Hiring off shore

[David Schwartz]

There used to be folks known as “executive recruiters” who kept in regular contact with hiring managers. They could get you in front of those who were looking for your skills. They also knew enough about the technology they were recruiting for that they could carry on a conversation with you.

Today about 19 out of 20 people who contact me about job opportunities have names consistent with people born in India. Many I speak with on the phone are nearly impossible to follow what they’re saying. 

But worst of all, none of them seem to have any workable understanding of what goes into the jobs they’re pimping. They’re just pimps. Or more politely, “outbound telemarketers”. I get the distinct impression that most of them were working for a credit card company or an investment firm less than a month before they called to “reach out" to me, as they like to say in their first breath.

Lately, the non-Indians who call me give me the distinct impression that these folks are new-hires at their firms who were told to go through the database of resumes and “reach out” to touch base with people just to see what’s up. 

As far as I’m concerned, these scammy hucksters exist for exactly one reason: because of Section 1706 of the Tax Code. For those who don’t remember, this was passed back in the mid-80’s at the behest of several large consulting firms like Anderson Consulting and the other “Big 8” firms who made a case to some Congressmen that the US Treasury was losing tax revenues because, as they alleged, independent contractors working on a 1099 basis were basically defrauding the country by failing to accurately report their earnings. So 1706 eliminated what’s called the “safe harbor provision” for determining whether a worker is an employee or an independent contractor — specifically for high-tech workers. 

>From what I heard, this amendment was never debated, but stealthily tacked onto a bill at 1:30 AM just prior to the bill being voted on around 9AM, and nobody realized it was there until after the bill passed. 

The GAO has reviewed this act numerous times and determined that it was totally bogus. In fact, the lack of 1099 workers in the tech field has had a significanly negative impact on tax revenues in this sector. Yet, Congress has refused every opportunity to repeal 1706. This section of the Tax Code creates unreasonably high risks of having any given worker reclassified by the IRS as an employee several years after they were employed. If that happens, it costs the company HUGE penalties and interest. So to reduce their own risk, they simply outsource the risk to 3rd-party firms and let them deal with it. In the process, the general quality of work has cratered, because these firms exist mainly to pimp bodies for large hourly rates, then skim a (relatively large) percentage of their fees off of the gross hourly rates paid, rather than focusing on employing more costly recruiters who could do a better job of matching workers to needs.

So today the entire system of recruiting in the tech field has evolved to become quite a pathologically screwed-up mess where we debate whether to hire the cheapest workers simply because it has become nearly impossible to get people with the best skills matched to hiring managers who need them.

-David Schwartz



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