Ask the Headhunter: Why have employers been replaced with middlemen?

Nick Corcodilos started headhunting in Silicon Valley in 1979 and has answered over 30,000 questions from the Ask The Headhunter community.

In this special Making Sen$e edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards or salary negotiations. No guarantees — just a promise to do his best to offer useful advice.

I don’t normally publish such long questions, but the jobs economy has become so convoluted that it’s important to discuss the problem and how it affects job seekers.

Question: I’m sorry this is long-winded, but it seems employment is no longer a simple matter of me working for an employer. I work for middlemen.

I’ve accepted a job offer, but technically, I’ll be an employee of the consulting firm that recruited me and is billing me out. There’s also a third company involved, the screening company.

Today, I received an email from the screening company, asking for W-2s from the employer I worked for between 2005 and 2011. I happen to know that companies verify prior employment electronically, so I asked the consulting firm why they needed W-2s. He said the screening company couldn’t confirm my employment. This made no sense to me. I said I would call the screening company to work this out, since there was a number on the email for customer service. The recruiter at the consulting firm said not to do that and that I should download the W-2s from the IRS.

READ MORE: Ask the Headhunter: Should you tell a recruiter your salary?

I called the screening firm anyway and asked a customer service rep why they needed W-2s to confirm prior employment when I know they can do it electronically. She said the screening firm didn’t need W-2s for employment verification and that it was the consulting firm that required W-2s.

But then she said they do call prior employers, in addition to doing electronic verification, and that my former employer did not respond to their request. “Would it be sufficient if my former employer called you?” I asked. She said, “Sure.” So I called the HR department at my former company and asked if they had any outstanding requests to confirm my employment. The answer: No. I asked if they would call the screening company on my behalf and they said they would only respond to a faxed request with a copy of my consent and gave me their employment verification fax number.

Fair enough. So I forwarded the fax number to the rep at the screening firm and then emailed the recruiter at the consulting firm to keep him in the loop. I said if they had any other concerns to please contact me.

I already have the offer in hand. I never disclosed my salary history during the hiring process. Why would the consulting firm want my W-2s? What exactly is the screening company’s role? Why did the consulting firm claim the screening firm needed the W-2s and then tell me not to communicate with the screening firm? I have more questions, but can you help me with these?

Nick Corcodilos: I don’t see how your prior W-2 (salary) information is anyone’s business. If the consulting firm does its job right, it knows you’re qualified to do the job its client needs you to do. Otherwise, what is it charging its clients for? What does it matter where you worked in 2011 or what you were paid?

You’re asking good questions, but there’s a bigger question: Why are there so many middlemen involved in this?

A cluster of companies

You have:

• The consulting firm that recruited you. That is, your actual employer that will sell your work.
• The company where you will actually be working. That is, the consulting firm’s client.
• The screening company that processes the hires that its client, the consulting firm, makes. The screening company seems to be handling the human resources tasks for the consulting firm.

I’ll hazard a guess that there’s a fourth entity — yet another firm that will process payroll, taxes and benefits.

There’s a term for the perverse amalgamation of arm’s length client relationships and consequent finger-pointing that make up this employment game: fiasco.

I have no idea how any of these entities can even stay in business with so many hands in the till. You’re not hired to work; you’re rented out to do work. The price being charged for your work far exceeds what you’ll see in your paycheck. Everyone’s getting paid for your work; everyone’s getting a taste of your pay. All I see is a hole in the economy where money goes without the creation of any value. (See ”Consulting Firms: Strike back and stir the pot.”)

This is not consulting

You’re not being hired by a consulting firm to help it consult to its clients. You’re hired by this consulting firm, so it can rent you to another company. That’s not consulting. (And don’t confuse your consulting firm with headhunters. See “They’re not headhunters.”)

Real consulting is an honorable business that creates value: One company turns to another for specialized help. The consulting firm employs experts in its field that are organized, usually as a team, to solve a client’s problems. Day-to-day work is not the product. A solution, delivered to the client, is the product.

The consultants report to a manager at the consulting firm, not to a manager at the client company. The consulting firm’s employees likely work on multiple client projects at a time. They’re never not working. They’re never “on the beach,” as modern rent-a-worker companies like to call unemployment. (See “Will a consulting firm pay me what I’m worth?”)

READ MORE: Ask the Headhunter: Are LinkedIn and HR technology suppressing hiring?

The deal you have signed up for is not consulting. None of the companies you describe seem to be responsible for you — or to you. One hires you. You work for another. A third handles the transactions. (It’s common for yet another to process payroll and taxes and to administer benefits if there are any.) When you have a question, each points a finger at the other.

Work for your employer

You’re asking good questions. I don’t have any answers. You’re being forced to deal with middlemen whose roles are questionable. In a well-organized, well-managed business, the functions of all those middlemen are functions of the company itself. A competitive enterprise leverages its expertise with all those functions to produce profit. Beware employers that you don’t actually work for.

My advice is work for your employer. Avoid any drain of economic value from your work. Don’t let middlemen interfere with the employer-employee relationship. The risk you take when you participate in this kind of jobs economy is that you are not the worker. You are the product. You become an interchangeable part. Worse, you become a returnable interchangeable part, because you’re a contractor and can be dismissed more easily than a real employee.

If the consulting firm is paying a screening firm to confirm who you are and to handle other transactions with you, then what value is the consulting firm delivering to its own client?

The employment industry has become one of the biggest rackets, with workers like you stuck in the middle. But as someone advised a long time ago when a dangerous political entanglement could not be unraveled, “Follow the money.” The real problem here is the company that’s paying multiple entities, so it can rent you. Are you comfortable with this arrangement?

Dear Readers: Who do you work for? Who pays you? Are you being paid for the value you create in the economy, or are middlemen draining your value?

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