £2k joining fee.