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Why it’s worth £6,000 a month to keep you out of a job

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Dreams are funny old things.

You’re playing for Scotland and you’ve just scored the winning goal in the dying minutes of the World Cup final – a clear giveaway this is a dream ­– the referee’s blown the whistle… and you watch in confusion as the trophy is awarded to the losing team instead.

Everyone goes home, leaving you on the pitch in your underpants. The stadium has pocketed the gate money, the vendors have made a packet out of the concessions – and you’re left with nothing. You wake up, screaming…

…and realise that it’s actually reality.

Because if you’re a contractor or a freelancer, something very similar may well be happening to you, right now.

Let’s say you’re working for a client – a big, well-funded client. You’re maybe taking home £400 a day and consistently knocking it out of the park. Your ideas are well received, your strategic ABM campaign netted a six-figure customer, and your copy is scoring hot, white marks across the souls of your readers.

Now, let’s also say that you’ve been there for eighteen months. As a contractor, you’re not getting raises or promotions; you’re not getting healthcare, insurance, paid sick leave or any of the other perks that the full-time workers get.

You don’t get a season ticket loan. You pay an accountant to do your taxes. That £400 a day figure is starting to look a bit low; surely you’re worth more?

Well, you are. Because the chances are that your client is paying almost the same as they’re paying you to the third-party recruiter who brought you on board.

Less than your job's worth

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Recruiters have been getting an increasingly bad rap recently for a number of reasons. As anyone on a job hunt will testify, getting pings from recruiters with an ‘ideal opportunity’ only to be subsequently ghosted is pretty much the norm.

This is part of the fallout from Industry 4.0 – automation is being used with alacrity to match prospects to roles, and the human element is being stripped away by agents clamouring to meet their KPIs.

But if you’ve actually been placed and, as in the example above, you’re an asset to the business – why won’t they just bring you onboard full time? Why are they instead paying 75% of your day rate to a third party who (apparently) adds no value whatsoever?

From the employer’s perspective, there are several reasons. Risk is a factor; hiring someone who then doesn’t work out is a major headache. Aside from the various processes that make up disciplinary and / or dismissal procedures, there’s then the whole business of re-advertising the position, interviewing new candidates and so on.

And it can be cost-effective. A company can make savings if it goes through three short-term contractors in two years – contractors who don’t need the same benefits as the full-timers. And if they’re really on the ball, it’s often possible for an employer to shift the most or all of the costs to the recruiter and then write it off against tax.

The recruiters, of course, are naturally keen to maintain the status quo. Having placed you, the last thing that they want is for their revenue stream to dry up. Which is why most of them charge a saint’s ransom to an employer to turn a contractor into a permanent hire.

The not-so-golden triangle

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So. Two sides of the triangle are happy, and the one who isn’t is the one who’s delivering the goods, which goes against everything that you learned about employment growing up.

The algebra of ‘get a job and earn a wage and the associated benefits’ has been turned inside out. You might be earning your fair wage, but you’re only actually getting half of it.

This is more serious than it looks (and from your viewpoint, it’s already pretty serious). There’s been a lot of talk about the stagnation of wages and which factors are causing it whilst at the same time, there are endless numbers of contractors who are having half of their wages siphoned off by an agency in the middle.

In the long run, the clients stand to lose out too – if a contractor has become an essential part of the business but has no job security, they can and will leave the second a better offer comes along; that one-week notice period suddenly cuts both ways.

And then the whole cycle begins anew, with recruiters and businesses bemoaning the shortage of quality workers – when in fact those workers are either locked into contracts, or have just given up and moved to Andalucía to raise chickens.

Sympathy for the Devil

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It’s easy to present the situation as a Manichean treatise – contractors are heroes, and recruiters are parasites. The reality is more complex.

Like any other business, recruiters have overheads to pay – office space, equipment and yes, their own full-time employees (unless they’re all contractors too, in which case the whole thing starts to resemble Inception).

There are a lot of good employers and recruiters who actively seek out and reward loyalty and quality; and equally, there are a lot of appalling contractors who let both of the sides down, over and over again.

More than a few contractors have weighed up the recruiter’s cut as a worthwhile trade-off for the freedom that they’re allowed in terms of how and when they work (particularly if their tax base is, in fact, The Hungry Iguana Bar and Grill in the Cayman Islands).

Like Scotland winning the World Cup, the recruitment industry isn’t set to kick up its legs any time soon, despite reports to the contrary; but the equilibrium has been upset. Social media and the likes of Reddit and Glassdoor are bringing more transparency to employment as a whole, and making it easier to laud or lambast the goodies and baddies.

With the current skills shortage, it’s the contractors and freelancers who are leading the changes; and it’ll be the forward-looking and empathic recruiters and employers who’ll share the benefits.

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