Unique client question

Here is what I am guessing is an unusual question. Has anyone ever worked with a client who was recruiting only 1099, independent contractor sales (IT) positions? If so, how would you recommend structuring the fee? What are your other general comments? I'm very lukewarm about this, so any feedback would be appreciated.

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Permalink Reply by Jason Babyak on September 21, 2008 at 5:55pm

I have don 1099 placements in the past but not for Sales which does seem a bit odd. With my 1099 placements we have a predetermined bill rate that will cover the hourly pay rate to the candidate and a profit to me and a profit to the employer of record. Being an office of one I am not able to act as an employer of record so a third party has to cover that for me.

From there I know how much I am making each hour the candidate works and I get cut checks each time the company pays the invoices. Obviously the money is not as much up front as a perm placement but if you can get several contractors working at once and they do so for long term the checks just keep rolling in which is nice.

Another area to look at here is that since these are sales positions the rate will be lower due to commission and bonuses so you may want to look at getting a piece of that as well but since I have never done 1099 for sales I am not sure how this would work. In summary, 1099 contractors can work out but you need to make sure it is fair for you.

One more thing, you may want to put a 'conversion fee' clause in your fee agreement that will cover you if the candidate is hired full time down the road. What some companies will do is hire someone as a contractor for 4 - 6 months and pay you the small markup fee and then hire them full time and your total profit will be much less than if they hired the candidate perm. So put a clause in there that if your total profit is less than what you would have made as a perm placement then they have to pay that remaining balance if they hire the candidate full time.

Somewhat confusing but hope it helps.

Jason

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Permalink Reply by Michael Chavez on September 21, 2008 at 10:14pm

Hi Jason,

Some very good advice here, thanks so much for your input!

Michael

Jason Babyak said:

I have don 1099 placements in the past but not for Sales which does seem a bit odd. With my 1099 placements we have a predetermined bill rate that will cover the hourly pay rate to the candidate and a profit to me and a profit to the employer of record. Being an office of one I am not able to act as an employer of record so a third party has to cover that for me.

From there I know how much I am making each hour the candidate works and I get cut checks each time the company pays the invoices. Obviously the money is not as much up front as a perm placement but if you can get several contractors working at once and they do so for long term the checks just keep rolling in which is nice.

Another area to look at here is that since these are sales positions the rate will be lower due to commission and bonuses so you may want to look at getting a piece of that as well but since I have never done 1099 for sales I am not sure how this would work. In summary, 1099 contractors can work out but you need to make sure it is fair for you.

One more thing, you may want to put a 'conversion fee' clause in your fee agreement that will cover you if the candidate is hired full time down the road. What some companies will do is hire someone as a contractor for 4 - 6 months and pay you the small markup fee and then hire them full time and your total profit will be much less than if they hired the candidate perm. So put a clause in there that if your total profit is less than what you would have made as a perm placement then they have to pay that remaining balance if they hire the candidate full time.

Somewhat confusing but hope it helps.

Jason