Wednesday, November 05, 2014

Contract jobs: The employee takes all the risks

I had a conversation with a recruiter for an East Coast contracting agency last week that was very illuminating, in that it made clear a number of drawbacks to the contract worker model that I hadn't really thought about. Rather than rehash the discussion, let's go right to the key points:

  • When a contract recruiter contacts a candidate for a job, the candidate will be working for the recruiter's client, but the employer of record will be the contract recruiter's own agency.
  • What's rarely admitted by either clients or agencies prior to giving the worker the final contracts to sign in order to start work is that he or she is initially being hired on a conditional basis--typically a two-week trial period. If the client isn't happy with the worker's performance, or the worker isn't getting along with other people in the client's company, the client can terminate the contract without a penalty (paid to the agency, not the worker.) That's critically important if you have to relocate to take a contract job. You should try to negotiate with the agency for temporary housing and, if needed, car rental in the new city for the trial period, so that you don't uproot yourself until you know that the client wants you to stay on.
  • Neither the client nor the agency will provide any relocation benefits. That means that the worker is completely responsible for covering the costs of finding a new place to live, packing, moving, and any hotel or motel costs.
  • When an agency recruiter says that a contract is for six months, a year or two years, that really means nothing. All it means is that the client estimates that the project or job will last that long. The worker can be let go of at any time, for any reason. Some clients give two weeks' notice, but others may give just a few days or none at all.
  • Eligibility for unemployment benefits varies by state, but in general, the client will argue that it has an independent contractor agreement with the agency, and the agency will argue that the worker is an independent contractor. While there's a possibility that you can get unemployment after a contract ends, it's safer to assume that you won't.
In my opinion, contract jobs only work well for both parties when the worker doesn't have to relocate to take them. A second possibility is when the worker is both single and would be working in an area with much better employment opportunities than where they're currently living. In that case, it may make sense for the worker to bear the moving costs, so long as they can find other work quickly once their contract project ends. However, many of the contract jobs that I've seen lately are in smaller cities and towns, and they're recruiting outside the local area because they can't find qualified candidates locally. Prior to 2008, those companies would have likely hired permanent employees and relocated them, but there was undoubtedly high attrition as many of those workers chose to return to where they came from. Today, they can bring on contract workers, pay them no benefits, aren't responsible for unemployment compensation and don't have to underwrite relocation costs.

That's why I say that the contract worker bears all the risks in the temp economy. The worst risks that clients face are the loss of a couple weeks of work, and possibly, some penalties that they have to pay to agencies if they terminate contracts early and without cause. This is inevitably going to boomerang into the faces of clients, because of high contract employee turnover, less-qualified candidates that make it through the screening process but that would have been weeded out with more extensive interviewing, and a complete lack of loyalty on the part of both clients and workers, all of which will lead to lower productivity. A better term might be the "mercenary economy" rather than the temp economy.
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