Sometimes you have to kiss a lot of frogs before you find your prince.

Telephone: Ring-a-ding-a-ling!

Agency Rep: Good morning, Humpum & Dumpum Contracting Services. What can you do for me?

Contract Worker: I'm a downsized corporate employee, and I'm looking for a firm that can help me locate a contracting assignment.

Agency Rep: Sure, no problem. Send me your resume, and don't forget to include the names and phone numbers of ten former employers and co-workers so we can conduct a routine prescreen and background check. [Click!] Hello, hello? Hmmm, we must have been disconnected, and I sure could have used those leads. . .

Telephone: Ring-a-ding-a-ling!

Agency Rep: Good morning, Fleecem & Cheetham Employment Agency. Your labor is our reward.

Contract Worker: I'm a downsized corporate employee, and I'm looking for a firm that can help me locate a contracting assignment.

Agency Rep: Oh you poor baby. You must be scared to death. Let me take your hand and lead you down the primrose path. What's the lowest hourly rate you are willing to work for? [Click!] Hello, hello? That's funny, she just hung up. . .

Telephone: Ring-a-ding-a-ling!

Agency Rep: Good morning, Holy Tribulation Gossip Choir and Contract Placement Service. We prey on you.

Contract Worker: I'm a downsized corporate employee, and I'm looking for a firm that can help me locate a contracting assignment.

Agency Rep: No problem. We'll just get your resume and fax it to every employer on our list. Now, this is a highly confidential business, so you must promise never to talk to anyone about this. OK? [Click!] Hello, hello? Boy, I guess she just can't keep a secret. . .

Telephone: Ring-a-ding-a-ling!

Agency Rep: Good morning, Confidential Employment Brokers. Where confidence is our game.

Contract Worker: I'm a downsized corporate employee, and I'm looking for a firm that can help me locate a contracting assignment.

Agency Rep: We can do that. But first I must ask if you are familiar with our code of ethics. You understand that once you sign with us you may never work for another agency nor discuss your pay rate with co-workers or any employee of the end user. [Click!] Hello, hello? Jeepers, if she's going to be that touchy I wouldn't want to work with her anyway. . .

Telephone: Ring-a-ding-a-ling!

Agency Rep: Good morning, Full Disclosure Technical Services. How may I help you?

Contract Worker: I'm a downsized corporate employee, and I'm looking for a firm that can help me locate a contracting assignment.

Agency Rep: So, you are looking for a job matching service?

Contract Worker: Yes that's it. How much do you charge for matching me with an assignment.

Agency Rep: We charge on a contingency basis. There is no charge unless you accept an assignment that we locate for you.

Contract Worker: That's fair. And if I do accept a contract assignment through you?

Agency Rep: Our fee is 15% of the rate billed to the end user.

Contract Worker: That's all? Does the end user pay you a finders fee in addition to what you bill for my labor?

Agency Rep: Oh, no. At Full Disclosure Technical Services our client is the contract worker. We work for you, not the end user. We work just like a publicist or talent agent. We arrange the contracting assignment in return for a percentage of gross revenues. For our job matching service the percentage is 15%.

Contract Worker: Well that's certainly encouraging. So your fee for finding me an assignment is just 15%?

Agency Rep: Yes, that is our basic fee where we locate the assignment, and you negotiate a direct contract with the end user. What we do is arrange the interview. The rest is up to you. We will assist you in negotiating a good deal, but the contract itself is between you and the end user.

Contract Worker: You mean a 1099 or corp-to-corp deal where I invoice the end user directly, and your firm is out of the loop? That means the end user would pay me whenever they got around to it. That could take several weeks or even months.

Agency Rep: Yes, exactly. As an independent contractor you would assume the risk of slow payment, or even no payment at all. We will bill you separately for our fee, just like any other professional service provider. Of course, you only pay us when and if the end user pays you.

Contract Worker: Of course. That's only fair. How much extra would it be if you handled the invoicing and collections, and also paid me up front on payday?

Agency Rep: You must be referring to our payment on payday service for independent contractors where we pay you on payday regardless of when the end user actually gets around to paying us. You must realize there is additional overhead associated with floating your paycheck and assuming the risk of non-payment by the end user. Fortunately we don't get burned very often, but when we do it really hurts. We charge an additional 5% to invoice the end user for you and pay you on regular paydays. Needless to say, we have a pretty aggressive collections department.

Contract Worker: I bet you do. I guess that means the fee for matching me with an end user AND floating my payroll would total 20% of gross revenues.

Agency Rep: That's correct. It's not unlike ordering dinner from an a la carte menu. Each separate service is individually priced.

Contract Worker: That sounds reasonable enough. But, I am not sure I feel comfortable being a self-employed, independent contractor. And, what if the end user requires W-2 status?

Agency Rep: Oh that's easy. We also offer an employer of record service. Our firm becomes your employer for the purpose of satisfying IRS requirements regarding collection of taxes and other compliance issues.

Contract Worker: I suppose there is an additional charge for your employer of record service?

Agency Rep: Yes, there is. We charge an additional 20% of the bill rate for this service. This covers our overhead for the employer's share of payroll taxes, workers compensation premiums, general liability insurance and additional expenses involved in processing your payroll. As a contract worker with W-2 status you automatically receive our payment on payday service as part of our employer of record service.

Contract Worker: That is certainly very reasonable. I expect to earn more than $68,400 next year. Do you lower your fee when my wages reach the FICA wage cap for social security tax.

Agency Rep: Absolutely. Since we no longer have to pay the 6.2% Social Security tax on annual wages over $68,400, we lower our fee by that amount for the remainder of the year after the cap has been met. Of course, on January 1 of the next year we have to start all over again, and charge the full fee. Incidentally, we also lower our fee when you pass the $7000 wage cap for unimployment insurance taxes. In our state that's equal to 4.9% of wages. Most agencies keep those tax savings, but we choose to pass them on to you, our valued client.

Contract Worker: Well that's certainly fair. So let me see if I have got it straight. If you locate an assignment for me the charge is 15% of the bill rate, and if you also serve as my employer of record there is an additional 20% charge.

Agency Rep: That's right. The total fee for both services is 35% of the bill rate.

Contract Worker: Boy, it sure does add up, doesn't it? But, if I understand correctly, I could save 15% by locating my own assignment. What if I find an assignment on my own, can you still handle the invoicing and collections?

Agency Rep: Certainly. Contractors who locate their own assignments qualify for one of our pass-through services. In a pass-through situation we don't get involved until you contact us with a done deal. We then contact the end user and negotiate a contract or purchase order that spells out the terms that you have already agreed to, such as bill rate, start date, duration, project definition and scope.

Our basic 1099 pass-through service is the simplest. Our firm invoices the end user on your behalf. And don't forget, we have a very aggressive collections department. When we receive payment we withhold our fee and immediately cut you a check for the remainder. We charge just 7% of the bill rate for our basic 1099 pass-through service.

Contract Worker: Wow! That's sure a lot less than the 35% margin you quoted for your full service.

Agency Rep: Of course. We only charge you for the services we actually perform. That's why our fee for basic 1099 pass-through is only 7%. If you prefer, we can add the payment on payday option to our 1099 pass-through service for an additional 5%. We recommend that new 1099 contractors use our payment on payday option when they first get started, at least until they have accumulated a cushion to carry them through periods of slow pay by the end user.

Contract Worker: Sounds good, but remember I explained that I am not ready to take on the responsibilities of self-employment. Plus, I want to be able to work where the end user requires W-2 status. Do you also have a W-2 pass-through service.

Agency Rep: Sure. It's just like our standard employer of record service. Our fee for W-2 pass-through is a flat 20% of the bill rate.

Contract Worker: Well, you sure did lay everything out clearly. Since I am just getting started in contracting, I think I would like both your job matching service and your employer of record service. Perhaps, as I become more experienced, I will be able to cut back on the services I use.

Agency Rep: Absolutely. Your take home pay will increase significantly as you become more self-reliant. Now, in order to get started I need your resume. I assume your resume is a fair and accurate representation of your skills and experience. Is that right?

Contract Worker's Bill of Rights

The Contract Worker's Bill of Rights addresses specifically the relationship between the contract worker (contractor) and contract broker (broker). Contractors are individuals who perform services defined by a contract or other separate agreement for an end user who is not the contractor's employer. Contractors may be self-employed sole proprietors, employees of "their own" corporation, partnership or limited liability company, or employees of a third-party employer of record. Brokers are individuals or firms that assist contractors in their relationship with the end user.

It is a basic right of the contractor that the broker shall have no interest or strategic alliance that conflicts with the best interests of the contractor. Whenever the potential for a conflict of interest exists, it is incumbent upon the broker to operate always in the best interest of the contractor.

The contractor performs direct services for the end user, whereas the contractor performs no direct services for the broker.

The end user pays for the contractor's labor, either directly or through the broker.

It is the end user that evaluates the performance of the contractor, and to which the contractor is ultimately accountable.

The primary working relationship is always between the contractor and the end user. The relationship between the contractor and the broker is secondary to the relationship between the contractor and the end user.

The exact nature of the relationship between the contractor and the broker depends on the professional services provided by the broker. However, the contractor-broker relationship shall never diminish the primary relationship between the contractor and the end user. The broker is the contractor's agent, and the contractor is the broker's client.

Contractors engage brokers to provide certain professional services on a fee-for-service basis. These services include, but are not limited to,

1. Job matching.
2. Contract negotiation.
3. Invoicing, collections and payroll.
4. Accounts receivable factoring.
5. Employer of record.

These services may be offered individually or in combination.

For example, a self-employed independent contractor may engage a marketing broker to locate a direct contract assignment with an end user. As an option the broker may also represent the contractor during contract negotiations.

In addition to job matching and contract negotiation services, the broker may provide separate invoicing, collections and payroll. When the broker receives payment from the end user, the broker withholds its fee and remits the remainder to the contractor. Another service often provided by brokers is accounts receivable factoring, also called cash flow management, whereby the broker advances payment to the contractor before the end user actually remits payment.

Alternatively, an independent contractor may locate assignments without the assistance of a job matching service, yet still engage the broker to provide invoicing, collections and payroll, and possibly also accounts receivable factoring. A common term for this type of relationship is pass-through. In a pass-through situation the contractor usually contacts the broker only after the contractor has already negotiated the terms of a contract with the end user.

Brokers may also provide pass-through service to contractors who require W-2 status, either because the contractor wishes to avoid the time, effort and expense of self-employment, or because W-2 status is required by the end user. Contractors who have W-2 status are properly referred to as contract employees.

While it is acknowledged that the W-2 contract employee is a regular employee of the broker, this relationship remains secondary to the primary relationship between the contract employee and the end user. The end user still pays for the direct services of the contract employee. The contract employee still performs direct services for the end user, and performs no direct services for the broker. And, the end user still evaluates the performance of the contract employee, who remains ultimately accountable to the end user.

W-2 employer of record service is, in fact, just another professional service provided by the broker. Brokers that provide W-2 status to contractors are properly referred to as contract employment agencies. The contractor assumes the role of employee solely for the convenience of having a third party withhold payroll and income taxes, and for the purpose of satisfying certain issues of compliance that may be of concern to the end user.

It is not uncommon that contractors engage brokers to provide job matching as well as employer of record service. The fact that the broker provides multiple services for the contractor in no way detracts from the primary relationship between the contractor and the end user, for whom the contractor performs direct services, by whom the contractor's work is evaluated, and to whom the contractor is ultimately accountable.

It is a basic right of the contractor to be fully informed of all charges imposed by the broker in return for services the broker performs as agent of the contractor.

Disclosure of rates, fees and charges is a hallmark characteristic of the professional service provider. Hiding or refusing to disclose service charges is unethical and may constitute fraud.

The end user pays for the direct services of the contractor. In those cases where the broker receives payment on behalf of the contractor, it is incumbent on the broker to disclose to the contractor all revenues remitted by the end user as payment for the contractor's direct services. No broker shall arrange a separate agreement with the end user for the purpose of concealing the full amount paid by the end user for the contractor's direct services. Doing so is unethical and may constitute fraud against the contractor.

Brokers shall clearly and fully disclose what services they provide, and clearly and fully disclose the separate and incremental charges for those services. Brokers shall employ a uniform fee schedule that applies equally to all contractors who engage their services. Brokers shall charge only for services they actually perform.

The broker may charge for professional services on a contingency or non-contingency basis. The broker may charge a fixed fee or bill for actual time and materials. Most frequently, the broker charges a percentage of gross revenues earned by the contractor over a specified time which may extend for the entire duration of the assignment. Exactly how the broker charges for its services to the contractor is immaterial to the requirement that all charges shall be detailed with respect to services provided and the specific charges for those services.

The contractor is under no obligation to honor a service agreement or an employer of record agreement that does not clearly identify specific services to be performed by the broker and their associated charges. Any attempt by the broker to withhold full disclosure of service charges is unethical and may hurt the contractor's ability to obtain gainful work.

It is a basic right of the contractor that the contractor's resume shall never be modified or distributed without the contractor's knowledge, review, and expressed permission.

The contractor's resume is protected by copyright, and remains the property of the individual contractor. Copyright protection is not diminished because the resume is posted to an electronic database, personal web page or other public venue. The contractor's resume is specifically not in the public domain.

The integrity of a contractor's resume is inviolate. Modifying the appearance and content of a resume for the purpose of misrepresenting an individual's skills and experience is fraud. Such misrepresentation may create unrealistic expectations of the contractor's performance, and thus damage the contractor's reputation and hurt the contractor's ability to obtain gainful work.

A resume may never be distributed to potential end users or to other brokers, or posted to an electronic venue, or sold to a third party without the contractor's expressed, prior approval. Unauthorized distribution of the contractor's resume may result in multiple submissions to the same end user, resulting in the contractor being removed from consideration for a qualified assignment, and thus hurt the contractor's ability to obtain gainful work.

The contractor has no contractual obligation to a broker that distributes the contractor's resume to an end user or other broker without first receiving the contractor's expressed permission to release the resume to that particular end user or other broker.

It is a basic right of the contractor that reference information shall be used solely for the purpose of conducting a narrowly defined background check of the contractor. Any other use constitutes theft and misuse of proprietary, confidential, information belonging to the contractor.

Examples of misuse of reference information include, but are not limited to,

1. Marketing candidates to references.
2. Soliciting job orders from references.
3. Soliciting from references the names of co-workers, colleagues, and contractors.
4. Soliciting business leads from references.
5. Attempting to recruit references.
6. Transferring or copying reference information to any location outside the contractor's own file.
7. Making reference information available to anyone not specifically engaged in placing the contractor with an end user.

Misuse of proprietary and confidential reference information as described herein may negatively affect the contractor's relationship with valued references, and thus hurt the contractor's ability to obtain gainful work.

It is a basic right of the contractor to work whenever and wherever the opportunity exists, free from unreasonable and overly restrictive non-compete periods and end user buy-out provisions.

In the case of job matching service, the contractor's obligation to the broker shall not extend beyond six months from the initial introduction to a prospective end user. When the introduction leads to a contract assignment, the contractor's obligation to the broker shall not extend beyond six months from the end of the assignment. The six-month maximum applies equally to non-compete periods and to end user buy-out provisions.

Non-compete clauses and end user buy-out provisions shall apply only when the broker introduces the contractor to the end user, and only for the specific department and physical location where the assignment is carried out.

No broker shall restrict a contractor from engaging the services of another broker.

No broker shall restrict a contractor from accepting work with a specific end user except as provided by a valid non-compete clause or end user buy-out provision as described herein.

As the contractor's agent, the broker shall exercise no ownership privilege, or exclusive right to represent the contractor.

Individuals and firms that attempt to interfere with the contractor's freedom to work as described herein may be practicing indentured servitude and other prohibited activities that can hurt the contractor's ability to obtain gainful work.

Individuals and firms that violate the terms and guidelines of this Contract Worker's Bill of Rights may be practicing fraud, indentured servitude, theft and misuse of proprietary information, copyright violation, and other activities specifically prohibited by law. Individuals and firms that carry out illegal activities, or cause material harm to the contractor, or otherwise hurt the contractor's ability to obtain gainful work may be subject to legal prosecution and civil remedies to the full extent permitted by the law, including substantial punitive damages, court costs, and attorney's fees.

No direct contract or third-party contract with the end user, and no employment agreement between the contractor and a broker, shall supercede or override the terms and guidelines of this Contract Worker's Bill of Rights.

[Revised 11/01/98]

Copyright © 1998 James R. Ziegler. All Rights Reserved.

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