“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 The agreement should also say that if payment is not made within the term the guarantee is no longer in effect, but the invoice is still due.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. 

For more information please visit and contact Back Door Hires.

How to Find Back Door Hires?

Now that we have talked about how prevalent the problem is, I want to start getting into the meat on how to find them, and what to do once you find a Backdoor Hire.  

  

First, let me give you my definition of a Backdoor Hire so there is no confusion. A Backdoor Hire is when you present a candidate to a company, and they hire that candidate without your knowledge. The presentation is not limited to recruiters. If you provide a contract or temporary staffing, and that person is hired without your knowledge that is also a Missed Recruiting Fees. Over on the staffing and contract side, the fee you are owed is typically referred to as a conversion fee, but for the sake of argument and to not confuse anyone I will just refer to all issues as a Backdoor Hire.  

  

You need a systematic approach to keep track of your biggest assets, and  

  

that is your candidates. Keep in mind that the numbers do not lie, and the  

  

numbers tell me that if you send out on average 100-150 candidates  

  

(regardless of the industry), then you have already been a victim to a Backdoor Hire and are not even aware of it. On average, our clients tell me that roughly 150 candidates are sent out per desk or recruiter; if you have been a recruiter for 10 years with an average payment fee of $20,000, then you should have an extra $250,000 in your bank account. That is a lot of money especially when you consider that is just on average over a 10 year period. I have clients that have been recruiters for forty plus years. By my guess, they are owed one million dollars.  

  

You need to set up a tracking system, whether it is a mechanical system that you personally or your assistant follows up on every 3 months or it is an automated system. You could keep a spreadsheet and simply check LinkedIn or call the company and your candidate to touch base, or you could set up a calendar item in your CRM that is repetitive every 90 days just to make sure the candidate has not been hired by your client. There are low-cost services in the Philippines and India that have cost-effective virtual assistance that helps with that type of stuff as well. In the end, you have a number of choices.  

  

Here is the problem with a mechanical system: it is "People Dependent." I have run my own companies for almost 30 years, and one thing I have learned is do not expect what you do not inspect. I also know that if I am personally responsible for a systematic task, it will not get done as often or as well as it should be. I think it is just human nature. The other thing that working with recruiters has taught me is you are as bad as me when it comes to microtasks.  

  

You can place someone and collect a $50,000 fee for 2 hours of work, but  

  

when you come to the conclusion that something is not going to produce  

  

revenue it is taken off your desk and it is out of sight and out of mind. You simply move on to the most probable revenue generating task. That is not a bad thing, it is a necessary skill in order to become successful. You do not major in minor things and do not micro-manage employees. I get it; I am the same way, and it has been very beneficial to my success. I focus on the most probable revenue generation task and delegate or forget the rest.  

  

What are your options? You can do all other tracking methods that I suggest, but I also believe that it will be like picking the low hanging fruit; you will find most of your Backdoor Hires by accident. At the end of the day, that is ok as well. You have your opportunity cost.  

  

There are other options, but let me say I am always reluctant to mention or promote our company's other services in the education projects that I work on for the staffing and recruiting industry. I feel that this is my way of giving back to an industry that has taken care of me and my family for over 25 years. I also know there is a cost effective solution to the first part of the problem of Backdoor Hires, and I would not do you nor the industry any services if I did not mention the resource to fix it. We have created a free product that you can use to find Backdoor Hires.  

  

It is 100% free to use. The only time it cost you is when we find a Backdoor Hire and you invoice them, and if they pay we will invoice you 10% of what you collected for your fee. If your debtor does not pay, then we simply ask to help you collect the debt at our standard rate; we do not charge you anything extra. The software solution that will find your  

  

Backdoor hires is called “Back Door Hound”. I respect your time so instead of spending a chapter promoting our product, just go to the website and learn more about this FREE service.