Managing the Risk of Back Door Hires
Jeremy Milligan, Director of Sterling Debt Recovery offers advice on what to look out for.
Back dooring is when a client engages a candidate without informing you, thus avoiding the engagement fee. It’s a growing problem for recruiters in every sector. The back door can take place shortly after the introduction, or can be months after, and the candidate may be employed in a position other than the one they were initially put forward for.
In a recent poll by Sterling Debt Recovery 52% of recruiters said they had been back doored by their clients in the past year, 20% said they probably had been and were too busy to check, and 28% were confident it hadn’t happened. The nature of the problem means that many back doors occur without the recruiter ever knowing, so whilst over 52% of recruiters report it definitely happening to them, experience tells us it’s probably also happening to most of the other 48%
The following advice should help you to uncover back door cases and will give you a better chance of getting paid.
Ensure your terms of business cover back door hires appropriately
Your client (or their solicitors) may look for loopholes in your contract to avoid payment. Unfortunately, the most commonly used TOB’s in the recruitment sector contain weaknesses that the client can use to their advantage. The main areas to review are:
• ‘Effective cause’ which requires the recruiter to prove that they were the direct cause of candidate’s engagement. The TOB’s should specifically state that this is not a requirement for the fee to be due.
• There should be a requirement for the client to notify the recruiter promptly should they already be aware of the candidate.
• It’s common in TOB’s for there to be no financial incentive for the client to not back door you. If they do then contractually they only need pay you the standard fee at a later date. As a minimum the obligation to pay should arise on the date of engagement and not the date of invoice so that contractual interest can be added if the client does back door you. Better still, a higher rate should apply if the client has breached the terms.
• Your terms should cover instances where the client refers your candidate to another company in the group, or other associated business.
Keep good data
The more relevant data you record in your CRM/ATS, the easier it will be to search and detect back door cases. Linkedin url’s are particularly useful, but you should also keep a history of the outcome from the submission. This will help to check search results at a later date. For example, if another agency had already put the candidate forward so your submission was rejected. 12 months later if you discover the candidate working for the client then you can view the history and avoid mistakenly accusing the client of back dooring you.
Schedule a regular search process
The majority of agencies do not have a set search process for back door cases, instead relying on irregular checks on candidates when time permits, or sheer luck.
Whilst searching for back door cases is a time-consuming process, if it’s done in the correct way it can uncover fees you’ve already earned with far less effort than making a new placement.
Putting in place a set process to a regular schedule (for example each quarter, searching 12 month’s history each time) will find cases early, giving you a greater chance of getting paid. You can run the process internally, or outsource to a specialist such as Sterling who have developed technology and procedures for the task.
Don’t jump to conclusions
When uncovering a back door the usual assumption is that the client has done it deliberately. Whilst this is often the case, sometimes it is a genuine mistake caused by their poor processes, or a misunderstanding of their obligations. Our advice is to approach the client under the assumption that it has been a genuine mistake. Sterling’s website contains a Tools area with standard letters you can use for this type of scenario including a gentle first letter and Final Demand should that not work.
Get them paid
If you’ve sent a final demand and the client still refuses to pay then it’s time to escalate the matter. Back door hire cases are usually contested and technical, so legal proceedings can be complicated, expensive and slow. In most cases litigation should be a last resort. Using a recruitment debt collection agency on a commission only basis removes the risk of throwing good money after bad and usually gets a quick result.