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.

Jobs you can't afford to take

A multi-year consulting project that I worked on ended several months ago, and I've been trying to find work since then. I've spent much of my career working as a product manager; my software developer career is far behind me. Like many people, I keep current resumes on all of the popular job sites, as well as an active presence on LinkedIn. From the last time that I was in a long-term job search (2008) to now, a lot seems to have changed. Here are two trends I've noticed:

• Insurance jobs that aren't jobs

Every time I post a new resume or revise an existing one on Monster or CareerBuilder, I get bombarded with emails and phone calls from insurance companies, all of which are interested in talking to me about sales jobs. I've not seen the same activity when I make resume changes on sites like LinkedIn, SimplyHired or Indeed, which leads me to believe that Monster and CareerBuilder have a function that allows employers to mass email jobseekers who've posted new or changed resumes.

The problem with the insurance company "jobs" is that they're not jobs at all. The companies are looking for people with sufficient assets to set up their own insurance agencies, and the compensation they provide is 100% commission, at least until a threshold is reached. At that point, the insurance company kicks in some money, but it's usually to help fund setting up the agency, not salary for the salesperson. A few companies make this clear in their solicitation emails, but most of them don't, and the jobseeker learns the truth by doing their own research or by participating in an amazingly easy-to-get interview.

I've gotten to the point where I simply ignore the flood of emails from insurance companies, but recently, a few of them have stopped taking silence for an answer. Some send multiple follow-up emails, and one has even taken to making follow-up phone calls. I can only imagine that there's tremendous turnover in their agent ranks, and why wouldn't there be? If you want to buy insurance, have you ever had trouble finding an agent? Not likely; in fact, it's very likely that in any given week, a life or home insurance agent will send you a letter soliciting your business. Any new agent that an insurance company adds has to succeed by carving away business from an existing agent. That makes the chances of success very small, and the agents who do succeed are both highly motivated and highly profitable for the companies.

If you receive an email from an insurance company as the result of posting a resume, they're offering you a small business opportunity, not a job. Unless you really want to be an insurance agent, get off their mailing lists.

• Contract jobs that require relocation

Since the 2008 Great Recession, companies have increasingly made jobs that were once permanent into contract positions. At least half the positions that I'm contacted about are contract ones. I understand companies' preference for contract workers--they don't have to pay for benefits, and there's no hit on their unemployment insurance if they let a contract worker go. I'm happy to do contract work in the Chicago area where I live. However, contract employment agencies are now recruiting employees from all over the country, without offering any relocation assistance.

A phone call I got this morning from one such recruiter is illustrative: He said that a major brokerage firm is looking for a product manager in Austin, Texas, and noticed that I had expressed interest in moving to Austin. He asked me if I'd be interested in a job in Austin, and I said yes. I then answered a series of questions about my background and experience for him. Then, as his final question, he asked if I'd be interested in a six-month "contract-to-hire" position. I asked if there was relocation assistance, and he said no, so I replied that I wasn't interested and ended the call.

Most recruiters are more straightforward about disclosing the nature of the job as contract, but the problem goes further than simply withholding the nature of the job until the end. Contract jobs are ephemeral, and either the employment agency (the real employer) or their client can end the contract at any time. Some companies are notorious for not hiring their contract employees, and all that "contract-to-hire" really means is that the agency and client have agreed that the client can hire its workers after a certain period of time.

The real problem is that I've never encountered any employment agency that was willing to pay relocation expenses, or even share a portion of the expenses. There are times when I've had enough money to pay for relocation myself, but most times, the money I've put away is to cover taxes, with a little left over for emergencies. Employment agencies are looking for truly desperate people who are willing to uproot themselves and their families for a six-month contract, and who are willing to foot the entire bill for and risk of relocation.

This is bad enough when a candidate is being asked to relocate to a city like Austin with good job opportunities, but it's far worse when the candidate is asked to move to a city where there's only a handful of major employers. I was approached by an agency for a 12-month contract position as a product manager with a major consumer products company in Racine, Wisconsin. There's only one "major consumer products company" in Racine: S.C. Johnson. I could commute to Racine, but I'd spend three hours each day in my car. The agency suggested that I could stay in a hotel in Racine three or four nights each week, but I'd be responsible for paying for the hotel, as well as the additional expenses for taking care of my cat while I'm gone. Over the course of a month, I'd spend almost as much for the hotel, gas and other expenses as I'd pay for an apartment. I could move to Racine, but when my contract ended, I'd almost certainly be forced to move again.

Not long ago, I interviewed for a 12-month contract position with a Chicago-area company. The agency sent in five candidates for interviews, all of which had been well pre-screened, but the company ended up turning them all down. After meeting with company managers, it was clear to me that this job was critical enough to the company that it should have been a permanent, full-time position, yet the company wanted to hire a contract employee to save a little money.

The trend toward hiring contract employees, even for positions that should be permanent full-time, is increasingly turning employees into fungible goods. Companies see these contract employees as interchangeable, even though they often apply the same standards to them that they apply to their permanent employees. Contract employees learn to live with multi-month income interruptions every six or twelve months, and with the minimal benefits offered by employment agencies. In turn, the contract employees get very good at "spinning" themselves into whatever employers are looking for, and employers are faced with much higher employee turnover because the contract employees may be able to talk a good game but not execute.

I fear that U.S. businesses are burying themselves in order to save a few dollars. As for me, I'm old enough that I'll be out of the labor force very soon, and the only problem left for me will be not how to pay for my apartment but where to spread my ashes.