I wasn’t alive when JFK was shot. Or when Mark Chapman put a bullet through John Lennon. However, I do remember where I was for the World Trade Centre attack; working in a water bottling factory in rural Kent. Likewise, I remember precisely what I was doing the moment Princess Diana died; driving my beaten up Fiat through a Parisian tunnel testing my new flashlight. At 10am on Wednesday of this week, I was sitting at my kitchen table, trying to ignore a 6 month old baby and my slightly too attractive cleaner in her yoga pants, when I witnessed the assassination of contractor recruitment in New Zealand as we know it. I am of course referring to the All of Government Generation Three Talent Acquisition Services Supplier briefing. Although we had been supplied with the outline for our new way of working with government agencies a full 3(!) working days in advance, there’s something about the drone of a procurement professional’s voice which really brought it home for the 180+ recruiters in attendance. In case word hasn’t trickled down to you yet, or you’re one of those bizarre non-recruiters who read my blog (thank you), here’s my takeaways:
- Recruitment agencies will no longer make margin on Contractors. Instead, a set fee (based on one of two job families) will be invoiced on start date. This will be for a maximum of 12 months, and pro rata’d for anything less.
- Recruitment agencies will however be able to charge a (no doubt miniscule) payrolling fee, and this will continue after 12 months providing they continue to payroll the contactor
- Temp to perm fees (or as they call them “Conversion fees”) will cease to exist in any meaningful way
- Recruitment agencies are to propose their best rate for this up-front contractor fee without collusion with any other agencies
- Recruitment agencies, warned of this change on the 5th August, have until the 2nd September to fundamentally turn their revenue model on its head, pick a competitive fee without knowing what the market is doing, and write a presentation on how they don’t mistreat refugees throughout the hiring process.
Just take a moment to let that sink in. Contractor Recruiters who serve government agencies, which in some cities is all of ’em, will no longer be working under a contractor recruitment model. Instead, each contractor placement is essentially billed as a perm or fixed term role. One (probably small) fee in advance, no recurring revenue (apart from the payroll fee which the recruitment agency will need to administer this thing), and no practical way of earning temp to perm fees.
So what might this mean? The industry has been abuzz this week with whispers and rumours and clandestine talk about what this one-off fee might look like. To suggest what this figure is might be deemed collusion and I’d find myself in hot water with the panel, but let’s just pretend that most agencies were saying $10k. Under the old model, if Wellington based Contractor IT Recruiter wanted to bill one million dollars to government agencies, it would need to look as follows:
44 Contractors, getting paid $100/hr, with an agency margin of 11%, working full time all year = $1,006720/year gross margin.
Under the new model, working under the assumption that the flat fee was $10k, the same recruiter doing the same work would bill $440,000/year gross margin (plus payroll fees, which the consultant won’t see). OUCH!
*It’s worth noting than contractor recruiters who serve the private sector on the “$20 margin for under $100, 20% for over”, would bill $1.8m…
Obviously, the reaction from the recruitment agency industry could be politely described as “mixed”. Many are complaining, most are panicking, and some Wellington-based agencies have adopted that Dunkirk spirit of accepting their fate. The RCSA have got involved of course, in a way that only the RCSA always get involved; they’ve written a strongly worded letter. For once, they actually have a point however. I’m a fan of disruption to this stale industry, and fair play that the biggest disruption I’ve seen has come from some leather-elbow-patched Government bods. Our sister business JOYN tries to disrupt the recruitment industry. We are but a pea-shooter at the blackboard versus these guns of the f*cking Navarone. Maybe, we are being too cynical, and firms who pick a $20k+ fee will still get on the panel and have a great time of it. However, the timelines seem grossly unfair. The lack of consultation with anyone we’ve spoken to seems unreasonable. The idea that cheaper is better is what screwed government departments in the first place. And the collective grouping of all roles into only two categories, with the fee bearing no relation to the level of the role, all seem just…well…wrong.
Wednesday’s session was meant to be a Q&A session. To be frank, this element was farcical. The panel of “procurement experts” answered about five easy questions with a 5 minute pause between questions. When quizzed on anything of substance, they used my new favourite response of “that’s too difficult to unpack verbally”. We are now left to firstly decide if we want to play ball, then pick a number that we will live and die by, and write our presentation in next to no time. It’s a big ask.
Thankfully, if you do want to vent your opinions, frustrations or conspiracy theories, you can comment below anonymously – so collude all you want.
Have a good weekend, and if you’re a Wellington-based Contractor Recruiter…have you ever considered Auckland?