Candidate is employed by a different, but related company

Over the past few years we’ve seen a growing number of these cases. Sometimes it is a genuine mistake by the debtor, especially if they are part of a large international group, but often it is a deliberate and regular strategy used by the debtor in an attempt to avoid recruitment fees.

In this case our client is a construction sector recruiter. Their debtor is a large property development company (let’s call them Business A) owing £38k in temp and transfer fees.

A web of businesses used to avoid payment

Our client had signed terms with Business A, who took their contractor on and paid fees for the first few months but failed to pay the final month fee of £5k. The client referred the £5k to Sterling for collection, however they had also heard that their contractor had been taken on with a permanent contract by Business A. Business A was disputing both invoices on the grounds that the contractor had not worked for them in the final month and was no longer employed by them.

After conducting an investigation Sterling found that the candidate was in fact not working for Business A, but was working for a different employer. However, we found that Business A had a history of using ‘special purpose vehicles’ (SPV’s) for property development projects, and had 57 of these separate associated businesses. The business that had employed the contractor (Business B) was not one of these companies and there were no shareholders or directors in common, but we were sure they were connected in some way as they were using the same head office.

Often the easiest way to obtain evidence is to ask the question in the right way. We called Business A’s switchboard and asked to be put through to Business B. The receptionist recognised the company name immediately and put us through to Business A’s accounts department who informed us that they did deal with invoices for Business B. We had recorded the call so we now had evidence to put a case forward to Business A.

Commonly used terms of business for recruiters include clauses covering ‘third party transfer’, essentially the introduction of the candidate by the client to other businesses. We wrote to Business A setting out our evidence, the link between them and Business B, and explaining how the ‘third party transfer’ clauses applied. After further discussions in which we explained the likely outcome, implications and additional costs involved for them should we be forced to take legal action, they agreed to make payment.

We were able to collect in this case as we understood the possible scenarios from the outset. We understood how they were covered by the terms of business, the best way to gather evidence, and the most effective way of explaining the situation to the debtor.

There’s also a lesson for recruiters from this scenario. If you’re searching for possible back door hires it’s important to consider not only your customer, but also other businesses in their group.

A note on our case studies:

You’ll notice that we do not publish the name of our clients on most of our case studies testimonials. Sterling’s debt recovery service is provided in a confidential manner, in most cases our client prefers that we do not use their name due to the customer relationship sensitivities involved.

Sterling are happy to arrange reference site calls on request, usually with a client working in the same or similar sector. If you would like to speak to one of our clients please contact us to discuss your requirements.