Employ a contractor as perm

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MrLizard

Original Poster:

261 posts

182 months

Wednesday 20th September 2017
quotequote all
hi, just a quick question hopefully, I have a contractor working for me at the moment in a 2nd line role.

We have advertised for a 3rd line role and they have applied for it. It isnt something I had considered before hand as I thought he wanted to stay as a contractor but evidently not. We would quite like to explore the idea but as he is from an agency im worried that we might owe them a large chunk of money.

Anyone with experience of this? I feel like if the agency made it essentially difficult for this guy to apply for a role above the role he is in you could claim they are (in)directly affecting his ability to progress his career ...


ozzuk

1,173 posts

126 months

Wednesday 20th September 2017
quotequote all
What does your contract with the agency say? When I was doing this mine stated I couldn't work for the company I was placed with for 6 months after contract end (unless a fee was paid). The contractor may also have something in his contract to that effect.

MrLizard

Original Poster:

261 posts

182 months

Wednesday 20th September 2017
quotequote all
there is this clause - its minimum 12 months and the fee is obscene... like 95% of the cost of the 12 months.

The clause reads as though it is there to stop the contractor from contracting for the company without the agency though that might just be the way I want to read it smile


zippy3x

1,308 posts

266 months

Wednesday 20th September 2017
quotequote all
I can't imagine this clause would be anything other than legally watertight. If it was possible to circumvent then the entire agency contractor model wouldn't work.

Any "employee" laws would not apply as the contracts are all between business entities (assuming Ltd.co. contractor)

Are you looking to replace the 2nd line role? If so you could get the agency to supply a new 2nd line contractor and maybe pay a nominal "finders fee" for the perm role. If you threaten to terminate the 2nd line role and fulfill the 2nd and 3rd line roles via a separate agency, then sense may prevail.

Otherwise, I think you'll need to recruit someone else.

S6PNJ

5,157 posts

280 months

Wednesday 20th September 2017
quotequote all
MrLizard said:
there is this clause - its minimum 12 months and the fee is obscene... like 95% of the cost of the 12 months.

The clause reads as though it is there to stop the contractor from contracting for the company without the agency though that might just be the way I want to read it smile
But if he is ceasing to be a contractor and becoming an employee then surely (hopefully) this clause is null and void as he is no longer a contractor and thus circumventing the agency. Maybe re-read the clause thinking about perm staff and not as a contractor?

schmunk

4,399 posts

124 months

Wednesday 20th September 2017
quotequote all
I am not a lawyer.

Restraint of trade clauses in contracts are potentially valid, and courts do uphold them, but they need to be reasonable and not onerous.

In this case, for a relatively junior IT bod, I would say 12 months is inappropriate and excessively long, so would expect it to be considered an unfair term.

I'm not saying "Go for it", but I would go for it.

I am not a lawyer.

Hoolio

1,143 posts

220 months

Wednesday 20th September 2017
quotequote all
zippy3x said:
I can't imagine this clause would be anything other than legally watertight. If it was possible to circumvent then the entire agency contractor model wouldn't work.

Any "employee" laws would not apply as the contracts are all between business entities (assuming Ltd.co. contractor)

Are you looking to replace the 2nd line role? If so you could get the agency to supply a new 2nd line contractor and maybe pay a nominal "finders fee" for the perm role. If you threaten to terminate the 2nd line role and fulfill the 2nd and 3rd line roles via a separate agency, then sense may prevail.

Otherwise, I think you'll need to recruit someone else.
This seems like your best bet. Essentially the agency are protecting their revenue stream with that clause. That said it sounds more like a penalty clause to me, i.e. if you and the contractor decide to cut the agency out you'll be charge a huge fee.

In the situation of a contractor going perm it is usual for a contract to perm fee to be paid if this is what you and the contractor want to do. As an agency owner I would never stand in the way of a contractor taking a perm role with one of our clients, that said I would expect the client to pay a transfer fee. You may well be able to negotiate this fee if you give them an incentive to be flexible.

silent ninja

863 posts

99 months

Thursday 21st September 2017
quotequote all
Why not terminate/not renew the contract. Give him a starting date a couple of weeks after termination. Give him the same role with a different name etc Must be a way around it.

edc

9,230 posts

250 months

Thursday 21st September 2017
quotequote all
Presumably you were happy with and agreed the terms at the start?

Why not renegotiate. Perhaps move the 2nd line into the 3rd line role. Negotiate no fee but give the agency first dibs on backfill of the 2nd line (on a reduced fee basis if that's what you want or on others terms you are more happy with).

Hoolio

1,143 posts

220 months

Friday 22nd September 2017
quotequote all
silent ninja said:
Why not terminate/not renew the contract. Give him a starting date a couple of weeks after termination. Give him the same role with a different name etc Must be a way around it.
Because the agency is likely to have a clause in their contract preventing the contract and the client from working with each other for a period of 6 to 12 months after termination. If the client goes direct to the candidate and cuts out the agency and the agency find out then the client will have no leg to stand on when the agency demand, and enforce payment of, their full fee which they are legally due according to the terms of the agreement signed.

MagicalTrevor

6,476 posts

228 months

Friday 22nd September 2017
quotequote all
Does the clause specify the individual or any Ltd. company that the contractor might be working under? You might not be able to employ 'ContactorCompany Ltd.' for 12 months but you might be able to employ the individual?

miniman

24,826 posts

261 months

Friday 22nd September 2017
quotequote all
How many contractors does the agency supply you with?

omniflow

2,545 posts

150 months

Saturday 23rd September 2017
quotequote all
This type of situation is not uncommon, and most recruitment agencies have clauses in their contracts to cater for it. The agency will want commission from you if a contractor that they've placed with you takes a permanent role in your organisation. In my view, this is perfectly reasonable and if you're trying to avoid paying it then I think you are being unethical.

The agency may well have a sliding scale. If the contractor has only been with you for a couple of months, then the commission would be similar to that paid to any recruitment agency for a permanent hire. If it's been a couple of years or more, then I would expect the commission to be quite a lot lower.

Given that you probably didn't negotiate terms with the agency based on their placement fees for permanent hires, you'll probably end up paying more than if you'd set off down this path from the beginning. On the other hand, you have had the candidate working for you for a period of time, so there is a lot less risk in the hire.

I am not a recruitment consultant.

Gargamel

14,957 posts

260 months

Monday 25th September 2017
quotequote all

I was a recruitment consultant, and temp to perm fees probably are the cause of the majority of arguments between recruiters and clients.

1. The clause is there, because otherwise an unscrupulous employer would hire everyone on "a contract" and whoosh a month later they are perm, thus avoiding all perm hiring fees.

2. Look at how long they have worked for you, also look at what you have already paid the agent for the period of the contract - by which I mean MARGIN, not total cost - ie, difference between contractors day rate and your total cost (less taxes)

3. Also look at what other work you have given the agent, what volumes do you have and what leverage might that give you.

Usually most recruiters will accept a lower fee to protect the relationship. also negotiate at the BEGINNING of the month, when the have all the month to meet target... Generally for clients that had had a contractor in place for over 12 months, I used to waive the fee, or accept around 25% of a perm fee.