This week’s inquiry comes from Marc Stevens:

Hi Jeff,

I’ve been recruiting now for about 11 years and as you would imagine, I’ve seen a lot of different things happen in this sometimes crazy but very rewarding business. I’ve attended the Fordyce meetings and really have benefited from your presence there. In your articles, you always share unique solutions we can’t get anywhere else…thanks!

Recently, I’ve been exposed to a situation that one of my candidates is facing and because of it seems a bit unfair, I wanted to share it with you to see what ideas or thoughts you have.

I have a candidate who has accepted an offer from our client and learned on his exit interview from his current company they wanted him to reimburse ½ of his relocation costs. Apparently the agreement is that 100% of the relocation costs are refundable to the company if the candidate leaves in the first year and 50% if within the second year. To me this seems a bit harsh — think of it this way:

Let’s say the candidate left on the 23rd month, well technically the company is looking for 50% of the relocation costs reimbursed? Huh?! I know I’m going to be biased about this but I can’t see why the company wouldn’t be amenable to at least working out a prorated schedule, which brings me to my question.

Is this typically something a company will enforce? Have you found that they would be willing to work something out, i.e. prorated schedule &/or does the candidate need to get an attorney involved?

Thanks,

Marc

Hi Marc,

We’re pleased to hear from you, and are here to help recruiters close as many placements as possible. Your JOC inquiry will help us show how to handle the matter of candidate reimbursements. Or rather – unhandle them, since there’s no need for the candidate to pay anything – or for you to blow a placement — if you set up the countermove properly.

We call these pre-employment gems Employee Payback Agreements (EPA’s). Typically, they’re a “condition of employment,” and the candidate has no choice other than to decline the job. That makes them disfavored agreements legally. So a court will look for reasons not to enforce them. But bringing up those reasons are the candidate’s burden of proof. And your “burden of placement.”

That’s where good recruiting comes in. You can coach the candidate to:

1. Attack the agreement itself. Employer lawyers generally overwrite these agreements to impress their clients. That means ambiguous, inconsistent and overbearing terms. Things that would work in a business-to-business deal don’t work when a court construes a disfavored agreement.

My favorite way to break relo paybacks is to show there was no consideration (something given in exchange) for the payback. It’s usually missed – even by experienced lawyers — and is the ultimate legal challenge. Here’s why:

The employer agreed to reimburse the relo expenses so the candidate would accept. Most defense lawyers stop there. But where is the payment for the payback condition (upon the candidate leaving)?

None. No consideration ergo no contract.

2. Use the reasons for leaving to counterbalance the terms of the agreement. There are always misrepresentations in the hiring process. Candidates make them, and employers make them. Now’s the time to bring up the ones the employer made. It’s a safe bet that there were around a dozen.

Was the job exactly as represented? Is it ever? By whom? When? What was said? How about the work area? The reporting relationships? The experience of the supervisor? The product? The product line? New products being developed? The company culture?  Since it’s a relo, what about employer statements as to job opportunities for the spouse? The schools?

See what I mean? The whole process is replete with representations and they become misrepresentations. Some intentional, others unintentional. No matter. Just blame the employer for everything that went wrong!

Do a candidate debrief with a plunger in one hand and a pen in the other. As the sewer backs up, step aside and take copious notes. O-o-o-h what yuk spews out! Who, what, where, when, and how.  It won’t be a brief debrief, but it’s worth your fee to document.

3. Bring up the employer’s failure to orient, train, and supervise the candidate properly. Every working wounded has a story. Take notes on this too. Dates and places are critical. The candidate can be wrong on just about everything, as long as he’s exact. It’s just some biased person’s view of the world. That’s good enough for us.

Once you’ve documented these three items, prepare a letter for the candidate to give to his ex. Threats aren’t necessary – just laying out the “facts.” Employer lawyers cave, or they get nailed in court with a lot more than the relo expense. Even worse – their clients ask why they paid for an agreement that was wrapped around their neck in the public square.

As I stated in The Employee Termination Handbook (probably on the employer lawyer’s desk):

The public has the impression that a court is like a giant automated teller machine. Just plug in the right facts and law, and the cash will appear. Trial lawyers who think otherwise are disabused of this impression rather violently during their first court appearance. This is the difference between art and science in the practice of law. The proof and interpretation of the law are critical.

There you have it, Marc. Once you know how to break EPA’s, you can let candidates know they should never stand in the way of taking a job.

No placement should ever be blown over an EPA. Half back? I don’t think so! Get an attorney? I don’t know so! Just a good recruiter like yourself — and off he goes to pursue his dream.

Best wishes for success with this and many more placements!

Jeff

If you have a legal question you’d like to have Jeff answer here on The Fordyce Letter, check out Jeff’s On Call! and submit your question.

The telephone interview went well and your candidate is preparing for their face-to-face interview. Now is the time that most objections not previously rearing their ugly head come up out of nowhere.

If you have not given them information about the area, do it now! If you have not talked with the spouse, do it now! If you have not set the appropriate relocation expectations with your candidate, do it now! If you have a relocation professional helping, get them involved to help with these steps. Remain in as much control of the process as possible.

If your candidate will have to sell a home, find out what the market is like in their area. Don’t let them rely on the neighbor-down-the-street scenario; the real estate market is changing so fast that appraisals are being thrown out after two months. There are free tools on the Internet to help in determining your candidates housing situation simply from an address. Do it yourself and deliver the information to them if you are concerned about them getting this done on their own. This gives you one more reason to contact them and keeps you in control of process flow.

Giving your candidate homework like talking to a real estate agent about selling their house without you can backfire. They may procrastinate or just not do it at all and tell you they have. It is better to find out that they cannot sell now then when you are sitting on an offer and you have just wasted your time and your client’s money.

Look for common relocation objections that can and very often will cause a deal to fall apart. Selling their home, finding a new one in a “good” neighborhood, schools for the children, and leaving family or friends.

The Employee Relocation Council recently released a survey showing that 41% of relocating employees are reluctant to relocate due to family resistance to the relocation. Dig deeper and find out if there are special family circumstances such as a high school football star who needs a special program, home-schooled children, a stay-at-home mother. These types of objections do not always hinder a relocation, but if the perception is that they cannot live in the new area in the same way they are accustomed to, they will get in the way. This can cause extended offer acceptance periods, and even worse, a kill the deal.

If your client has not determined the exact relocation benefits for the position, start addressing what the candidate may need to help them with. Find out what your candidate will need and start formatting amounts for the negotiation. Get a quick quote on the move. Find out the costs of temporary living, get trend information on what should be covered for that particular level of hire.

If you are requesting $30,000, show line-by-line what it will be covering and how much each line item will cost. This way you have the data, you aren’t scrambling for it, and can justify your request when your client is ready to write the offer.

The details, the whining, the demands, the questions, and the art of the negotiations can be overwhelming. Countless recruiters are having fall-offs very late in the placement due to relocation issues that they thought were already addressed. In fact, several recruiters and clients are swearing off relocation altogether.

But is that the best approach?

In this menacing economy, it is critical for your clients to attract top talent to achieve growth. Clients who once considered dropping relocation are now leaning on recruiters to take care of the leg-work involved in getting a candidate to sign on the relocation dotted line.

So where do you start? How do you proceed? Where can you get information?

You are a skilled recruiter, but ultimately there are certain things that may be completely out of your control. The most critical aspect of dealing with a relocation placement is making sure that you, your candidate, and client are taking the same steps toward success.

Establish the Information Flow

In order to help a client with a relocation placement, you must first ask three critical questions:

• First, determine which relocation benefits are covered; get a policy snapshot if one is available. Don’t be afraid to ask this question and ask it early, and don’t be afraid to clarify what they mean. If your client tells you, “Relocation is covered,” ask what that means. Each person and each company can define “covered” in a different way. Don’t be surprised by a $2,000 lump sum for your executive when the offer is presented if you do not ask. Don’t make the mistake of pre-closing your candidate on a ‘covered’ relocation and end up paying for a move out of your fee to keep the deal alive. Inadequate and insufficient offers go out every day.
• Second, determine whether your client plans on covering the taxes imposed by the IRS on the relocation benefits. If you are not sure which benefits are taxable to your candidate, take a look at the IRS website and publication 521 for clarification (www.irs.gov). Most relocation expenses are considered taxable benefits to the employee whether they are paid to a vendor or the employee. If your client is reimbursing $20,000 in taxable expenses, but not grossing it up or covering the taxes, your candidate could be surprised at tax time as the typical tax impact is around 40% or $8,000.
• Third, find out how they intend on helping the candidate move. Do they have a relocation provider or in-house person who counsels the candidate? Do they give a relocation lump sum and let the candidates fend for themselves? It is important to find out so that you can come in and complement what they are lacking in assistance to your candidate. If they do not have an agent taking your candidate around the destination area on interview, consider doing that to manage what, where, and how your candidate views the destination city.

Identify Objections

Now it’s time to approach any objections that the candidates will bring up, even before the telephone interview. Are there inadequate aspects of the benefits? Is the area known as a tough city? Is there a perceived prejudice about the area?

Answer those objections before you begin your search for the perfect candidate. Gather information about the destination area from cost-of-living information to school reports. Gather the selling points of the area and put them in front of your candidate. It may even be a good idea to find out something about the area that you like. This will help you get excited when you are pitching prospective employees about the position and the location!

Give the candidates a summary or spec sheet on the area early so they can put aside their perceived objections and move on or out of the process.

Tomorrow, in part 2, look for ways to handle common relocation objections.

According to Korn/Ferry’s latest “executive quiz,”  85% expect more job losses in the global labor market in 2009, and 78% expect unemployment to rise in Q4 2008. Given the perceived volatility in the labor market, executives report an extreme willingness to chase job opportunities around the world; 84% say they are willing to consider relocating, with 55% willing to move internationally for their next position.

“This is a very dynamic time in the global labor market, and while the overall demand for talent will certainly rise over time, job creation may be in different locations than today’s talent pools are clustered,” said Sergio Averbach, President of Korn/Ferry International, South America.

“In countries such as Brazil, Russia, India, and China, the world’s fastest growing economies, it’s not uncommon to see unemployment temporarily increase as labor supply and demand find a new equilibrium in such geographies and different industries,” said Averbach.

The results showed a contradiction when respondents were asked about their own company’s hiring plans. Nearly half – 47% – said their companies were hiring even in the current economic environment. Another 27% said their companies were in a hiring freeze. Only 26% stated that their company was currently downsizing.

First:

“You have a superb client company, it’s a step up in his career, more responsibility, more money, more vacation, and part ownership…what kind of candidate would not go for a pot of gold like that?”

And second:

“You will never find anyone in the local market who fits this opportunity…we know everyone, and nobody around here has what we want. That’s why we need you to conduct a nationwide search. We’ll gladly pay your fee…but we want a national effort.”

I believed the above statements only once, back in the mid 1980s. That’s because I don’t make the same mistake twice. The mistake? Performing placements where relocations are necessary.

I have filled every position I have ever filled from the local market of the client company, or I placed the candidate I was working in his/her local area, unless he/she had a special place they wanted to go, and a compelling reason to get there. That includes positions that were very unique and specialized, and very unique and specialized candidates.

Isn’t that a rather limited way to do this business? I prefer to think of it as a smarter way of doing this business.

I have always believed that within 30 miles of any point on the map every kind of candidate exists, and a good opportunity exists within 30 miles for anyone open to pursuing a new job. Relocation is rarely, if ever, necessary for any candidate or any company, even when convinced their “uniquely qualified candidate” cannot possibly be a local candidate.

In fact, my manager would marvel at how I could always fill a job with a candidate who was always right under the client’s nose. A good example was a senior manufacturing position I filled for a Fortune 50 food processing company. This company had run ads everywhere, had flown in candidates from all across the United States, and had even had a ‘no show’ on a hire.

I made one phone call…to the person doing the job one level below this position at another major food processing company, located directly across the street from my client company. This recruit aggressively pursued the opportunity because it was a step up and lacked the major personal disruption of relocation. He was hired because he was 60% qualified, 100% motivated, and 100% local. This, after my client company said it was not possible to find a local person who could be hired for this position. This was no fluke.

I was trained on the conventional model: sell outstanding candidates on pursuing outstanding opportunities, and if relocation was necessary, cover a lot of bases related to the stress of moving. I was trained to go to the competitors of my clients, wherever they were located.

That makes sense, but almost always meant relocation for whoever was recruited. To me, that was always a waste of time. I knew that no matter what a company said about industry experience, if you could find someone locally who connected well personally with the hiring manager, and could perform many of the functions of the job, regardless of industry, a hire was likely. I was rarely wrong.

Supreme Quality of Life

That’s why I created my own geographically based business model. Today, geographic preferences in employment are more important than ever.

Quality of life is no. 1, and the majority of people want to live and work where they want to live and work. They are willing to pay the professional price to do so. Gone are the days where the majority will “go where the best career opportunities are located.”

The good news is that the right placement or job search approach can minimize that professional price. In fact, I operate by the “Thirty Mile Placement” principle:

“Except when facing highly unusual economic, geographic, or occupational circumstances, when using the correct approach, almost every type of talented person can find, or be placed in, satisfying employment within a thirty mile radius of any medium size population center within the continental United States; and any company can find every type of professional it needs within that same thirty mile radius.”

Today, my company places transitioning military people only. But we put them exactly where they want to live, and that is a big draw with these candidates because all other military placement firms require that the candidates go where their jobs are located.

Even so, if I still performed search assignments for client companies, I would never look beyond 30 miles from my client company’s front door because I know the person they will hire is probably right next door.