Recruiting and Staffing Agencies

Employment recruitment and staffing agencies are a pretty standard participant in the software engineering ecosystem. Someone has a job looking to fill, someone wants a job in search of one, these agencies serve as a broker of putting the wanter in the same room with the wantee.

Over the past years, I've found myself both as a hiring manager as well as a job seeker, so I feel I have some experience in both camps and I thought my observations might be of interest to some.

The Journey of a Resume

Let's take a journey, shall we?  The journey of a your engineering resume begins when one day you receive an e-mail, or perhaps a phone call, from a staffing agency.   Perhaps someone you've worked with in the past, perhaps someone you've never heard of.  I'll attempt to use the term staffing agency throughout this post, but you may prefer the use of: contracting house, consulting firm, employment services or technical recruiting house.  Regardless, they each serve as an agent that introduces those who have jobs with those seeking jobs.  These agencies have two primary purposes; tracking available job positions and tracking candidates for said jobs.  Staffing agencies act as a middle-man in introducing job seekers with job providers, their fundamental purpose.

The e-mail, or phone conversation, will be detailed in some respects and curiously vague in others.  The exchange may call out a good deal of technical details; tooling, software, programming languages and dev-op specifics, but curiously vague in the company and/or exact industry the job exists.  This is for good reason; specifically it's an effort to ensure you apply for the position through them rather than directly with the company providing the position, or an alternative agency.  If you show interest in the position, or a vague interest in alternative positions, the recruiter will tend to suggest "why don't you fire me an updated resume?".  This exchange has some significance which we'll touch on later, but let's continue following the path of your resume for a job you're interested in.

You send your resume to the recruiter for the position, the recruiter slightly tailors your resume to be later sent to the hiring manager (or HR) for consideration.  The tailoring is subtle, mostly not of consequence, and has the same desired effect of preventing direct contact between applicant and hiring manager.  Your resume, electronic or physical, is stripped of direct contact info; your e-mail address is removed as is any phone number.  Typically, your name is preserved, so with modest effort a hiring manager could contact you directly; they don't tend to however because there is a legal, or professional, agreement between the hiring company and agencies that discourages direct exchanges.  

At this stage, the recruiter has your resume and it goes to the hiring manager, right?  Whelp, not quite, but almost.  Before an agency submits your resume they establish legal protections to prevent them from being removed from the hiring process and getting paid.  It should come at no surprise that agencies are compensated for their efforts.  To prevent a hiring manager directly offering a job to a candidate the agent provided, the hiring company and agency sign legal agreements.  These agreements tend to specify that candidates provided by the agency are represented by the agency and cannot be directly approached.  Agreements also call out constraints to avoid being kicked to the curb at a later time.  For example, most agreements state that if you hire candidate X from agency Y the candidate cannot move to agency Z for the same position.  This is to avoid agency Y who may be charging $120/hr to be replaced with agency Z for $110/hr.  The candidate is locked to the agency for the existing position.  Agreements also call out contract-to-hire positions, where a candidate comes in as a contractor for an hourly rate and is allowed to be hired as a W2 (direct) employee after some period of time if the company wishes to do so.  Agreements that specify the contract-to-hire options tend to charge a bit higher rate and likely a transition bonus if the candidate goes direct.  A properly placed candidate with long-term potential is like an egg-laying goose, locking in a candidate to a long-term hourly position is extremely profitable so contract-to-hire positions tend to adjust the rate higher to offset the loss or make up for it with an agency hiring bonus.  Agency compensation details (like invoiced hourly rates or hiring bonuses) are considered competition-sensitive and typically prevented in the form of a non-disclosure agreement (NDA).  Signed agreements in place, your resume is forwarded to the hiring manager.  

If the hiring manager feels you're a good fit they will contact the agent and you will proceed on, likely with a phone interview or on-site interview.  Your resume is then likely kept on file at the staffing agency for future opportunities.

Job Position Evaluation Process 

Once the resume hits the hiring manager's hands, the staffing agency continues as a middle-man between the hiring manager and applicant.  At each stage of the hiring process, the agent participates in the process.  Often, many communications between hiring manager and candidate flows through the agent.  This can prove to be useful in uncomfortable conversations, like negotiations, so it can be beneficial to the applicant as well as the hiring manager.  If you're a good fit you'll likely proceed on with the hiring process, if not  the agent will typically discuss specific mismatches to be used to tailor their search for alternative candidates.  Exchanges between a hiring manager and candidate are restricted as a result of pre-existing agreements prevented by existing NDAs.

Hired / Continued Involvement

In the even that you're hired, your relationship with the hiring agency may be short-lived or have a longer existence depending on whether the position is hourly (e.g. contractor) or direct.

Assuming that you were hired as a direct (W2) employee, the agency involvement is nearly complete.  The hiring company is obligated to pay a placement fee, typically a percentage of the positions annual salary.  For instance, if you are hired at $100,000, the agency gets an X% placement fee of that $100,000.  Likely, that placement fee is contingent on continued employment, like staying in the position for 3-months.

Contractors, or hourly workers, have a longer-term relationship with the agency.  The contractor bills the agency $X / hr, the agency bills the hiring company $Y / hr (X > Y).  Such long-term relations between you and your representing agency can be binding, preventing you from changing to an alternative agency for the same position.  What if you love the contract job, and find the agency to be a nightmare?  You are kinda stuck, for the duration of the position, learn to work with the agency or leave the position.  A 3-month contract, 6-month, 1 year, 10 year.....you're pretty much stuck with the agency/position pairing.  It's important to choose a good agency because it's equally difficult terminating an AOL subscription.

Fire Me A Resume

Let's go back to the fork-in-the-road decision to send an agency for a job position.  Hopefully it's clear from the process discussed above that this decision shouldn't be taken lightly.  At this particular moment you are entering a relationship, possibly with a person/company you know absolutely nothing about.  I'd implore you to take this step in an informed position.  You are empowering this person to provide professional introductions and communications on your behalf.  This person/company will be representing you for a bit, or a long while, and you may very well be working with them for a while.  Work with respectable agencies and your professional life and reputation can be preserved.  Agency specifics can also effect your selection probability.   For example, an agency may bill you out significantly higher than other candidates a disorganized agency may prevent you from getting a position you're highly qualified for.

Hiring Agency Compensations

Gaining insight into agency compensation specifics is difficult and perhaps unnecessary or uninteresting for many.  Signed agreements legally constrain discussions and social conventions tend to carry the torch as well.  I'm currently contracting and my hiring manager likely is unaware of what I bill my contracting agency hourly.  My hiring manager knows what the agency is billing me out at, and only the agency has specifics of both rates.  Tomorrow, if I chose to, I could walk in and tell my hiring manager my bill rate and then he and the agency would then know both rates.  As an hourly worker it's difficult to ever learn what you are being billed to the company at.  Having positions both as a contractor and at the hiring company, having reviewed agency agreements and knowledge of industry-norms of staffing agencies I can give you some insight.  Your mileage will vary.

Let's start with the easiest; staffing direct (W2) agency compensation.  Typically, a placed candidate is compensated by a one-time placement fee paid from the hiring company to the staffing agency.  Typically, 20% of the annual salary of the new employee.  Hire in at $100,000 and the agency gets a $20,000 check.  I've seen the placement rate negotiated down to 18% and such, but typically 20% is pretty standard.

Hourly rates for contractors are compensated differently.  The agency pays the contractor $X for each hour of work, and bills the company $Y.  I've *heard* of agency adjustment rates as low as 15%, but more typically I've seen 40% adjustment rates.  In one particular case, an agency billing $120/hr, the contractor sees $85/hr.

Why should you care?  Well, it's important to know what you're getting for what you're indirectly paying for.  This awareness should be considered when you ask for annual rate adjustments and such.  It can also be of interest if you ever wish to transition from a W2 contractor to a C2C contract.

This rate adjustment is paying for agency services, administrative activities, the frequent on-site visits hustling for new job prospects, possible sick-time, vacation days, retirement accounts, professional liability insurance, legal consults, agreements,...so while at first glance it may seem extreme, understand it bankrolls a good deal of activities and expenses.

In addition, we are likely all accustomed to getting paid regularly, perhaps weekly, bi-weekly or monthly.  Businesses have been known to be sluggish in payments and it's not uncommon to invoice monthly but be paid by net-30, net-45, net-60 conventions.  That means, the company you're providing service to may only pay for those services 30/45/60 days later.  An hour you work today, invoiced later, is paid 30/45/60 days later.  Agencies buffer that payment in many cases, isolating the payment schedule from the company from the contractor.  Contractor gets paid regularly, agency gets paid less frequently.....a short-term loan orchestrated by the agency acts as a buffer to the individual contractor.

Multiple Agencies

So, what is the harm in multiple agencies distributing your resume?  Well, nothing completely, in fact it can be a good idea for a few reasons, but can have negative consequences as well.

Let's hit on some pros first.  Agencies are hustling for getting the inside track on job positions.  Some, maybe many, are constantly visiting companies and asking "Do you have any new positions coming up?".  Once an agency has a relationship with a hiring manager they will continue to reach out to them with the goal of finding out early of upcoming positions.  That gives them additional time to stack up some potential candidates.  In a fast-pace industry, many companies will fill a position soon after finding a good candidate.  A queue of potential candidates presented to a hiring manager early increases the chance of being selected.  Good agencies are constantly seeking new positions coming up rather than waiting for the position to be publicly posted.

Additionally, some hiring companies have a pre-approved list of agencies that they work for.  A job at company X which exclusively works with agency Y kind-of means you need to submit your resume through agency Y to get the job.  

There are negative consequences of shotgun blasting your resume to each and every agency that approaches you.  The first-come-first-serve representation model means that the first agency to submit your resume represents you, for now and possibly virtual-eternity.  That agent could be a flake or a superstar; just perform your do dilligence. As a seasoned contractor I have numerous stories of staffing agency shenanigans that place you in financial and professional jeopardy, be wary and vet any and all representatives that will be representing you.

Agency Expectations As A Hiring Manager

As a first-time hiring manager, one of the things I expected from a staffing agency that I later found to be unlikely is the ability of them to perform 1st stage vetting of technical expertise.  I figured that software technical recruiters would be....well....modestly technical.  You'll likely never find a recruiter with a degree in engineering, nor a graduate of a code camp, or even well-versed in informal knowledge from YouTube.  I kinda expected technical recruiters to be more skilled in vetting than a general-purpose human resources representative, but that typically isn't the case.  Staffing agencies often are representing multiple disciplines so it's unlikely they could acquire sufficient expertise in the relevant disciplines.  Staffing agencies that specialize in engineering simply means they place engineers, it doesn't mean they have proficiency in recognizing engineering fundamentals.  Keyword resume searches are about all you can expect by agency reviews. It's equally likely that the agent you are working with is a 20-year vet in technical recruiting or fresh out of college.

Our industry is perhaps overly accepting of the eccentric, genius programmer, or some on the spectrum.  Distinguishing a good-intending socially awkward person from an a$$hole isn't always difficult but in my experience you don't tend to find an agency making any effort to rule out terrible team player.  This is especially true from 'resume farm' agencies who simply collect resumes from anyone willing to provide them and shotgun them out to any/all job postings.  These agencies are the equivalent to day-traders and are easily recognized with the modest of communications, my advise would be to simply stay away from them...period, they'll do you no favors.

Most of us have a list of references available to be delivered on-request, people we have worked with closely that can speak to what we are like as a professional.  Additionally, every position we've ever had has co-workers and those co-workers know whether we are competent and if we're impossible to work with.  Agencies typically don't talk to references nor past co-workers and do little more than just talk to the candidate.  I originally thought that an agency participation would conduct such discussions, but I found this not performed by any agencies I've worked with.  The burden is typically on the hiring company and dysfunctional candidates can hide in plain sight.  

Background checks aren't provided by most agencies as well, that typically falls again to the hiring company, be wary of candidates posing false credentials as the agencies typically won't do it for you.

That said, your best use of an agency is simply providing them with a keyword search and have them open the faucet with potential candidates.  Don't anticipate the agency has the knowledge, expertise or capacity to perform any real vetting.  Prepare to review dozens, or hundreds, of resumes and prepare to completely manage the comprehensive list of candidates you've been given, who you've ruled out and who has been scheduled, disqualified......

Any agency that says they'll do it for you is misguided or only telling a partial truth.  Unless you have an exclusive agreement with ONE agency you'll have to do it yourself.  Whether it's two or twenty agencies sending candidates, the burden will be on you to manage the hiring workflow.  Make a spreadsheet right out of the gate and keep track of the evaluation process stages. 

On the topic of a single-source exclusivity agreement with a staffing agency.....for the love of all that is holy DON'T DO IT.  You may be enticed by an elaborate weave of reasons why this particular staffing agency can do it all for you, give you a sweet discount and shower you with daffodils and unicorns in a fairy-tale journey of finding the GOAT candidate.  It's all fiction, you'll have a limited stream of potential candidates and quite likely be assigned a disorganized representative from the agency, locked in likely for a year via exclusivity contract; nightmare material.

I hope this finds some of you as interesting and/or informative.  Unless you're a long-term employee who picked their full-life employer you'll likely conduct business with a staffing agency at some time in your career.  Choose them wisely, they will make this process easier and more effective.  Choose them poorly at your own peril.  Interview them with the same diligence as you would the candidate or company you seek.

Cheers.