When you start your career as a software engineer you will meet recruiters. They are a core part of the industry and provide a service to both the company they work for and to you, the candidate.
It’s important when working with recruiters to understand how they make money and the incentive structure they have in place. I’m going to generalise here and talk about the methods I have seen and I don’t promise that this will be an exhaustive list.
Different kinds of recruiters/TA
The first and simplest way a recruiter makes money is by working for the company they are hiring for. In many cases these people will be called Talent Acquisition or TA and recruit for the organisation broadly, this means they aren’t just hiring software engineers but also design, product and even non-product roles like finance and legal. A company with their own TA team may include different specialisations that focus on different roles within a company.
The second kind of recruiter you will encounter will work for a recruitment agency. This is a pretty typical service based model between the Host Company and the Recruitment Agency, the recruiting group who get paid for finding a candidate which could be a fixed fee or may be a percentage of the employees salary for a period of time, eg 12 months. The salary model is better for everyone since the recruiter has incentive to hire the right people and keep them at the company for a longer period however it only works for permanent employees not shorter term contractors.
The third kind of recruiter I have worked with is the freelance/independent recruiter. These people operate as their own one person agency and will find roles that they then send out to contractors. This is the recruiter cohort with the most variability. You will find the best and worst people here. Some genuinely want to help you find a great role and others just want a mass of CVs they can send to as many clients as possible. Overall these people will operate in the same way as larger recruitment firms so all of those rules apply here.
Working with recruiters
Be mindful of who you give your CV to. If a recruiter presents you to a company the company will not be able to accept an application from you if you apply directly. The recruiter and company will have an agreement to that effect. When first talking to a recruiter check if they have any roles that match your skills, you can waste a lot of time talking to people that have no relevant roles on the promise that they will find something, your time is valuable so don’t spend it doing speculative interviews.
If you have a job somewhere that a recruiter sources for you then you quit and try to go back then the company will often have to pay the recruiter a fee. It’s easier to just tell the recruiter you’re going back and preserving the relationship for everyone. These agreements have a time limit on them, often 12 months so after that point you’re clear. The company may choose to argue this, it’s not your job to be involved with it. Read the contract you receive from the recruiter and the host company so that you know your rights and obligations.
Recruiters and companies may have disagreements or disputes. Stay out of it unless your money is impacted. Both parties won’t ruin their relationship with you because they are disagreeing.
A recruiter’s most valuable asset is their network and having a roster of people they can reach out to when searching for roles. If you are interested in contracting then finding a few good recruiters you can go back to frequently will have the best results. A recruiter wants to be known for having high quality, reliable candidates so make it easy for them and they will make it easy for you.
You will see memes and jokes calling recruiters dumb and clueless which is inaccurate and doesn’t understand their role in the hiring process. It’s important that recruiters have an understanding of the field they are working in which helps them screen better candidates for the hiring organisation but don’t expect them to be experts on language features or the latest frameworks. If you pass the hiring screen you will be referred to a person at the company who will test your technical skills if necessary. For contract roles you probably won’t do a code test since the company has less commitment if you are not good they can just end the contract. You never know where you next role will come from or where a recruiter will end up in the future so build relationships and help them where you can. If you are not interested in a role it’s perfectly fine to say that to them or even recommend a friend or co-worker for the role if you think they would be a better fit.
Timesheets, invoicing and money 🤑
You will be paid through the recruitment company either issuing invoices or as a casual employee. This will change on your location and local laws. If you want to contact long term you should look to set up your own business so assets and taxes can be done separately. As a contractor you will not be entitled to leave or superannuation so make sure you take this into account when establishing your day rate. The host company and recruiter will not manage your taxes for you if you are running your own business, don’t get stung later because you didn’t expect to pay taxes.
When contracting, a recruitment agency will receive a fee from your day rate that is billed to the host company. An example is that you bill the recruiter $1000 per day and the company is billed $1200 per day. The company pays the recruiter who then pays you.
When I first started contracting I had a day rate of $450/day and at one point I saw I was being billed to the host company for over $900/day. This is good and bad, on one side I’m not getting the full value of my labour, on the other side it shows that the host company has budget to pay for the role and that in my next contract I can go for a higher day rate. Getting upset isn’t going to help you, once a contract is in place you will have difficulty changing the money but if it matters that much to you raise it and be prepared to move on if you don’t get the result you want.
Day rate, not hourly. A company wants you on board full time and every recruiter I have used uses day rates. Use a website like paycalculator.com.au to figure out how much your take home pay is and what your tax obligation will be.
If you have a day rate then any amount of work on a day will trigger that full day being used. Stick to this to avoid working one or two hours and only being paid for that. As a contractor you need to be a strong advocate for yourself.
As a general rule the company and recruiter will avoid talking about how much your day rate is compared to the recruiters fee and that information. Rightly or wrongly this is what I have seen happen and will change depending on the firm you contract through. If you have strong feelings about knowing where the money goes do so at your own risk and expect some push back. It’s your call if it is worth it or not, just know that the recruiter is getting paid for the work they do.
Timesheets will be done with the recruitment agency and may also be done with the host company. The recruiter’s fee will be established based on your timesheets so just do them and don’t leave it to the last minute. Your time sheet doesn’t need to be down to the minute so log full days when you work full days. If you are being paid a day rate you will not be paid overtime however if overtime is consistent then raise it as an issue and either increase your rate or remove that workload.
Leave and Life
Raise any leave periods very early especially if you know it’s coming before the contract starts. Contractors are brought in for specific work streams and if you are not able to complete that it’s better to be honest early in the process. Most places don’t care, you don’t have any annual leave so won’t be earning money during the leave period.
Looking for the next contract
You can go to a recruitment firm and ask them to shop around a contract for you. Recruiters can act as business development for a 1 person company. They will find the work and you will complete it.
When you get 2 months out start talking to your host manager and the recruiter about extending or ending the contract. Some places will want to keep you on, others won’t. Don’t take it personally. If you are not continuing the contract then talk to your current recruiter about any other contracts they have available. You may not be out of work at all.
I hope this gives you a quick intro to recruiters in the software engineering space and how you can work with them. Good recruiters can make the job hunt better and more profitable for you whether contracting or going full time. It’s important to remember that you need to advocate for yourself in this arrangement because no one else will do it for you, do the math and figure out what your day rate is then stick to it.