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Contract Employee's Newsletter
Helping Contract Professionals
Manage Their Careers
September 01, 2002
Edited by James R. Ziegler
A Companion to:
The Contract
Employee's Handbook
www.cehandbook.com
Sponsored by:
P.A.C.E. - Professional
Association for Contract Employment
www.pacepros.com
About The Contract Employee's Newsletter
The Contract Employee's Newsletter is a free e-mail publication
for technical and professional contractors containing news, commentary,
tips, links to useful resources, nuggets of wisdom submitted by
readers, and anything else that seems appropriate at the time. The
CENewsletter is distributed bimonthly or whenever issues warrant
and time allows. The subscriber list is confidential and will not
be disclosed outside this organization.
In This Issue
Read recent
issues of The Contract Employee's Newsletter.
Suggest A
Topic For The Newsletter
Ideas Anyone?
Thank you for your excellent suggestions for future newsletter
topics. Keep 'em coming. Chances are, if a topic interests you as
a Contract Professional it will certainly interest the majority
of our readers.
Guest Appearances
I would like very much to publish short guest contributions
to the Contract Employee's Newsletter. Maybe a marketing tactic
that works for you, or a true story of agency madness? I'll cite
your name, your e-mail address, and a link to your professional
website. I can't pay you, but I'll make sure that everyone who reads
the Contract Employee's Newsletter knows who you are and what you
do. It can't hurt, and, who knows, it might help your consulting
career. Contributions should be of general interest to all Contract
Professionals.
Mail your suggestions to suggestion@pacepros.com.
Return to Table of Contents.
Featured Topic
How Ordinary Staffing Vendors Incorporate Illegal
And Unethical Business Practices That Harm Both Contract Professionals
And The Companies That Use Their Consulting Services
In the first
installment of this five part series I contrasted high-end Hyperskilled
Contract Professionals and low-end Deskilled Temporary Employees.
In the second
installment I discussed the recent rise of contingent work in
America and the factors that have contributed to the phenomenally
rapid, pervasive, and insidious growth of staffing agencies in the
corporate arena, especially with respect to highly skilled and highly
compensated Contract Professionals. In the third
installment I discussed the many reasons why Contract Professionals
and companies use staffing vendors, and I described how all of the
services provided by staffing vendors are being replaced by more
efficient, more effective, and less expensive services that will
soon render ordinary staffing vendors obsolete and unnecessary,
if not completely irrelevant.
In this fourth installment I describe specifically
how the ordinary staffing vendor business model incorporates illegal
and unethical business practices that harm both contract professionals
and the companies that use their consulting services.
How Staffing Vendors Harm Contract Professionals
Let’s look at a few of the ways that staffing vendors harm
Contract Professionals by incorporating unethical and possibly even
criminal practices into their standard business model.
Staffing vendors systematically harm Contract Professionals by
practicing:
- Illegal restraint of trade
- Fraud
- Violation of Copyright
- Extortion
- And Hijacking The Labor Load
Illegal Restraint Of Trade Through The Practice Of Tying
Tying is an arrangement or agreement by which a vendor sells a
product or service to a buyer only if the buyer will also buy another
product or service. Tying arrangements violate federal antitrust
laws.
Examples of tying:
- MegaZoom Motor Company sells you a car and then says the warranty
is void if you have your MegaZoom automobile serviced by a non-MegaZoom
dealer, or if you use non-MegaZoom brand Gasoline or non-MegaZoom
brand tires.
- Half way through a difficult and expensive legal negotiation
your attorney informs you that he will not continue unless you
agree to hire him on retainer for all of your future legal needs.
Personally, I believe that tying is the central evil practiced
by recruiting firms. Tying is at the core of why staffing agencies
have been able to exert enormous market power to bully both Contract
Professionals and the client companies that use their services.
Recruiting firms tie the job matching function to the employer
of record function. The up side of this arrangement is that recruiting
firms help you locate contract assignments. The down side is that
in order to take an assignment you must become their employee. Even
if you succeed in retaining your status as an independent contractor,
the recruiting firm still holds you captive by keeping you from
signing a direct contract with the end user and by refusing to disclose
what they are billing the client for your consulting services.
Staffing agencies use tying to isolate contractors from the very
information they need to assess their careers. For example, staffing
agencies invariably bar contractors from active participation in
contract negotiations with the client. Most contractors never see
the contract that defines the very conditions under which they must
work.
Staffing agencies also use tying to keep contractors ignorant of
their value on the open market. They don’t want contractors
to know how much they could be billing as independent contractors,
and they certainly don’t want contractors to know how little
they are being paid in comparison with their actual worth.
Staffing agencies view contract employees as their competitors,
and they view contract details and billing rates as competitive
information to be protected at all costs. Staffing agencies
use tying as a strategic tool to protect their “competitive
information.”
If contract professionals are to regain their independence they
must split the entirely separate functions of job matching and employer
of record. They must break the ties (pun intended) that bind them
to traditional recruiting firms.
Only then will contractors be able to make reasoned decisions based
on the quality of service and on price. They will be able to shop
for professional placement services and employer of record services
on the basis of value delivered rather than on the basis of who
controls the information.
I believe that this issue is ripe for a class action lawsuit, and
I would love to serve as an expert witness for the prosecution.
Fraud
Fraud is the intentional perversion of truth in order to induce
another to part with something of value or to surrender a legal
right. Fraud is an act of deceiving or misrepresenting.
Examples of fraud in the staffing industry are:
- Posting a job description for a nonexistent position.
- Telling the candidate that a nonexistent job has just been filled.
- Bait and switch tactics. Posting a higher rate and then offering
a lower rate.
- Claiming to work for the candidate and then refusing
to quote a professional services fee or agency margin.
- Refusing to disclose the billing rate.
- Telling candidates that they will be punished if they discuss
billing rates and pay rates with the client.
- Asking for resumes and references for the express purpose of
using them as business leads to companies and hiring managers.
- Collecting resumes and references on the false pretense that
there is a viable job opportunity.
- Modifying the candidate’s resume for the purpose of misrepresenting
the candidate’s skills and experience.
Fraud is illegal, yet recruiting firms routinely practice fraud
every day in their standard business operations.
Violation of Copyright
Violation of copyright violates a person's exclusive right to reproduce,
publish, or sell his or her original work of authorship.
Examples of violation of copyright in the staffing industry are:
- Modifying, editing, or repurposing a resume without the express
permission of the owner.
- Distributing, sharing, or selling resumes to resume resellers
and other staffing agencies without prior authorization or compensation
to the candidate.
Your skills profile or resume is your brochure. Companies may not
distribute, sell, or repurpose another’s marketing collateral
for their own use without the full consent of the owner.
Extortion
Extortion is the act or practice of obtaining money or property
from a person by force, intimidation, or undue or illegal power.
Especially a gross overcharge.
Examples of extortion in the staffing industry are:
- The use of an overly broad and unenforceable blanket noncompete
clause for the purpose of intimidating the contractor into signing
an unfair agency contract.
- Threat of reprisal if the contractor violates an overly broad
and unenforceable blanket noncompete clause.
- A gatekeeper or preferred vendor making a contractor who located
the assignment on their own sign a noncompete clause as a condition
of working with the client.
- Taking more than 35% of the billing rate to place a contractor
and provide W-2 employment.
- Enforcing a code of silence and threatening reprisal if the
contractor discusses the billing rate and pay rate with the client.
- Not publishing a standard fee schedule.
- Exploiting a contractor's ignorance and the agency’s privileged
position as a trusted intermediary to underpay the contractor.
Hijacking The Labor Load
What companies pay for a salaried, fully benefited, full-time employee
is called the fully loaded labor cost. It consists of the employee's
salary plus the employer's share of payroll taxes, administrative
overhead, payments for health insurance and other benefits, contributions
to the employee's retirement plan, plus the cost of training, equipment,
supplies, and perks.
It is easy to compute the fully loaded labor cost for a contingent
worker. It is simply the billing rate charged to the client by the
independent contractor or the contractor's agency.
Thus, the billing rate paid to an independent contractor is equivalent
to the fully loaded labor cost for a regular employee. But unlike
regular employees, independent contractors must pay for their own
payroll taxes, cover their own administrative overhead, pay for
their own health insurance and other benefits, contribute to their
own retirement plan, and pay for their own training, equipment,
supplies, and perks.
The amount left over after the independent contractor pays expenses
is the independent contractor's taxable gross earnings, and is equivalent
to a regular employee's taxable gross wage.
Our free market system ensures that companies pay the same fully
loaded labor cost for equivalent labor, regardless of whether it
is for a salaried, fully benefited, full-time employee or a contingent
worker.
In a buyer's market (few jobs and abundant labor) there is downward
pressure on employee salaries, and independent contractors must
lower their billing rate to compete with full-time employees. In
a seller's market (many jobs and scarce labor) there is upward pressure
on salaries, and independent contractor can compete with full-time
employees while charging higher billing rates.
For this reason, the fully loaded labor cost of a regular employee
and the billing rate of an equivalently skilled independent contractor
remain roughly the same.
For this reason also, the taxable gross wages of a regular
employee and the taxable gross earnings of an equivalently
skilled independent contractor are also approximately the same.
Nevertheless, market forces operate primarily on the fully loaded
labor cost, and less so on wages, and this is never more evident
than when an ordinary staffing vendor is involved.
Staffing agencies take at least 35% off the top of the billing
rate. This is the agency's margin, and it represents the agency's
share of payroll taxes plus the agency's gross profit.
Although the client company pays the same amount to an agency that
it would pay directly to an independent contractor, far less of
that amount ultimately makes it to the contractor.
Essentially, the agency hijacks the labor load that would
otherwise pay for health insurance and other benefits, contributions
to the contractor's retirement plan, training, equipment, supplies,
and perks. Instead of passing to the worker, the labor load instead
is diverted to the agency's coffers.
Therefore, it is necessarily true that whenever a contract professional
is employed by a temp agency or recruiting firm there is no conceivable
way that the agency can afford to pay for the contractor's health
insurance and other benefits, or make contributions to the contractor's
retirement plan, or pay for training, equipment, supplies, and perks.
The contractor receives less pay than a similarly skilled employee
of the client, and/or receives little or no benefits. Either way,
the situation sucks.
As we will see below, state legislators across the country are
introducing bills that would make staffing firms pay wages and benefits
to their assigned temps that are equal to those of the client's
employees. These bills, if passed, have the potential to drive ordinary
staffing vendors out of business. To survive, staffing vendors will
have to significantly lower their margins or significantly increase
their billing rates. Either solution is untenable. Ordinary staffing
firm business models are simply not profitable at margins lower
than 30% of the billing rate, and market forces will ensure that
companies will not pay billing rates that exceed the fully loaded
labor cost of a similarly skilled employee.
Stuck between a rock (unacceptably lower margins) and a hard place
(unacceptably higher billing rates), the temp agency business model
will implode.
State Legislators Are Beginning To Take Action
Abuses by the staffing industry don't go entirely unnoticed. Every
year a few states introduce legislation designed to curb staffing
agency abuses. For the most part, the staffing industry has been
successful in lobbying against reform legislation.
Lately, however, the pace of reform legislation seems to be picking
up, and the year 2002 has seen a rash of bills that would attempt
to rein in abusive staffing industry practices. Here is a brief
rundown culled from the NAPS Track
Legislative Overview State Updates published in January 2002:
FLORIDA
Bill No. S420
Prohibits employment agency from charging applicants any fees before
the applicant obtains employment through the agency's services.
HAWAII
Bill No. H1963
"Temporary Worker Bill of Rights" would require staffing
firms to provide the rate paid by the client for the firm's services,
the method of computing compensation and benefits, the job description,
and the length of the assignment. Staffing firms would have to pay
assigned employees' wages and benefits equal to those of the client's
employees. They may not restrict an employee from accepting a permanent
position with the client, but may receive a "reasonable"
placement fee from the client.
MASSACHUSETTS
Bill No. H2314, S484
Caps rate for services provided by nursing pools to licensed nursing
facilities at 135% of the median salary cost per hour for direct
care nursing staff employed by nursing facilities.
MINNESOTA
Bill No. H895
For each job opportunity posted, the firm must provide, among other
things, the rate paid by the client for the firm's services, the
method of computing compensation and benefits, a job description,
and the length of the assignment. Requires that temps be paid wages
and benefits equal to those of the client's employees.
NEW YORK
Bill No. A3736, S801
Requires employer fee paid placement firms to keep certain records
concerning job orders and advertisements for one year, and not advertise
for jobs for which they do not have on file bona fide job orders
without disclosing that fact.
Bill No. A7428
Requires staffing firm to provide temps with wages and benefits
equal to those of client employees if the employee works for client
for 90 days or more, and disclose to employees the rate charged
to clients and post detailed job descriptions.
PENNSYLVANIA
Bill No. S685
Requires contingent workers to receive the same wages and benefits
as the client's full time employees.
TENNESSEE
Bill No. S303
Requires staffing firms to pay assigned employees wages no less
than those of the client's employees.
So What?
I am not so concerned with whether or not these particular legislative
bills will pass or have passed into law. The point I am making is
that the jig is up for unethical staffing industry vendors. State
legislators have them in their sights. Corporate clients have their
number. The writing is on the wall. The cat's out of the bag.
Eventually, despite heavy lobbying by the staffing industry, the
states will, one by one, pass legislation that will impose criminal
penalties on staffing agencies that continue to practice the status
quo.
The consequences are clear. If staffing agencies don’t wise
up they will find themselves legislated out of business. (Come to
think of it, that wouldn’t be an entirely bad idea.)
Either reform or be reformed. In either event, it is the beginning
of the end for abusive staffing vendors as we have come to know
them.
How Staffing Vendors Harm Their Clients
As we have seen earlier, companies believe erroneously that ordinary
staffing vendors offer a sufficient affirmative defense against
the risks of co-employment. And many companies believe that they
have no alternative but to run their contractor's through ordinary
staffing agencies to mitigate co-employment risks, even though the
practice contributes to inflated contingent labor costs and any
number of harmful side effects.
When companies become aware that absolutely every service
provided by an ordinary staffing vendor is currently available at
lower cost through other channels, allowing companies to direct
source their contingent talent with greatly reduced co-employment
risk, they will move en mass to disintermediate predatory recruiting
agencies and other staffing vendors.
If you own stock in ordinary staffing vendors, sell it. Cut your
losses. Temp agencies are toast. Take 'em off the barbie, mate.
They're done!
Let’s look at a few of the ways that staffing vendors, especially
vendors on premise and preferred vendors, harm their
own clients by incorporating unethical practices into their standard
business model.
Staffing vendors systematically harm client companies by:
- Inflating the cost of contingent labor
- Exposing the client to class action lawsuits for retroactive
benefits
- Multi-tiered subcontracting arrangements
- Limiting access to talented professionals
- Holding clients hostage
- Creating hostile vendor relations
- Creating unintended harmful side effects
- Mismanaging their businesses to the detriment of the client
Inflating the cost of contingent labor
Vendors on premise typically charge a transaction fee or markup
for every contingent worker that they "manage", regardless
of whether the contingent worker was direct sourced by the client,
submitted by a second tier staffing vendor, or placed by the vendor
on premise itself. The management fee averages at least 5% of the
billing rate.
Additionally, vendors on premise and preferred vendors typically
charge subcontractors and/or the client an additional 10% (at least)
for each independent contractor or agency that subcontracts through
the vendor as a condition of working for the client.
The total overhead charged by a vendor on premise and the various
first tier staffing vendors is, therefor, somewhere around 15% of
the billing rate, or $11.25 per hour if the average billing rate
is $75 per hour.
Let's do some simple arithmetic. Two-thousand hours per year times
$11.25 per hour equals an overhead cost of $22,500 per contractor
per year. A company with just twenty-five contractors can save over
$500,000 per year by eliminating their gatekeepers and by managing
their contingent workforce in-house using a vendor neutral risk
management service like P.A.C.E.
ProTect with ComplianceSecurity.
Companies can no longer afford to squander their resources on smoke
and mirrors, and savvy companies are taking steps to direct source
their contingent workers and eliminate expensive and ineffective
staffing vendors.
Exposing the client to class action lawsuits for retroactive benefits
If paying too much for under-benefited contractors were not enough,
companies like Microsoft
and the Metropolitan Water District of Southern California are
discovering that staffing agencies also offer scant protection from
class action lawsuits on behalf of disgruntled agency temps who
seek to recover compensation for retroactive benefits. Rather than
going after the agency itself, aggressive class action attorneys
are going after the agency's client company by taking advantage
of the ease with which agency temps can be reclassified as co-employees
of the client.
Ordinary staffing agencies that provide little or no benefits turn
their clients into sitting ducks for class action lawsuits. Savvy
companies must insist that staffing vendors offer benefits equivalent
to the benefits that companies offer their own employees. Yet, as
we have seen, the temp agency business model is incompatible with
this requirement.
The only acceptable alternative is for companies to direct source
their contingent workforce, and then use a progressive employer
of record service like P.A.C.E. ProTrac to provide W-2 employment
and a superb benefits package, and use P.A.C.E. ProTect with ComplianceSecurity
to provide attorney-validated and attorney-endorsed co-employment
risk management.
Multi-tiered subcontracting arrangements
I have seen agency subcontracting chains as many as five agencies
deep, each taking a cut of the ultimate billing rate. Chains of
two or three agencies are commonplace, especially when there is
a limited number of preferred vendors blocking access to the client.
The practice of multi-tiered subcontracting further inflates the
cost of hire for contingent workers and simultaneously reduces the
wages available to the contractor. If an agency margin of 35% to
50% is too much, imagine the effect of three or four agencies, each
subcontracted to the one above. Once again, either the client company
pays too much for what they get or it gets an under-skilled, under-paid
and/or under-benefited contractor.
Limiting access to talented professionals
Ordinary staffing vendors view independent contractors, other staffing
agencies, and even their own temporary employees as hostile competitors.
Ordinary staffing vendors are decidedly not vendor neutral.
Vendors on premise and preferred vendors have a strong financial
incentive to block or delay the appointments of direct sourced independent
professionals and contractors presented by rival agencies while
they seek to fill the position themselves. As the Executive Director
of P.A.C.E. I have on numerous occasions witnessed this unethical
practice first hand, with the result that the client's mission critical
projects are delayed while the preferred vendor attempts to locate
a substitute contractor of its own.
Vendors on premise and other first tier vendors routinely buy time
by holding job requisitions for 48 to 72 hours before they release
the requisitions to second tier vendors and ultimately to the Internet
job boards. Coupled with the time delays inherent in multi-tiered
subcontracting, this practice can add a week or more to the hiring
process for contingent workers when compared with direct posting
by the client itself.
Holding the client hostage
Companies should ask themselves, "Who owns the resumes submitted
to vendors on premise and contingent workforce management companies
for job requisitions released by the client?"
The fact is that once a company selects a vendor to manage the
temporary services process that vendor ends up owning the data and
the information management system. This gives vendors on premise
and contingent workforce management companies tremendous leverage
to abuse their position as a trusted intermediary. Once a staffing
vendor is ensconced within a company it can be very difficult for
the company to replace it.
Moreover, it is a common practice among staffing vendors to require
that their clients sign an exclusivity agreement that prevents the
client from sourcing its contingent workers through competing staffing
vendors. If the client does use a competitor the exclusivity agreement
specifies that the client must pay a significant "corkage fee"
to the gatekeeper.
Creating hostile vendor relations
For the most part, companies value their relationships with their
vendors, and they go out of their way to treat vendors fairly and
pay them in a timely manner. Yet, when a company outsources its
contingent staffing services to a gatekeeper it sets up an intrinsically
hostile relationship in which the gatekeeper is at once a representative
of the company and a competitor to every other staffing vendor.
The two roles are incompatible, and lead to any number of unfair
competitive practices.
As mentioned above, at P.A.C.E. we routinely see situations where
a gatekeeper attempts to block the assignment of a contractor submitted
by a rival agency to the detriment of a mission critical project
at the client.
Creating unintended harmful side effects
At P.A.C.E. we occasionally have to deal with a particular contingent
workforce management vendor that contracts with large client companies.
The vendor qualifies independent contractors and staffing vendors,
and manages their access to the client. Independent contractors
and staffing vendors must subcontract through this vendor as a condition
of working for the client.
The vendor's sales pitch to prospective clients goes something
like this: "We will charge you very little, if anything at
all, to manage your contingent workforce. Instead we will take our
fee out of the subcontractor's billing rate. And we will help you
manage your overtime costs by paying your contractors only three-fourths
of the standard rate (not the customary time-and-one-half) for hours
billed beyond eight hours a day."
This approach is a relatively easy sell because it promises an
immediate dollar savings. In practice, however, the vendor's approach
has the potential to produce disgruntled subcontractors who resent
being gouged by a "do nothing" gatekeeper. And, the approach
has the potential also to produce unhappy project managers who suffer
because staffing vendors have a greater incentive to send their
candidates elsewhere. Moreover, adding insult to injury, the regressive
overtime policy has the potential to discourage contractors from
working extra hours on time-pressed, mission-critical projects.
I know that the employees of one client served by this particular
vendor are unhappy with the service they receive because the client
routinely and covertly bypasses this staffing vendor to contract
directly with P.A.C.E. whenever possible.
Mismanaging their businesses to the detriment of the client
Here is one example of how an inept vendor on premise can harm
its client to the tune of several million dollars.
A very large company (that I cannot name as a condition of a legal
settlement) turned over its contingent workforce management to a
grossly understaffed and under-trained vendor on premise. Apparently,
because the vendor qualified as a gender-based minority vendor,
there was little effort on the part of the client to hold this vendor
fully accountable for its many incompetencies, in spite of loud
and vigorous complaints by the many staffing vendors, including
P.A.C.E., that relied on this gatekeeper for payment.
Over a period of two years, of which I am personally aware, the
client regularly paid this rogue gatekeeper for invoices submitted
by many different staffing agencies. Unfortunately, because of what
I can only attribute to inefficiency and greed, the primary staffing
vendor was unable to manage its cash flow. It became increasingly
late in paying its subcontractors, often losing invoices outright.
Payments were routinely delayed by three to six months, and toward
the "end" some invoices were in arrears almost one full
year.
Incredibly, the client was either unwilling or unable to pull the
plug (perhaps, because of an exclusivity agreement in the contract?)
until eventually this rogue gatekeeper filed for bankruptcy protection.
The bankruptcy left subcontractors holding the bag for millions
of dollars in unpaid invoices. At first, the client refused to accept
responsibility for the unpaid invoices, claiming that it had already
paid the gatekeeper. After several months the client offered to
pay off the agencies with pennies on the dollar. Eventually, because
its position was legally untenable, the client paid all outstanding
invoices in full, even though it had previously paid the full amount
owed to the now bankrupt staffing vendor.
Many staffing vendors were affected, and I am personally aware
of just three staffing vendors that settled for approximately $20,000,
$400,000 and, incredibly, over $800,000 in unpaid invoices. This
is yet another graphic example of what can happen when companies
turn over control of their contingent workforce to a third-party
gatekeeper.
Yet, companies continue to use staffing vendors to mitigate co-employment
risks
Despite such abuses, or at least the potential for such abuses,
large companies continue to endure onsite gatekeepers, preferred
vendors, and approved staffing agencies to manage their contingent
workforce. Why?
The answer, in a word: Fear. Companies are afraid of the
consequences of doing nothing, so they do the only thing they know
how to do. They create as much distance as possible between the
company and their contingent workers by running them through ordinary
staffing agencies. Unfortunately, this is not enough.
Consider these points:
- The IRS still considers employment tax abuse to be the second
largest tax compliance issue in the US.
- The IRS estimates that 50% of all contingent employees are
misclassified, and the IRS attempts to reclassify as many independent
contractors as possible as common law employees of the companies
where they work.
- Despite stepped up compliance efforts by companies, the IRS
still assesses more than one-third of audited companies for back
taxes, penalties and interest because of “misclassified”
workers.
- In 2001 the IRS audited an estimated 50,000 companies for contingent
workforce compliance.
- And in nearly 12,000 audits over one six-year period, the IRS
reclassified 483,000 workers and raised close to 1 billion in
back taxes, interest and penalties - often from companies that
thought they were in compliance with current employment tax laws.
Using a staffing agency to employ contractors is little more than
a placebo; a placebo that is virtually useless in the face concerted
efforts by the IRS, class action attorneys, or the courts to reclassify
agency temps as employees of the company where they work.
Staffing vendors are very aware that the mitigation service they
perform is a sham, but it gives them the leverage they need to carry
out their real mission, which is to wrest control of the contingent
workforce from their clients, and then grab as much as possible
of the money companies pay for their contingent workers.
P.A.C.E. ProTrac and P.A.C.E. ProTect to the rescue
The growth of the staffing industry (temp agencies, recruiting
firms, professional employment organizations) poses a huge threat
to the benefits of temporary employees and contract professionals,
and to full-time, regular employees who are converted to agency
temps. Essentially, staffing vendors hijack the employee labor load
to fund their profits and operation, leaving the contractor with
virtually no benefits. P.A.C.E. is attempting to counter this threat
by showing both contractors and the companies that use their consulting
services how to connect to one another directly and thereby disintermediate
the expensive and abusive staffing vendors.
The P.A.C.E.
ProTrac business model, with its low margins and superb benefits,
makes it possible for contract professionals to obtain the best
of all possible worlds: All the freedom and financial advantages
of self-employment, all the security and continuity of corporate
employment, and the best benefits package available to ANY employee
in ANY company in the USA.
The P.A.C.E.
ProTect business model, offering the only attorney validated
and attorney endorsed co-employment risk management solution in
the USA, makes it possible for client companies to direct source
their contingent workers and finally wrest control of their contingent
workforce back from the cold clutches of expensive and abusive staffing
vendors.
The largest private employer in the USA is reputedly either Manpower
or Adecco. Both are temporary staffing agencies! So you can
see how big this issue is, and how big is the potential market for
an organization like P.A.C.E. that gives so much back to contract
professionals and to the companies that use their consulting services.
In the next issue of the CENewsletter I will discuss how talent
agents benefit entertainers and professional athletes, and I will
show how a similar model incorporating true talent agents for knowledge
workers is vastly superior to the current situation in which contract
processionals use temp agencies and recruiting firms to find work.
Return to Table of Contents.
Kudos and Testimonials
What People Are Saying About The Contract Employee's
Project
[We received an e-mail recently containing the following kind
words about P.A.C.E. I wanted to share them with you.]
"My brother switched to P.A.C.E. after I told him about you,
and the following is what he wrote:
FYI, I just started with P.A.C.E. Supposedly, my previous agency
was transparent with me, but the minute I began with P.A.C.E.
I was instantly privy to all kinds of information that had been
withheld from me before. P.A.C.E. faxed me the actual purchase
order and we went over the break down of how the figures in the
purchase order were derived. Apparently, there was a lot of margin
for over time and travel expense that my previous agency might
have been keeping for itself without telling me. Furthermore,
unbeknownst to me, my previous agency was paying Microsoft 2%
of my income to get a guarantee of payment in 10 days instead
of 60 days, and they never said a word to me about it. Of course,
I’d rather be paid in 10 than 60, but it is not worth 2%
of my income to get that service!!
Looks like my salary will be going up about $8 / hour, thanks
to lower agency margins, and I’ve got a giant health insurance
premium coming up in about a month that I will be able to pay
for (100%) out of pre-tax dollars, thanks to the expense account
system P.A.C.E. has set up. Wow, what an improvement.
Anyway - I'm just touching base. Thanks for all your great work.
You're still my hero."
[In my book every P.A.C.E. Division Manager is a hero, by taking
a stand against unethical and abusive recruiting firms, and by daring
to take control of their consulting career. By the way, P.A.C.E.
is an approved "V Dash" direct vendor at Microsoft, as
in "v-johndoe@microsoft.com".
"V Dash" contractors may work indefinitely at Microsoft
without having to abide by the standard one-year-on-one-hundred-days-off
contract regimen. Staffing agency temps are typically "A Dash"
contractors, as in "a-janeroe@microsoft.com".]
Return to Table of Contents.
Agency Madness
More And More Clients Direct Sourcing Their Contingent
Workers
Redback
Networks Inc. posts the following message in the employment
section of their website:
"Note to Employment Agencies
Resumes received by Redback Networks Inc. from search firms
are considered unsolicited and will be kept as Redback's intellectual
property, or deleted as appropriate, unless a contractual obligation
exists otherwise between Redback and a search firm."
Documentum,
the Pleasanton, CA, based document management company has an enterprise-wide
policy of direct sourcing all full-time and contingent workers.
Documentum will not hire candidates that are introduced to the company
through a recruiting firm. Period!
Companies are increasingly direct sourcing their employment candidates
and consultants, and most do not appreciate being deluged by resumes
from recruiting firms and pushy intermediaries. It's nice to see
companies be so forthright in their denunciation of unnecessary
recruiting firm costs and unethical practices.
Return to Table of Contents.
Ask Dungaree Dan
How To List An Incomplete Degree
Q: Dear Dan -- I attended college a while back but did not
finish to get my degree. How should I list that on my resume? I
have almost two-and-one-half years finished. I also took an intensive
technical hands-on programming course which I never used. -- Signed:
Incompletely Degreed"
A: Dear Incompletely Degreed -- You don't have to jettison
several years of school just because you didn't complete the curriculum.
State your experience like this:
====================================
EDUCATION
ABC College
Anywhere USA
75 units toward BS degree in Electrical Engineering
CLASSES AND TRAINING
Name and description of relevant class or hands-on programming course
Name and description of another class or hands-on programming course
Name and description of another class or hands-on programming course
Etc.
====================================
There is no shame in citing course work prior to completing a degree.
After all, nowadays, community colleges and many private schools
do most of their business teaching individual classes outside of
a regular degree track.
I recommend that you DO NOT put dates on your education. Not only
does it tend to reveal your approximate age, which is nobody's business,
but is also indicates that the education may be stale or out of
date. Why give companies the opportunity to discriminate against
you on any basis other than whether you can do the job, and how
well you can do it?
All in all, having a college degree is way better than not
having one, and I heartily recommend that you spend the time on
evenings and weekends to complete your degree. Companies look at
college as a character builder. The advanced level courses teach
you how to think and communicate clearly, and they introduce you
to new ideas.
An individual who completes college level and graduate level courses
while working full time demonstrates the kind of commitment and
industry that I, personally, like to see in my own employees. I
can't imagine that other employers and clients wouldn't feel the
same.
Granted, college is a lot about theory, and often I hear people
who have not completed college tout the many advantages of "hands-on"
experience over theory. But, in my humble opinion, which is worth
the price you are paying for it, college plus hands-on experience
has it all over hands-on experience alone. -- Signed: Dungaree
Dan
Questions for Dungaree Dan
Send your questions about contract employment to Ask
Dungaree Dan. We will try to answer all of your questions, and
we will publish the most interesting ones in The Contract Employee's
Newsletter.
Return to Table of Contents.
Contract Employee's
Glossary
Terminology For Contract Professionals
More terms from Appendix
B: Glossary of Terms for Contract Professionals of The
Contract Employee's Handbook.
I-9 form
The I-9 form must be completed for all employees, whether citizen
or noncitizen, in order to show evidence of the employee's eligibility
to work in the United States. The employee must submit documentation
that establishes both identity and employment eligibility.
Incorporated contractor
A Contract Professional who is the sole shareholder and sole employee
of a corporation. A one-person corporation.
Incorporation
To form into a legal corporation. Forming a corporate business entity.
Indemnification Clause
Also referred to as a hold harmless clause. Indemnification is a
contractual arrangement by which one party assumes the liability
inherent in a situation, and thereby relieves the other party of
responsibility. For example, a client may seek indemnification against
the financial consequences of a defective software deliverable.
Clients frequently require that their Contract Professionals carry
general liability insurance and errors & omissions insurance
for this purpose.
Independent contractor
The IRS recognizes two types of worker status for tax collection
purposes: employee and independent contractor. An independent contractor
is any worker or entity for hire that is not an employee. Independent
contractors may be sole proprietorships, partnerships, limited liability
companies, or corporations. Most technical and professional consultants
are either sole proprietorships or one-person corporations. These
are the two business forms that we usually associate with individuals
who operate as independent contractors. There is some disagreement
about the precise definition of an independent contractor. Some
authors restrict the term to individuals working as an independent
business. Others include all businesses ranging in size from a one-person
operation to the largest mega-corporation.
Independent consultant
An independent consultant is a consultant who works independently
of a consulting firm or staffing agency. An independent consultant
has the freedom to contract directly with their client or select
their own employer of record to contract with their client. A free
agent, freelancer, or independent contractor. Contrast with captive
consultant, captive contractor, or captive employee.
Independent professional
A free agent, freelancer, or independent contractor.
Injunctive relief
Injunctive relief is a court order requiring a person to perform,
or to refrain from performing, a designated activity. Staffing agency
contracts often contain an injunctive relief clause for the purpose
of preventing a contractor or subcontractor from soliciting a client’s
business in violation of a blanket noncompete agreement. Injunctive
relief is invoked when monetary damages are not the appropriate
remedy to compensate for loss.
Internet
The Internet is an electronic communications network that connects
computer networks and organizational computer facilities around
the world. The World Wide Web is a part of the Internet designed
to allow easier navigation of the network through the use of graphical
user interfaces and hypertext links between different addresses.
Return to Table of Contents.
P.A.C.E. News
Press Release: Computer Crisis Threatens Processing
of Business Data
FOR IMMEDIATE RELEASE:
September 1, 2001
Computer Crisis Threatens Processing of Business
Data
Media Contact:
Bill Payson
The Senior Staff, Inc.
San Jose, CA
(408) 371-9064
payson@srstaff.com
Preoccupation with the Economy, Corruption, Collapse
of Dot-Com Ventures obscures vulnerability of business to Data Processing
skills no longer taught, yet in critical short supply.
"Old Pros to the Rescue!" Legacy Reserves called to action.
e-Legacy Learning now available at www.legacyreserves.com.
San Jose, CA -- The Senior Staff (largest databank in the
U.S. of Information Technology professionals over age 35); DePaul
University, Graduate School of Business; and P.A.C.E. (Professional
Association for Contract Employment) announce a joint initiative to
mobilize veteran programmers, train them in moving business data
to the Internet, and put them to work as contract consultants to
help meet the data processing crisis threatening businesses all
over the world.
COBOL is the Dial-Tone of Business. No Dial-Tone, No Business.
"Three-quarters of business data is processed in COBOL (Common
Business Oriented Language), a 42 year-old skill that hasn't been
taught at the university level in 15 years," says Bill Payson,
President of Senior Staff Job Information Exchange. "In addition",
Payson adds, "youngsters don't want to learn COBOL for the
simple reason that it's not 'new', and if technology is not new,
it is -- to many under age 35 -- ipso facto, no good."
Hidden Assets of Business Information Technology.
Dr. Howard A. Kanter, CPA, who conducts the e-Legacy Learning program
at DePaul University, described the rationale; "In today's
business environment, the search for increased efficiency goes on.
A strategy that many worldwide organizations are following is the
reuse rather than the rewrite of legacy applications. The overall
objective of this course is to provide the training necessary for
an individual to become an 'Integrated System Architect,' competent
in both mainframe and microcomputer skills."
"One feature of this advanced training of veteran programmers
is to utilize industry-wide guest lecturers to convey to job seekers
what companies require today in the way of Information Technology
skills," said James R. Ziegler Ph.D., executive director of
P.A.C.E. "Companies will be asked to make two commitments:
1) If a candidate/student successfully completes the course, the
company agrees to an interview, and 2) If the candidate is hired,
the company agrees to reimburse the candidate for the cost of the
training. E-Legacy Learning costs are modest, starting at $600 per
year," Ziegler added.
Payson summed up the overall objective of the initiative: "The
idea behind continuous education is to capitalize on hidden assets
of cumulative experience and to provide constant, updated, factual
data to candidates so that they can stay on top of very fast changing
technologies for the whole of their professional life."
"e-Legacy Learning is now available to Legacy Reservists via
their own desktop computer, at home, on their own schedule, at a
modest, conditionally refundable investment," added Payson.
More information may be found at www.legacyreserves.com,
(click on the e-Legacy Learning Logo); e-mail:
info@srstaff.com, or call (408) 371-9064.
LEGACY RESERVES
A Professional Relationship
The Senior Staff, Inc.
Strategic Staffing
P.O. Box 1382
Campbell, CA 95009-1382
(408) 371-9064
www.srstaff.com
www.legacyreserves.com
DePaul University, Kellstadt Graduate School
of Business
e-Legacy Learning Continua
1 East Jackson Boulevard
Chicago, IL 60604-2287
(312) 362-8449
www.elegacylearning.com
P.A.C.E. – Professional Association for Contract Employment
Employer of Record Services
1355 Willow Way, Suite 244
Concord, CA 94520
(925) 680-0200
www.pacepros.com
www.cehandbook.com
P.A.C.E. is a Win - Win - Win - Win Solution for Downsized Employees,
Contract Employees, Independent Contractors, and Client Companies.
Check out P.A.C.E.
for the best benefits package available to ANY employee in ANY company
in the USA.
Return to Table of Contents.
The Contract Employee's
Project
The Contract Employee's Project is the larger context under which
the following interrelated vehicles operate to promote and defend
the interests of Contract Professionals:
Copyright and
Publication Info
Copyright (c) 2002, James R. Ziegler. All rights reserved.
You may copy or forward this free publication provided it is left
intact with all links and this notice unchanged. Any unauthorized
duplication, including republication in part or in full for commercial
use, is an infringement of copyright.
Published by:
P.A.C.E. - Professional Association for Contract Employment
1355 Willow Way, Suite 244
Concord, CA 94520
USA
http://www.pacepros.com/
Editor:
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
(925) 680-0200
CENewsletters@pacepros.com
Return to Table of Contents.
Disclaimer
The Contract Employee's Newsletter is designed to provide information
in regard to the subject matter covered. Use is granted with the
understanding that the publisher and authors are not engaged in
rendering legal or financial advice. If expert assistance is required
you should seek the services of a competent professional.
The purpose of this information is to educate and entertain. The
publisher and contributors shall have neither liability nor responsibility
to any person or entity with respect to any loss or damage caused,
or alleged to be caused, directly or indirectly, by the information
contained in this Newsletter or by information contained in any
web site or resource referenced by citation or hypertext link within
the pages of this Newsletter.
Return to Table of Contents.
Subscribe to The Contract
Employee's Newsletter
The Contract Employee's
Newsletter: Sign Up Now! Useful News & Updates
Return to Table of Contents.
Sign-off
I hope you have found the information in this newsletter to be
interesting, informative, and provocative. I encourage you to share
the CENewsletter with your friends, colleagues, coworkers, clients,
and agency recruiters.
Why clients? Because you need every ally you can get. Why agency
recruiters? Because they need to know the jig is up.
Wishing you success in your contracting career,
James R. Ziegler, Ph.D.
Executive Director
P.A.C.E. -- Professional Association for Contract Employment
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