Recruitment Agency Commission Money
Recruitment agency commission money is always a hot topic with contractors.
The EU Agency Workers Directive now allows contractors to go direct to the client after the contract ends.
This applies provided the contractor doesn’t opt out of the regulations.
The Professional Contractors Group (now IPSE), in conjunction with Agencies’ representatives, lobbied for and got an ‘opt out’ from this legislation from the Government. Now agencies have used this to try and force contractors to opt out. That’s so that they can keep hold of them even after their contracts run out.
However, should IT agencies, by rights, receive any agency commission money for the IT contractors after the initial contract has run out? Do they legally deserve commission money?
This has caused much debate amongst contractors.
There are two views on this. I’ll argue one of them.
No More Recruitment Agency Commission Money
IT Agencies should no longer get commission money:-
1) Because the contract is over.
It is restraint of trade to try to keep the contractor indentured to the IT agency after the contract is over, but that is what they were doing in the past. Now the law has changed and they can no longer do it.
2) Because the agency adds very little value after the initial matchmaking.
Don’t Deserve Commission
Very few businesses get money when they add no value – unless they use some kind of monopolistic devices to do so – or some legal ruse.
To my mind all the value is added at the beginning as far as the agencies are concerned so that is when they should receive their income.
The model suits best a one-off fee, as happens with permies, for a placement.
Contractors don’t work for agencies. They use them as matchmakers.
Agencies Are No Help
Agencies are not able to help contractors do their job. They are able to find them a job and that is all.
They are not capable of helping them further and are not skilled to manage them at a client’s site or to do anything else useful except to process invoices and timesheets.
Therefore it is only the probably false use of a restrictive practice clause in their previous contracts that enable them to obtain agency commission money for the contractor’s work long after they have added any value.
Probably the most suitable thing they could do is to obtain an initial fee for matchmaking a contractor and a client (as they do with permies) and then be on their way to add value in the way that they do best, i.e. matchmaking other clients and contractors.
At a stretch you could say that by taking fees for every hour or day worked by a contractor on a contract they are simply spreading the finders fee over a period of time.
However, by no stretch of the imagination could they justify taking recruitment agency commission money in perpetuity (or however long that the contractor stays at the client).
They add no extra value beyond a new contract negotiation. It is not justifiable by the work they do or the value they add.
They were only able to obtain the money before by using a legal threat.
The threat is no longer legal – except for those contractors who use the ‘opt out’.
Nor Moral Justification
Agencies, therefore, have no moral means of justifying additional agency commission money after the contract ends.
It’s just a shame that they were given a hole to escape through by this ‘opt out’ clause – and escape through it they have in their legions.
I realise that this is seen from the contractor viewpoint and agencies may have different opinions.