What tech freelancers using recruitment agencies must beware

Being a freelancer in exciting industries like technology can be extremely rewarding, but it can be a challenge, especially at the outset.

Many computer or digital freelancers therefore rely on technology recruitment agencies to secure them work, and to advise on how best to operate as a freelancer when starting out.

And while us recruitment agencies can and will do just that, there are some dodgy tech recruiters out there who will leave freelancers high and dry, writes Matt Collingwood, managing director of IT recruitment company VIQU.

Here are 6 things freelancers should consider when working with a recruitment agency.

1. Understand what you’re signing

Often, when a tech or digital recruitment agency introduces a freelancer or contractor to their client, they will expect all parties to sign an agreement.

The agency’s contract will contain terms that are often weighted to protect the agency -- first and foremost.

A popular clause within this type of agreement states that if you (the freelancer) provide services outside of the initial agreement within a set time period (it’s usually six months), the agency is within its rights to take a margin for the work performed.

I’ve heard some horror stories over the years where freelancers have done extra work requested by the client -- often some months later, only for the agent to take umbrage at the fact that their agency was unaware. Or the agent, specifically, wasn’t informed.

In most of these cases, it was a simple oversight by the freelancer, and the lost margins were small to the agency. But I have heard cases where agents have taken an aggressive stance, quoting the terms of the written agreement.

For instance, I know one tech freelancer who worked with a client for a set period through an agent on a project, before being approached a month later by the business. Unfortunately, the freelancer was naïve about his contract, and agreed to continue providing digital design consultancy services to the client for a couple of days a week. This carried on for a few years, only for the agent to get wind of the one-to-one, resulting in the agent sending the freelancer a ‘Letter before Action’ demand. The letter cited a hefty £12,000 in “lost margin”.

My recommendation? Always understand the terms of the agreements you sign as a computer freelancer with third parties, and unless you’ve got a good eye for contract law, get the agreement professionally reviewed. Staffing agencies have deep pockets and will pursue what they see as a breach of contract and loss of margin.

2.  Be careful what information you release to tech recruitment agents

A good employment business will do their ‘due diligence.’

Some of their agents will want to see your portfolio of work as an IT freelancer, and even take up references from your other clients.

This is the norm. But there are a lot of agencies that will harvest client contact information solely for their new ‘Business Development’ needs.

I worked for a corporate recruitment business for many years. I remember one particular director who joined us from a less scrupulous agency. One of the main BD ‘tools’ he continually pushed on his consultants was to create ‘fake tech assignments’ with the sole aim of finding out freelancers’ referees’ contact details! The lead generation of referees based on selling bogus assignments was astounding and a massive time-waster for those freelancers hoping they were in the running for a genuine role. A role, of course, which didn’t exist.

My recommendation? If you’re asked for referees as an IT freelancer, I would suggest you say that you’re happy to share these after a successful interview, not pre-interview, as you don’t want your clients and peers contacted unnecessarily.

3. Start a brag folder

One of my biggest pieces of advice that I always tell tech freelancers is to start creating a ‘brag folder.’ The brag folder contains references from clients on their letter-headed paper. This is a great move to make as managers move on, businesses close, and contacts get lost to other industries. You don’t want to do a great job as a tech agency freelancer but then have nothing to show for it because your contact has disappeared! Brag folders are great to reach for when you want to secure a rate rise at contract renewal.

But a bit like your prized referees’ details, don’t give your brag folder to the agent freely. My recommendation? Tell the agent you will share the folder directly with the client due to its confidential nature.

4. Keep watch of your agency’s financials – and its directors

Don’t get hit with bad debt as a freelancer.

At the time of writing, UK company insolvencies are up 40% on last year. With the barrier to entry to launch a recruitment company very low, sadly a lot of agencies set up by ‘bedroom recruiters’ are going bust. I’ve heard of an increasing amount of recruiters closing shop, and I believe this is going to continue into next year.

I’ve seen many examples of mismanaged agencies going to the wall overnight, only to rise like a phoenix from the ashes the next day with no debt. In a number of these examples, freelancers were left without payment for their invoices.

My recommendation? If you’re working through a recruitment agency as an IT freelancer, credit check them online!

Look on Companies House to find out how long have they been trading. Find out about the conduct of their directors -- and do this with a questioning mind. Have they previously put companies into administration, for example? Do they have a lot of failed staffing businesses to their name? These are just some of the ‘red flags’ tech freelancers need to look out for.

5. Consider payment terms, and down tools if they’re flouted

Tech freelancers need to consider payment terms.

Some employment businesses with poor cash flow will write ‘pay when paid’ clauses into your agreement, or the agreement with your limited company.

The effect of this clause is that you won’t get paid until they do. I dislike this agreement and believe all parties should pay on according to day-specific payment terms, and not rely on the previous chink in the supply chain to pay.

My recommendation? If the agency breaches the payment terms and you are not paid on time, you should cease working until you are paid. Make sure you voice your concerns over payment to the agency, but if you’re not getting what you need from them, involve the client – albeit only as a last resort.

6. Don’t ghost (without full awareness of the reputational consequences)

Most computer freelancers are consummate professionals and would never leave an assignment or contract early, unless it was an emergency.

Unfortunately, I have witnessed occasions where the odd freelancer has done just that, and it’s left them in a sticky situation.

Recruiters talk and move around. It’s highly likely if you let a recruiter down by leaving a role early -- and leaving both client and agency in the lurch, that it will be mentioned to others. Some agencies even keep a running system of those who ghost them! So a bad reputation with one agency can stick, and spread.

A former employer of mine pursued a freelancer for £8,000 for the loss of a client due to her walking out of her assignment early. The employer could demonstrate that they had lost their client as a direct result of the freelancer walking out and breaching her professional and contractual obligations. They said they would make a claim through the small claims court. As a result of their insistence of being compensated for the ‘ghosting,’ the freelancer chose to settle out of court. Cheaper than going to court -- but not by a lot.

Final thought

My ‘horror stories’ don’t paint recruitment agencies in a great light, and I’m a recruitment agency boss myself!

Agents are generally professional and upstanding -- just as most candidates are. But some recruiters can be sneaky, money-motivated, and looking to catch you out as a tech or digital freelancer. Almost needless to say, there are plenty of reputable and trustworthy agencies out there. But it’s important you educate yourself on the nature of agency freelancing in the UK technology sector -- in order to protect both yourself and your clients. Stay safe out there computer freelancers!