Recruitment Industry Backdoor hiring Issue Round Up
How to help recruitment firms get paid when a client employs a candidate directly.
As previously employed as a Credit Manager by a national recruitment company and working for many recruitment firms since setting up CMG UK I have a vast amount of experience in making sure our clients get paid.
This is the final instalment of this series of blogs, so I thought I would share a couple of examples where we couldn’t help our client.
Example 1.
Our Client: Recruitment firm providing chefs and skilled kitchen staff to pubs and restaurants.
Debtor: Gastro Pub
The position: Head Chef
After supplying a Head Chef for several months to a gastro pub, the chef told our Client he had to go home to sort out family business and wouldn’t be available for work for a few months. Around 3 months later, our Client discovered the worker was now working directly for the debtor and seemly had been since leaving our Clients employment.
Our Client’s contract stated they were entitled to charge a fee if the worker is taken on by the company within 8 weeks of him leaving our Client’s employment.
Although we could prove the chef was currently employed by the debtor, our Client did not have any proof the chef was employed directly within the 8-week period. We explained to our client that the burden of proof is on the Claimant (our Client) to prove the chef was employed by the company within the 8 week window, not for the Company to prove he wasn’t. Therefore, we could not proceed with further action.
Lesson– our client has substantially increased the time limit for being able to charge for a worker being taken on directly by a client.
Example 2.
Our Client: Permanent recruitment firm to legal, property and construction industries.
The Debtor: A national, well known high street estate agent.
The position: Building Surveyor
The Company failed to pay our Client’s fees for the placement of a building surveyor.
When passing the debt to us, we asked our Client to confirm the legal entity of the company they were contracted to as the debtor was a franchisee, the name they had on the invoice was only the franchise trading name.
We worked with our Client to attempt to verify the debtor’s full name. Email correspondence with the debtor did not have a signature confirming full registered name or company registration number, the person our Client had discussed the position with was not registered as a director at Companies House. The franchisor was reluctant to release any details of the franchisee to our Client.
Our Client eventually found out the name of the limited company behind the franchise. Unfortunately, that company had recently gone into receivership.
Lesson: Our Client now credit checks all new companies and confirms full legal entity name at the outset. We also provide a monitoring service for our Client so if their customers credit ratings change, we alert them immediately.
Finally, a case study on how we helped our Client when they outsourced their credit control to us.
Our Client: Recruitment firm providing temporary workers to the hospitality, warehousing and commercial industries nationwide
Size: £6.5m Turnover 350 live accounts
Form of finance: Confidential Invoice finance sales ledger
Issue
- Debtor days of 62 and increasing.
- The Invoice finance company were considering turning the finance facility to a disclosed factoring arrangement. Which our Client felt would look unprofessional to their customers and would result in higher finance costs.
- Customer accounts were in the name of trading names rather than legal entities resulting in any legal action taken would be unenforceable
- Credit checks not completed on any customers
Solution
- Agreed consistent collection strategies with our Client
- Advised on improving onboarding process for new customers
- Assisted in successfully taking legal action on delinquent accounts.
Result
Debtor days brought down to 30 days over 6-month period and maintained
We provide inhouse training courses to our Client’s recruitment consultants to make sure they are aware of what they need to do to make sure we can recover payment always!
There are several important points to be aware of to be successful in recovering your fees.
- Make sure you always send your terms and conditions with any CV’s and refer to the terms being attached in the body of the email.
- Be aware of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 and be able to prove you have complied with these regulations if challenged
- Keep detailed notes & emails not only with your prospective client but also with the candidate. Confirm all conversations in emails.
- Being aware of the court’s pre-action protocols for debt recovery
If you are currently experiencing a situation like the above we can provide a review of your systems and processes and assist you to strengthen under performing areas as well as coach your staff to ensure you will always get paid for any back door hiring as well as promoting best practice.
We can also assist you with specific back door hiring debts as well as general credit control. Please contact us to see if we can help 03332 413 203. contact@cmgroupuk.com
