[UPHPU] Freelance Opportunity Starting ASAP

[Mac Newbold]

Monday at 9:09pm, Robert Merrill said:

>> Why not?  Why not charge a flat rate instead of a percentage of  the pay?
>> Isn't that a more logical way to tax someone for finding an employer?
>
> Good points.  Sometimes agencies do charge a flat rate.  In fact, it's
> easier for me to do it that way in most-respects, though all companies are
> setup a little differently.  For me, it all depends on what the client 
> company
> wants to do.
>
> I do think, however, that an hourly fee is more exact and more efficient in
> economic terms than a flat fee.  It's like the electric meter at your house,
> minutes on your cell-phone, or a gas tax levied as pennies extra paid per
> gallon of gasoline you buy.  From an economic standpoint, estimating the
> value of a fee as a flat-rate is an awkward and inefficient measurement.
> Who knows if a programmer will be needed for 50 hours, 1,000 hours or
> 5,000?  Who knows if a programmer that's hired on will milk the company
> purse for a nice check and then walk out the door a few months later?
> Nobody knows.  Charging a flat fee up-front surely works, but it's actually
> smarter for a company to divide the fee up into hourly chunks and only pay
> for what is in fact "used".
...
> staff and infrastructure, other communications expenses, etc, etc... All of
> those services are outsourced via the contractor agreement to the agency.
> They need to be paid somehow, and a few extra dollars per hour is usually
> the simplest and, I would argue, most economically efficient, way to
> accomplish that.

The problem I have with the hourly add-in fee is that it scales with the 
amount of work the employee does for the company, not with the amount of 
work the recruiter does. Granted, in certain situations there are some 
costs that scale, and even some value (better employees usually get used 
longer, unless they finish the project faster) that scales up as the 
number of hours worked increases. But if the recruiter is helping match up 
an employee with an employer in a direct hire situation, I think it is 
most fair that they get paid for what they did (i.e. relative to the 
effort it takes, the quality of the result, and the value they provide). 
That value to me is a flat one-time thing, even though a monthly payment 
might be the most convenient way to pay it. As a way of reflecting the 
quality of the result, I think it would be fair to say that the full 
payment is only due if the employer likes the employee enough to keep them 
for at least X months. If they try the person out, but have to terminate 
them after 3 months, obviously the value provided by the recruiter wasn't 
very high, as hiring, training, and terminating an employee takes a lot of 
time and effort from the company and leaves them in the same boat as they 
started in.

I may be off the mark, but if I remember accurately what the last 
recruiter told me they charged in a direct-hire scenario, it was something 
like 20-25% of the annual salary, which works out to something in the ball 
park of $10K, give or take a few thousand, for a lot of development hires 
in Utah. I'd need a recruiter to confess the average number of hours it 
takes to make a match like that, but for $10K I'd bet the hourly rate is 
in the range of at least $100/hr, which is a few factors more than I think 
I'd be willing to pay for someone to help me find an employee to hire, 
unless I was extremely desperate. A cost that high also makes it very hard 
as an employer to get the right person, as it adds 20-25% to what the 
employee costs in their first year, so generally that means you have to 
offer less for the starting salary/wage, which isn't very fair to an 
employee who ends up betting a sub-standard salary. The match would have 
to provide a lot of value to me as an employer to be worth even $2K, and 
way more to be worth $10K. Maybe big businesses can lose that much money 
in the noise, but in organizations with 2-20 people, that is pretty 
significant and the money has to come from somewhere.

Thanks,
Mac

--
Mac Newbold		MNE - Mac Newbold Enterprises, LLC
mac at macnewbold.com	http://www.macnewbold.com/