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Opinion, Comment and Ideas
July 2009

We've had quite an online discussion recently about the behaviour of the recruitment industry. We've now received information about what some contractors consider to be 'secret commissions' on referrals. There's nothing wrong with commissions if they are disclosed. But just what are the principles that should operate here?

ICA's views on the matter appears below. We offer them in order to generate discussion and comment on the important topics of transparency and disclosure.

Do you have views and comments on this subject? Have you had personal experiences you can share? Send us your contributions and we'll include them on a dedicated discussion page.

E-mail your thoughts to us at: contact@contractworld.com.au.


Recruitment Agencies II: Transparency and Disclosure
(July 2009)

A contentious issue seems to have emerged in the contractor management space regarding contractor management and recruitment companies. It's an issue of transparency involving the contracts of independent contractors who use recruitment agencies.

It is common for a recruitment agent, once they find you a contract, to refer you to a contractor management company to handle the payroll, administration and insurances among other things.

You would normally expect a recruitment agency to make referrals based on what is best for you---the independent contractor and the client. The advice and referral provided should always be independent and unfettered. But in reality this may not always be the case.

Contractors have complained to us that some contractor management companies they have dealt with offer elaborate "kick-backs" to recruiters in return for referrals. These "kick-backs" are believed to include gift vouchers, plasma screen TVs, even an overseas holiday. The contractors have found out about the kickbacks after they have been induced to work through a contract management company.

There's an issue of ethics here. Someone has to wear the cost of the commissions. The question is does this practice result in independent contractors covering the cost through fees? Further, is a recruiter making recommendations the agents are personally rewarded for because they firmly believe it is the best option for you?

There's nothing wrong with commissions. It's often normal practice. The practice of offering incentives in return for business is widespread in society. The question of ethics is raised when such incentives are offered and accepted without a key party in the arrangement knowing about it. Protecting oneself from dubious advice really comes down to having full knowledge. One cannot rely on the probability that all the advice they receive is ethical and accurate.

Independent contractors should be aware of this issue and press recruitment agents for transparency and disclosure. An agent must be able to articulate why a particular recommendation is best suited to your individual requirements. Ask the following questions when a recruitment agent refers you to a contractor management company.
  1. What are the reasons I should be managed by this contractor management company?
  2. Are you getting any referral fee/reward by recommending me to this contractor management company?
  3. If yes to question 2, what kind of referral fee/reward do you receive by referring me to this contractor management company?

Have you had such experiences? What do you think of the practice? Let us know. Contribute to the discussion E-mail your thoughts to us at: contact@contractworld.com.au.