Commission only recruiters?

Can anyone share their experiences with hiring recruiters to work on a 1099 basis and paying them for commissions only on direct placements? What commission were you paying them on their placements?

I am considering providing the right candidate with a laptop, sharing my licensing to job boards, and giving them access to our ATS. Just wondering if anyone has worked in a similar scenario. Any feedback would be appreciated.

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Permalink Reply by Steve Levy on February 22, 2009 at 1:29pm

I humored you and read the study highlights the same way I listened to your rusing podcast with Charles "I Think" Yett.

For one, the Texas building trade association where this propaganda was posted is simply a garden variety labor organization whose purpose is to support organized trades. Two, the researcher is not a doctoral-level researcher and as such, his analysis of the data is open to significant discussion (he compiled data from multiple sources and made no mention as the local data collection procedures nor analytical tests conducted - this is a sign that the researcher "wanted" the results). Three, and most telling, is that this "study" appears to zero in on the state of Illinois. In fact, on the very last page comes this...

Along with expressions of concern from the office of Illinois Governor Blagojevich, Lisa Madigan, the Illinois’ Attorney General, has announced that due to our research on this topic she intends to create a special task force to tackle the growing problem of employer misclassification in the state of Illinois.

No wonder Illinois was so interested in this issue: Governor "Pay me the bleeping Money you bleeping bleep" Blagojevich was at the helm.

No, the Texas trade website does not "[demonstrate] how Free Markets Need Fair Markets to continue to survive"; it demonstrates what organized labor will do to protect a bloated work structure. You use as "facts" in your subsequent argument items pulled from Pinkham's missive as if they were brought down from Mt. Sinai when in fact the analysis were paid for by organized labor! Search the Internet on his name - it's been primarily labor organizations that have picked up his message.

Over the years your arguments have consistently called for more regulation - perhaps because you believe rich business owners and corporations are screwing the working class - the GED deserves to earn what the MBA earns, right? Unfortunately, the more regulation the government imposes on an historically free-market system, the more it will create ultra-classism where the workers are one class and the government the other. It's also called socialism and there is no freedom in socialism, only the freedom one is told they have. Socialism may be nice to some because they can have a house of their own but its the house they're told to buy.

If Jason wants to hire someone and pay them 50-55% commission, good for him - just don't confuse the issue at hand by comparing construction workers to recruiters which is what your comments have done. People do not deserve to earn the same as others who are smarter, more creative, or work harder; regulations won't make dumb people smart, dolts creative, or slackers into Type As but they will make smart people question why they are using their brains during 14 hour work days to support others. A fair share is fine but not 50%; life isn't a splits network.

One more thing...heaven help us when government tells us how to recruit - Good God, the current administration is a lesson in showing us recruiting best practices!

By the way, nice of you to offer expert opinion from R4 - for a price. You just blew up your own argument...

KarenM / Hirecentrix.com said:

My apologies to all for what may appear of tremendous passion on this topic. It is true, this subject is one that is extremely dear to me, and one that invokes what some may think as probably excessive - considering our financial times, I ask, is it possible that many are not aware of how much damage the problem costs our economy, which sadly is why we underestimate the problem?
So, I ask that you will please humor me a little bit, and visit the following link http://twurl.nl/w1ay60 - it is a Study on the Economic costs of Employee Misclassification in the Construction Industry (but it relates to All industries, as Misclassification has migrated to Big business, White Collar workers today, especially in IT and yes, even Recruiting / employment industries)
The website demonstrates how Free Markets Need Fair Markets to continue to survive. Unfortunately Misclassification of Employees Harms businesses in so many ways, but it also harms fair trade and the economy, competition, the federal reserve, and of course The employee who takes most of the brunt

Many of us know Fellow recruiters who have lost jobs, and many of these individuals do not have Unemployment Benefits - it may not be much, but it would have been enough to save their homes, and feed their kids. These are benefits that they legally should have been entitled to..

For those who don't want to go to the link let me please demonstrate what Misclassification does to our economy and Our trade..

Misclassification allows unfair contractors to sabotage a competitive bidding process;
• Misclassification allows unfair contractors to decrease payroll costs as much as 15-30%;
• Misclassification allows unfair contractors to reduce their unemployment insurance tax;
• Misclassification allows unfair contractors to reduce their workers compensation premiums;
• Misclassification allows unfair contractors to reduce social security contributions;
• Misclassification allows unfair contractors to reduce their administrative payroll costs;
• Misclassification forces higher overall workers compensation premiums onto fair contractors

Misclassification negatively impacts society in several ways.
• The conditions for a fair and competitive marketplace are sabotaged. Firms that misclassify can reduce payroll costs by as much as 30%. Honest employers suffer a distinct competitive disadvantage.

Misclassification allows employers who violate state statutes to be rewarded.
• “Gaming the system” –
(1) Sub-Subs and Labor Brokers
(2) Exploitation of the ‘undocumented’
(3) H2B-Visa scams

• Workers who are misclassified also suffer. If a worker needs to apply for unemployment insurance benefits, they may be denied those benefits, since there may be no record of them having worked.

Again, the violating employer is rewarded because the laid-off employee is not charged to their unemployment insurance account.
Other protections and labor rights are also voided.
• States lose substantial revenues (UI taxes, income taxes, WC tax)

Lost state revenues due to misclassification for all industries (2001-2003): Massachusetts
• State Income Taxes: $91 to $152 Million
• Unemployment Insurance Taxes: $13 to $35 Million
• Workers Compensation Premiums not paid: $91 Million

Troubling Associated Costs
• Workers who are misclassified do not receive pension or health insurance benefits
• The lack of health insurance coverage exacts a large toll on the uninsured – the costs borne by the uninsured include a greater probability of avoidable deaths, reduced preventive care, and a smaller likelihood of early detection of medical problems.
• 33 percent of emergency room visits were for health reasons that did not require emergency room care and could have been avoided.

Tremendous Societal Costs
• The health system also bears an economic cost as well. It is reported that $34.5 billion in uncompensated care was received by the uninsured in 2001.
• Taxpayers also bear economic costs of the uninsured and underinsured. Federal, state, and local governments support care of the uninsured through public clinics, and payments to certain care facilities that care for the poor and uninsured.
• The Commonwealth Fund reported that these intergovernmental (taxpayer) expenditures were approximately $30.6 billion annually.
• Safety concerns - Misclassification leads to underreporting of injuries (especially re: ‘undocumented’)

Injuries: Human and Economic Burdens
• Direct costs (reported): lost earnings and health care expenses related to occupational injury and disease.
• Indirect costs borne by employers: additional hiring and training costs, disruption of work, damaged equipment, and the effects of workplace injuries on the productivity of co-workers who feel heightened risk.
• Indirect costs borne by the injured workers and their families: loss of other income, depletion of savings, reduced standard of living; increased expenditures for professional therapy and caregiver services in the home; home modifications and equipment related to disability; and deferral or loss of education for family members.
• Additional costs may fall on the community in the form of increased need for social service programs.

Partnering with Academics
• We conclude that misclassification is an increasing problem and the operation of fair, competitive markets are compromised when the bidding process is undermined by the practice of misclassification.

• Every state should benefit from better documentation on misclassification along with measures that help to improve compliance with the state and federal laws.

Permalink Reply by Penny on August 5, 2009 at 4:35pm

Jason, I personally wouldn't do it, you are opening yourself up to a lot of heartache. I personally don't care much for 1099 for I have been burned more than twice, so I got the message loud and clear. However, when you are ready to release a laptop, job-boards and access to your ATS system, that's a goldmine. I hope you don't get burned in the process. Is there a reason you don't want to go w2? that would probably be your best bet.

Permalink Reply by Suzanne M King on August 5, 2009 at 5:54pm

Hi Jason. I don't think sharing licenses is favored by the job boards. Just didn't want you to get yourself in a pickle.

Permalink Reply by Susan Neal on October 13, 2009 at 3:57pm

Sandra,

Thanks for sharing....I am just now reading this post because I am new to this group. I agree with you hold heartly......real recruiters will not fear the commission only offer. I am in the process now of looking for commissioned based recruiters. I do not want to go broke paying out salaries for little or no results.

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 Jerry Albright on October 14, 2009 at 1:17pm