Bust Recruitment Agencies – When IT agencies go bust | IT Contractor

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Bust Recruitment Agencies and Contractors
Bust Recruitment Agencies and Contractors

Bust Recruitment Agencies Hit Contractors

Bust recruitment agencies cost contractors money. Take care.

A lot of contractors have lost a lot of money in the past through not recognising the warning signs soon enough.

Several major agencies have gone under sometimes taking a whole heap of contractor money with them.

For example, Chamberlain Scott International went under a few years ago with debts of almost £2.5 million. Most of it they owed to contractors.

ITContractor.com put contractors in touch with free legal advice. They organised them to reject the administrator‘s offer of 3p in the pound for the money owed to them. They voted to send the company into liquidation in order to try to maximise their returns.

CSI owed one contractor 48 grand by CSI and there were many others in the 20 to 30 grand range.

Why?

I can almost hear you asking ‘Why did they let it get so far’?

Continue to Work and Hope

Perhaps because they felt that they had no other option. They felt they had to continue to work and hope that the latest excuse from the company was correct. They hoped that they would get the money soon.

CSI sprung back up again only days later as CSI (UK) telling their contractors and clients that nothing had changed.

They only took the plum contracts with them. The administrator sold them the contracts, which were from a business turning over £9.5 million a year for only 50 grand.

They didn’t offer anyone else the opportunity to buy out the contracts.

If they had offered them the opportunity, the administrators might have been able to pay at least part of the money they owed to contractors.

Stock Market Quoted Agencies

There have been several other agencies, including RDL, who were on the Stock Market, who have gone under recently.

The favourite trick is to go into voluntary administration, set up again with the same name but with (UK) after the name, buy the assets of the previous company from the administrator for buttons, leave the debts of the previous company with the administrator, and then start up afresh with the best of the contracts telling clients and contractors that nothing has changed (unless forced to).

Someone should do something about this scandal. The big problem seems to be with the administrator selling off the assets cheaply to the directors of the company going bust.

Chamberlain Scott Administrators

When we contacted the administrators of Chamberlain Scott International they said that the reason that they didn‘t offer the contract assets elsewhere was because once other agencies got wind of what was happening they would try and poach the contractors from the agency for nothing.

They said that the process for tendering was timely and the business could deteriorate during that time.

I spoke to other agencies about this since and they said that if they got an offer of a business with sales of £9.5 million for a small sum they could ‘make the sale happen‘ within a matter of days. That would include taking on some of the contractors debts.

It looks as if the administrators just want their fees and weren‘t too bothered at helping contractors recover their debts.

Opportunity to Buy Out Their Contracts

What they could also have done was to offer contractors who were still in contract the opportunity to buy out their contracts.

Contractors would have jumped at this. It would mean that they had the agency‘s cut as well in the future.

The money raised from this could then have been used to pay back part of the money owed to contractors in the past. That would include those who no longer were contracting through the agency.

However, administrators don‘t seem to be doing this. They are just offering the assets to the directors at a very cheap price. They take their fee, and then moving on to the next fat fee.

The bust agencies directors are laughing.

Bust Recruitment Agencies – Contractor Options

What can you do in these circumstances?

The contractors whom CSI owed money sacked the administrators and agreed a lesser fee for them. They then put CSI into receivership. This means the receivers can now take other actions, including chasing the directors personally for the money.

That might be a lesson to encourage other agencies who are tempted to dump their contractor debts and spring up again free.

However, it still remains the case that CSI (UK) are still trading and contractors are still chasing the money CSI owe them

Bust recruitment agencies can just dump their debts and set up again.

I‘m sure that this is not how administration should work.

For more advice on dealing financially with recruitment agencies click on Agencies Money.

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