Protect your Company from Temp Napping and Back Door Hires

By: Wilson Cole
Date: 3/1/2007

The economy has recovered from the slow down a few years ago, and it seems like everyone needs staffing or needs help finding qualified candidates for direct hire. That is the good news. The bad news is that we have seen a spike in recent months of "Back Door Hires" and "Temp Napping." So I wanted to take a moment and let you know what to do to protect yourself from these issues.

First, let me take a moment to explain what I am talking about when I say Temp Napping and Back Door Hires so everyone is clear about the subject. Back Door Hire is when you present a candidate and the company hires the candidate without your knowledge and cuts you out of your recruitment fee. This is typically done to recruiters or staffing companies that do direct hires. Temp Napping is similar, but it happens when you send a Temp to a location and this location calls the temp back and has them work on their own payroll.

I do not have to tell you how much this costs you when it happens. You have to cover all the costs of recruiting the individual, marketing them to the company either as a Temp or as a Candidate, and then when it gets to the point of having them pay for it, they directly go behind your back. In my opinion, these types of collection cases and debtors are the worst because they have stolen someone from you. Most companies that come into my company for collections are good companies and good people. They have just misjudged cash flow. But, the ones that come in for Temp Napping and Back Doors Hires are the worst of the worst in my opinion, because they never intended to pay you. They pick up the phone and call you, knowing full-well from the very beginning they never intended on paying you a dime.

So, now that I have pointed out the obvious, let me give you some tools and some guidance on what you can do in the future to protect your company. The solution is primarily the same regardless what side of the industry you are on. If you are temporary agency, you need to put the following safeguards on your credit applications and time sheets. If you are a recruiter, make sure it is on your fee agreement.

Lesson 1: Get a Signature.
Yes, we can still collect in most states with just a paper trail, but it is much easier to get it collected if someone with " Perceived Authority" signs your paper work. If the deal goes south, sometimes the debtor will claim the person did not have authority to sign. Legally all you have to have is perceived authority. Let me give you an example in plain English. If the manager, VP, director or supervisor signs, you are in good shape. They would all have Perceived Authority, but if the janitor, doorman, security guard or receptionist signed, they would not have Perceived Authority.

Lesson 2: Be specific.
Be very specific on what is owed if the candidate or temp is hired. For example, 25% of estimated yearly earnings or 33% of base pay would be specifics and would be very easily enforced. So, the key is to be very specific.

Lesson 3: State you are owed.
Make sure you mention that you are owed regardless if they become an employee, independent contractor or work for a third party. Also, you want to make sure you state that you are owed if they work full-time or part-time.

Lesson 4: Cover collection fees.
Make sure they agree to pay reasonable collection and/or attorney fees if they fail to pay you. Mention your late fees and interest on any unpaid invoice. The law is very clear here. If you do not have a signed contract specifically on these items, you cannot charge the debtor for those items if the account goes into default. You have to absorb those costs even if you win in court.

Pay very close attention to these items regardless what part of the country you service. However, if you are in Massachusess or New Jersey, you need to pay very close attention to these items, especially with regard to lesson number one.

Over the last 15 years, I have collected millions of dollars for over 800 staffing and recruitment firms. I have developed a Credit and Collection Audit that will tell you instantly if you are at the bottom or the top of the industry when it comes to Credit and Collect Risk. For a free Credit and Collection Audit, simply go to www.aercollections.com/test; then answer a few simple questions, and the system will automatically tell you where you fall in the industry.

Wilson Cole is Founder of Adams, Evens & Ross and Co- Founder of Recruiting & Staffing Solution Magazine. He can be contacted at 800.960.4365, or by email at wilson@aercollections.com.