“We hired the candidate, but they did not last 90 days.”
Every recruiter I know hates the dreaded words, “The candidate did not work out,” but it comes with the territory. The issue becomes even worse when they have not paid you for the candidate in the first place. No one wants to work for free, and no one wants to replace a candidate when they have not been paid on the original placement.
When I get a call from a recruiter, the conversation sounds a little bit like this, “Hi, Wilson. We placed a candidate at a company four months ago, and they were let go [within that period of time]. The hiring company still has not paid us for the original candidate, and they say that they are not going to pay us for that fee.” At the risk of sounding like a broken record, my first question is, “Do we have a signed agreement and what does it say about a guarantee? How long was the guarantee? Was it a 30 day, a 90 day, or a 12-month guarantee?” I want to know what it says about the guarantee as far as payment from the hiring company. In this type of unpaid recruiting, it is absolutely critical that you have a signed agreement. The signed agreement is, in essence, a prenuptial agreement that says if things go bad, this is how we are going to solve the worst-case scenario. This agreement should say something along the lines of a replacement of the candidate is the only remedy. The agreement should also say that if payment is not made within the term the guarantee is no longer in effect, but the invoice is still due.
Now I’m being a bit redundant, but I want to bring to your attention why I want a signed agreement. Try looking at the replacement guarantee as a prenuptial agreement, could you imagine someone saying even though they did not sign the prenuptial agreement before we married it really means that they agreed to the terms and conditions of the prenup? In the hiring company’s defense, the agreement on how to resolve an issue when a candidate does not last past a guarantee is in the contract. One of the things that you could do to help resolve it yourself before we get involved is point out to your client, assuming you have a signed agreement, that it says a replacement guarantee and not a money back guarantee. When the hiring company does not pay you for a candidate that did not last a guarantee, they are in essence taking a refund vs. a replacement.
These type of recruiting fees are very difficult to get the debtor to pay the full amount without replacing the candidate. This complicates the problem because sometimes the candidate left the hiring company because the hiring company treated the candidate in the same way they treated you after they hired him. They did not pay your fee, and they start doing the same thing with your candidate on their compensation package. When your candidate leaves, psychologically, the hiring company is thinking, “Well Gee, we don’t know why the candidate is no longer here.” If you should run into this type of recruiting fee you need to ask yourself, is this company worth saving as a client? Does the company have a point, and do I want to work with this company again in the future? The next question you want to ask yourself if you have established that this company is not one you want to work with again is: do you want to provide another candidate into a company that you cannot wholeheartedly recommend? If the issue is that it was a dispute and the candidate left before they paid your invoice, it is more of a business decision at that point. You have to ask yourself if this client worth saving, and how hard do you want to push for a fee before you do the replacement?
This scenario is the one that I originally described where they were behind on your invoice for five months, and they need to pay it before you do any additional work on the replacement candidate. Use my The “Litmus Test” to see if you need to get us involved. Meaning, as soon as you hear the debtor say, “I’m not going to pay you because…” You need to pick up the phone and give me a call. Anything you say and do from this point forward will only make the collection much more difficult.
I am going to give you two case studies listed below. In the first case study, our client had a signed agreement. In the second case study, the client did not have a signed agreement. These had very different outcomes.
Case Study Number One:
$50,000,000 Revenue Sized Company
Fee Owed: $16,000.00
Reason for the Dispute: The candidate left 45 days after the start date; the payment terms were 30 -Days while the guarantee period was 90 days. Our client had a signed agreement.
Resolution: We got involved, and the debtor paid in full within 10 days. Our client agreed to provide three qualified candidates for the position that was replaced. The signed agreement did have some weaknesses because it was very vague on when the guarantee was voided for failing to pay within the term.
This had a happy ending for the client because they continued to work with this particular hiring company for at least another four years placing three to five more candidates. The reason I know this is because the hiring company was placed again for collections several years later with a positive outcome as well.
Case Study Number Two:
$50,000,000 Revenue Sized
Fee Owed: $18,000.00
Reason for the Dispute: The candidate left within 60 days of being hired, and they had not paid the fee. Our client did not have a signed agreement; the agreement that they had sent over prior to working with the client was not signed or acknowledged and had a few weaknesses as well.
Resolution: After 30 days of back and forth, originally with the HR manager, and eventually with their legal department, our client accepted a $5,000 settlement without having to replace the candidate. In my opinion, we were lucky to get that because there was no signed agreement, and the candidate had left within a relatively short period of time. The agreement that was unsigned was very vague on when the guarantee would be canceled for failure to pay.
Wilson Cole is the founder and CEO of Adams, Evens & Ross, the nations largest credit and collection agency design exclusively for the staffing and recruiting industry. In 2008 he was inducted into INC Magazines, “INC 500” for being the CEO of Adams, Evens & Ross, the 307th fastest growing privately held company in America. This exclusive group of other INC 500 CEOs includes Bill Gates of Microsoft and Larry Ellison of Oracle.In 2007 Recruiting & Staffing Solutions Magazine’s Editorial Staff named him “ The Billion Dollar Man” due to the fact that he had collected or helped his clients collect more than 1 Billion dollars in past due debt over his career of almost 20 years as CEO of Adams, Evens & Ross.