The Art of Following Up

Written by Guest Blogger - Steve Catt

In the staffing business, 80% of success is just following up and this is the area is which so many sales people and recruiters fall flat on their faces. It’s no wonder that most candidates or hiring managers hold so few allegiances to any particular recruiter or remember to call a specific sales person when they have an opening. 

We badger a candidate when we feel we can sell their skill set to a client, want a referral or to persuade them into going for an interview on a Friday afternoon at 4:00 pm across town. Then, after they’ve dutifully provided us with what we need from them, they don’t hear from us again for weeks or maybe months on end!

Sales people spend hours and hours on the phone “dialing for dollars” repeating a variation of the following; “Hi my name is so-and-so, and I want to place someone in your account so I can make money, do you want anybody? No, well thank you, you won’t hear from us again until I turn your account over to the new guy and he repeats the process”.

It’s no secret why so many clients and candidates treat us like a commodity; it’s because we treat them like a commodity. Staffing companies must personalize their approach for their clients and candidates – which doesn’t mean that we should just throw them on an e-mail list and send them a thinly veiled advertisement every week.

If we are going to foster relationships, get referrals and be perceived as valued partner, we need to regularly reach out to our stakeholders in a more personal manner.

A common objection to this is  “I speak to hundreds of people every week, I don’t have the time to touch everyone personally, let alone often” the secret is you don’t have to touch everyone, but those you DO reach out to, you need to reach out regularly and ensure your communication adds value.

This is where the art of following up comes into play. When you engage a candidate or potential client, determine that person fits into your core target demographic and add them to your “gold sheet”. The gold sheet is made up of the top 25-50 companies, candidates and managers that you want to work with and who will eventually make up your personal “Eco System”. These are people you must form a good relationship with to be successful.

This list should contain no more than fifty people (any more is unmanageable). Gold Sheet Members should take up 50-75% your effort and time. Remember the 80/20 rule? Track their interest and personal information in your CRM and reach out to these people with a phone call and email of interest every month and personal note every two months. This will equate to 2 ½ touches per month, not too much to be intrusive, but enough to be consistent. Set it up in your CRM so that you are doing no more than 10-15 touches per week - that way the task is not overwhelming and you can personalize each one.

An email of interest is a piece of content you have come across that you can forward to your gold sheet member that would be of interest to them. Twitter, TED.com videos and The Harvard Business Review are great sources of content. Accompany with a note like ”thought you might find this interesting” or “came across this and it made me think of you”.

Phone calls and personal handwritten notes don’t have to be anything more than something like “nothing urgent, I just wanted to let you know I thinking of you. Wishing you and your family a wonderful Thanksgiving, let me know if I can help you in anyway”.

After the fourth or fifth touch, you will begin to see a huge change in the way you are perceived. You will stand out because you actually reached out when you didn’t want anything – which makes it much easier to approach them when you do.  

It takes a little time and effort to organize, but it’s well worth the effort for those on the “gold sheet”. However, if you really want to stand out from the crowd, return every call you get, gold sheet member or not. Just think how you feel when someone doesn’t return your phone call. And remember, today’s junior account manager is tomorrow’s CEO!

Steve Catt is a successful entrepreneur and one of most highly regarded staffing professionals in Southern California. Steve's simple, logical approach to helping a client define the outcome they want from every job and then finding the best person to provide that outcome, in the clients environment, has made him the go to staffing partner for companies large and small for nearly twenty years. His latest project, The RiteVu, is revolutionizing the way companies identify, select and manage the contract labor.

Temporary Worker Misclassification Crackdown Spreads Across the U.S: Feds Announce Misclassification Alliance

Government agencies have aggressively cracked down on worker misclassification in recent months; but took it an extra step further last week when they announced that the U.S. Department of Labor has entered into an agreement with the IRS and other agencies to crack down on employers that misclassify workers as independent contractors when they should be classified as employees.

The signatory states are Connecticut, Maryland, Massachusetts, Minnesota, Missouri, Utah, and Washington with other states expected to follow suit. Numerous other states, including Pennsylvania and Wisconsin, have already passed worker misclassification laws that impose severe penalties on employers who misclassify their employees in an attempt to recover billions in lost revenue.

If a worker is an employee, the employer must pay the necessary federal and state unemployment taxes AND its share of Social Security and Medicare taxes, in addition to the withholdings of the employee's share of Social Security, Medicare and Income Taxes. The employer must also incur costs related to pensions, health insurance, vacation pay, sick pay, and workers' compensation insurance. In addition to all this, employers face federal and state regulations regarding working conditions and overtime.

With all of these burdensome obligations to handle, no wonder employers try to take a shortcut by classifying temps as independent contractors. However, with the likelihood of getting caught on the rise, the financial implications of incorrectly classifying workers could be financially crippling. If your company is found to be in breach of the rules, penalties include back taxes, PLUS interest AND a fine of up to 35% of the total owed. 

If you utilize or supply temporary workers on a 1099 basis, it’s worth talking to a company like Emergent (855 250 5000) who are able to handle employer obligations including payrolling, tax withholding, workers’ comp and risk management on your behalf.     

Unfortunately, the economic downturn has increased pressure on staffing firms and their clients to classifying temporary or contract workers as independent contractors to lower their costs and/or provide a better rate to their clients. Staffing firms tempted to do so are well-advised to first make sure they are complying with federal and state law as well as the IRS 20 Factor test. The majority of workers assigned through a staffing arrangement perform their work under the supervision and control of either the staffing firm or the client, and the assignment usually takes place at the client’s offices –a good indicator that the worker should be classified as an employee rather than a contractor.

Worker misclassification also can lead to other serious issues such as work authorization, overtime pay, benefits eligibility, workers' compensation insurance, state unemployment insurance taxes, and violation of state worker misclassification laws. The entire process can be costly and extremely onerous for businesses. To be safe rather than sorry, contact Emergent today on 855 250 5000 or info@emergent.com.

For additional information on proper classification of workers, see the new 12th edition of the ASA book Employment Law for Staffing Professionals.

Working with PEOs: Do you know the risks?

PEO’s (Professional Employer Organizations) comprise a nearly $10 billion industry in the United States. These companies provide valuable services to clients who want to leverage a 3^rd party employer to handle the statutory employer responsibilities as a co-employer of their workers. 

PEOs essentially hire their clients’ workers, thereby becoming their employer of record for tax and insurance purposes, charging a service fee (usually between 4 – 12% of payroll) in return for taking over the payrolling and HR functions of the workers performing services for their clients.  

In recent years many staffing companies have looked to PEOs to help employ the workers they recruit who perform services at client sites. This relationship is a bit more complex that a direct one between a PEO and a client company because there may be three employers rather than two – the staffing company, the client company, and the PEO.

Some staffing companies are attracted to using PEOs because they be able to leverage the PEO’s workers’ compensation coverage at a much lower rate than their company could obtain directly through a broker or through State insurance.  However, many staffing companies that use PEOs are unaware of the risks involved in using these resources to lower workers’ compensation costs.  

Problems occur when staffing companies attempt to obtain a lower worker’s compensation rate by “piggybacking” off of another PEOs insurance policy.  In California piggybacking was barred in 2003, but some staffing companies and PEOs do not understand the complexities of this type of engagement which may be primarily based on saving on workers’ compensation insurance.

Recently, California’s State Compensation Insurance Fund (SCIF) won a case that found a staffing company and a PEO in violation of subverting payment of millions of dollars worth of worker’s compensation premiums.

According to sources close to the case, the damages and penalties could end up costing upward of $300 million dollars – due in part, to Code Section 756 which says an employer is liable for 10 times the amount of premium it avoided paying due to its fraudulent actions.

Because of the potentially ruinous penalties, consult your legal counsel if you are considering engaging a PEO to make sure that the arrangement you undertake is in compliance with federal and state law and that the PEO has a proper arrangement with their insurance carrier. The rules and regulations for employing contingent workers can be complex and it can be easy to fall into non-compliance of them.

Emergent is a trusted employer of temporary and project-based contingent workers throughout the U.S. Our family of companies services are utilized by Fortune 500 companies and small businesses alike. Emergent is not a PEO, we screen and employ the workers staffing companies recruit, looking after employer obligations such as HR, Legal, Risk Management, Payrolling and Worker’s Compensation.

To find out more about how Emergent can help your business today call us at (855) 850-5000 or e-mail us at info@emergent.com. 

The Basics of Staffing Markups

The total size of contingent workforce payroll in the U.S. is expected to rise to $164 billion by 2018. The opportunity for companies to capitalize on this trend, increasing the productivity and flexibility of their workforce, has become more widely known in recent years. Additionally, companies are using contingent workers in more highly skilled roles to augment internal staff and in these roles the bill rates - hourly rates including all costs and fees charged to the client company by the staffing supplier - increases as the pay rate does.

In many cases, the companies that supply contingent labor to clients on an hourly basis use a fee model that based on a percentage of the pay rate, often referred to as a markup. This 'markup' consists of several components, including:

• “Burden” (employer taxes, payroll costs, workers compensation insurance, etc.)
•  Recruiting personnel and expenses
•  Overhead (general and administrative costs)
•  Profit margin

The pay rate (aka hourly rate) of the worker plus the markup is called the bill rate. Markups can range from 30% to 60%+ with an average in the high thirtieth percentiles across all skill disciplines. Some staffing suppliers promote rates below 30% and, conversely, some services may charge 75% to 100%+ markups.


The Burden costs vary based upon the worker’s skill specialization, the risk of the job, the State in which the worker is employed, the total volume of payroll with a client, and the payment terms. Recruiting costs and pay rates may differ from assignment to assignment, as different factors such as the availability of talent, ‘going’ market pay rates and length of assignment come into play. 

For example, if a contingent worker is engaged on a three (3) month assignment (12 weeks at 40 hours or 480 total hours) the following total costs would apply relative to the pay rate of the worker and markup:

		Total Payroll + Staffing Markup ("Billings")
Pay Rate	Total Payroll	30%	35%	40%	45%	50%
$15	$7,200	$9,360	$9,720	$10,080	$10,440	$10,800
$25	$12,000	$15,600	$16,200	$16,800	$17,400	$18,000
$50	$24,000	$31,200	$32,400	$33,600	$34,800	$36,000
$100	$48,000	$62,400	$64,800	$67,200	$69,600	$72,000

There are other ways that contingent labor is delivered to clients including fixed markup costs, statement of work or milestone based pricing, per unit or task pricing, or fixed bill rates. For the most part however contingent labor in the is delivered with a markup on pay rate. If your company is using or supplying contingent labor then it is helpful to understand how the marketplace prices these services in order to maximize profits and productivity. 

Benefits of Temp-To-Hire

Hiring a worker on a temporary basis is a great way to try out a potential new employee before extending them an offer for direct hire employment.  It’s also a great way to implement a new position within a company before creating a new role.

Rather than hiring the worker as a full-time, internal employee – engage a worker can be done easily through an Employer of Record service. 

During a probationary period, usually lasting from 8 to 14 weeks, the temporary employee’s performance can be evaluated and a decision on whether he or she should be hired full-time or let go can be made.

BENEFITS OF TEMP-TO-HIRE

·         Extended interview period - Temp-to-hire allows a company to “get a feel” for someone over a period of time in a way that is difficult to accomplish during a short interview. For example, does the worker fit with the rest of the team? Do they have a good work ethic? Can they work under pressure?

·         Engage workers quickly and easily - Temp-to-hire candidates can be engaged quickly and easily through an Employer of Record service. These services (see Emergent's website for more information) handle all statutory employer responsibilities, including background screening, on-boarding, and payroll processing during the workers assignment – enabling you to focus on your core business needs.

·         No obligation to hire - If a company finds that the worker is not a good fit, they can disengage with the worker before or at the end of the contract. without having the obligation to hire them.

·         Evaluate long-term hiring need - Whether a company is hiring to address recent growth or a newly created positions, temp-to-hire provides the time to ensure that the position is needed before adding to the internal headcount.

·         Free to end assignment at any time - If a temp-to-hire candidate isn't a good fit, the assignment can be ended at any time.  When the candidate is the employee of an employer of record service, legal exposure is minimized.

·         Reduced benefits spend - Companies that use temp-to-hire workers do not incur benefits or vacation time costs during the probationary period when engaged through an Employer of Record service. 

·         Alternative to high recruiting costs - Temp-to-Hire and Employer of Record arrangements can offer significant cost savings versus hiring a permanent employee through traditional means. 

Misclassified Staff at General Motors Sue Over Pay

Workers at a car factory in Ohio are suing General Motors for $4 million in back pay after they claim they were wrongfully classified as temporary employees. The workers claim they were paid forty percent less than their "permanent" counterparts. 

The group of workers were hired in 2006 and laid-off the following year before being brought back on board six months later. When they were re-hired, they claim that they wrongfully reclassified as temporary workers. 

See News Article Here for More Information

1099s and Independent Contractors: What You Need to Know

Contingent worker classification, for tax purposes, continues to be an important topic.The article provides some resources to help understand the factors that make a contingent worker an employee or a 1099 independent contractor.

20 Factor Independent Contractor Test


In order to understand if the contingent workers your company utilizes are classified correctly you may first consult the IRS 20 point test. This test will help to see if the independent contractors you work with meet the criteria needed for classification as independent contractors. In essence though, the more control your company exercises over how, when, where, and by whom work is performed, the more likely the workers are actually employees, not independent contractors.

A downloadable version of the 20 Factor Test can be found here.

46% of Independent Contractors Are Found to be Misclassified

Ultimately, 46% of Independent Contractors reviewed by the IRS are determined to be misclassified and one in three companies fail a worker classification audit. The IRS claims to lose nearly $350 billion a year in unpaid taxes, with $39 billion attributed to underpayments or non-payments by independent workers. Also, if your contractors are re-classified as employees, you have to provide them with the same benefits that you have available to your other employees.

Penalties for Corporations Can Be Severe

Needless to say, the IRS is keen to clamp down on this loss of revenue – last year they hired 4,500 new agents to undertake audits. If your company is found to be in breach of the rules, penalties include back taxes, PLUS interest AND a fine of up to 35% of the total. These penalties can easily stretch into millions of dollars. Defending these cases can take years and also absorb thousands of dollars and a lot of man hours to make the case.

It’s not just smaller companies that have made mistakes, the rules are complex, making big companies equally as fallible as smaller businesses. For example, FedEx was found to owe approximately $319 million in back taxes over worker misclassification issues and Microsoft were famously held responsible for the non-payment of employment taxes by workers inappropriately classified as contractors.

Legal Action

Class action lawsuits by groups of independent contractors requesting employee status are becoming increasingly common. A contractor may successfully sue you for unemployment insurance, disability payments, workers compensation, employee benefits, stock options, profit sharing and retirement benefits by claiming they were effectually employees. Microsoft had to settle for $97 million a few years ago because of benefits denied to contractors who were later classified as employees.

$25 Million Allocated by the Department of Labor to Target Misclassification

The Department of Labor has a $25 million budget for 2011 targeting independent contractor misclassification. The following text (in italics) from the DOL budget outlines the use of these funds and can been seen at there site here.

Employee Misclassification: Individuals wrongly classified as independent contractors are denied access to critical benefits and protections to which they may be entitled as regular employees. Worker misclassification also generates substantial losses to the Treasury and the Social Security, Medicare and Unemployment Insurance Trust Funds. To address this problem, the FY 2011 Budget includes a joint Labor-Treasury initiative to strengthen and coordinate Federal and State efforts to enforce statutory prohibitions, identify, and deter misclassification of employees as independent contractors. The Department of Labor's budget includes $25 million to support this initiative, comprised of:

• Wage and Hour Division. An additional $12 million and 90 FTE are requested to focus on misclassification during targeted WHD investigations.
• Employment and Training Administration. $11.25 million and 2 FTE are requested for competitive grants to States to increase their capacity to focus on misclassification and reward the States that are most successful at detecting and prosecuting employers that fail to pay their fair share of taxes due to misclassification.
• Solicitor of Labor. $1.6 million and 10 FTE are requested to pursue misclassification litigation, including multi-State litigation to coordinate enforcement with States and leverage their groundbreaking work.
• Occupational Safety and Health Administration. $150 thousand is requested to modify training curriculum and investigation guidelines to allow inspectors to identify potential employee misclassification and share information with WHD.

In addition, the budget proposes legislation to ensure the proper classification of employees by: (1) shifting the burden of proof to employers to demonstrate that their employees are classified correctly, (2) closing the loophole created by Section 530 of the Revenue Act of 1978, and (3) making misclassification a violation of the Fair Labor Standards Act, with appropriate penalties.


Additional Resources and Readings

Navigating Independent Contractor Compliance
Proposed Changes: 1099 Independent Contractor Classification and Misclassification Penalties

Independent Contractors Or 1099 Employees - The Risks