Releasing employees to clients

[Mark Stephan]

Hello All,

I have a client who wants to hire out my employees from under me. My contract doesn't allow for this unless I release the client and employee from noncompetes.

I've thought about it, and might be willing, if there is a finders fee. Have any of you dealt with this? What would a typical finder's fee be for letting a client create a direct relationship with an employee I've trained and mentored and had working on the project for over 8 months?

Thanks!

----------

Mark E. Stephan

Managing Partner / Founder 

Ruby On Rails Web Application Development Services
Austin, Texas

Http://www.calcedon.com 

Austin Office: +01-512-961-6059

Email: mste...@calcedon.com 

IM: markestephan (Skype)

IM: markes...@yahoo.com (MSN/YAHOO)

IM: markestephan (AIM)

IM: markes...@gmail.com (Gtalk)

IM: 63071782 (ICQ)

Twitter (Personal): http://twitter.com/mstephan

Twitter (Corporate): http://twitter.com/calcedon

[Evan Dorn]

Wow. If I were even considering something like this, I'd be asking
for a quite substantial fee.

I would start by finding out what typical recruiting agents in your
area ask, and think of it more as a recruiter role than as a "finders
fee". Recruiters in my are frequently demand 20% or 25% of the
employee's first year salary.

If these are employees you've trained in general *and* trained on the
client's project for more than half a year, you have performed far
more than any recruiter ever will. The client would be getting a
fully pre-trained employee ready to work at full capacity on the first
day! This should be worth for more to them than they would pay a
recruiter.

Evan Dorn
CEO, Logical Reality Design
http://lrdesign.com

[Josh Susser]

In California, that kind of employee non-compete is not enforceable; not sure about Texas.  There's also the question about good-will.  Suing your clients isn't a great way to remain on good terms and get referrals for business, and suing former employees will just make it harder to hire.  And is the finder-fee really going to make a difference to your bottom line?  Don't worry about a finder fee - it will only make things slightly less annoying for you and gives the client the impression that the quid pro quo makes the poaching acceptable.

The problem you are trying to solve is preventing your client from hiring away your employee.  The actual problem you should be solving is how to retain your employees, no matter who is trying to hire them away.  Just make your place the best place to work and you'll be fine.  But if an employee is ready to leave, you're not going to be able to keep them around with a client non-compete; they'll just go somewhere else.  Yes, the client may be more convenient and accelerate things a bit, but it's just a matter of time.

--josh

On Nov 29, 2010, at 8:09 PM, Mark Stephan wrote:

I have a client who wants to hire out my employees from under me. My contract doesn't allow for this unless I release the client and employee from noncompetes.

I've thought about it, and might be willing, if there is a finders fee. Have any of you dealt with this? What would a typical finder's fee be for letting a client create a direct relationship with an employee I've trained and mentored and had working on the project for over 8 months?

Thanks!

----------

Mark E. Stephan

Managing Partner / Founder 

Ruby On Rails Web Application Development Services
Austin, Texas

--

Josh Susser

http://blog.hasmanythrough.com

[John Trupiano]

On Mon, Nov 29, 2010 at 11:09 PM, Mark Stephan <mste...@calcedon.com> wrote:

Hello All,

I have a client who wants to hire out my employees from under me. My contract doesn't allow for this unless I release the client and employee from noncompetes.

I've thought about it, and might be willing, if there is a finders fee. Have any of you dealt with this? What would a typical finder's fee be for letting a client create a direct relationship with an employee I've trained and mentored and had working on the project for over 8 months?

Our contract stipulates a fee of 30% of annual salary and requires our approval.  Never actually done it though.  Regarding why you'd let your employee go, I can only imagine that you don't have your sales pipeline filled enough to keep him working?

-John

[Ryan Heneise]

Josh makes a good point. Ultimately it is the employee's decision to leave or to stay with you. However, I would do everything in my power to retain good employees. 

- Ryan

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[Karthik Hariharan]

The key here is to figure out what the employees want and what your
client is offering that makes it more attractive for them to leave.

If you can't match it, your best bet is to let go and try to make up
the cost of their leaving by determining what it will cost you to find
and train their replacements. Use this number as your "fee" to break
their noncompete.

Also recognize that you do yourself a lot of potential long term
damage if you make it hard for your employees to leave. A former
disgruntled colleague will be less willing to provide good references
or even opportunities for future consulting work if they become
leaders later on. But you will be the first one that someone calls for
future work if you part on good terms.

Just my $0.02.

Regards,
Karthik Hariharan

On Nov 29, 10:09 pm, Mark Stephan <mstep...@calcedon.com> wrote:
> Hello All,
>
> I have a client who wants to hire out my employees from under me. My contract doesn't allow for this unless I release the client and employee from noncompetes.
>
> I've thought about it, and might be willing, if there is a finders fee. Have any of you dealt with this? What would a typical finder's fee be for letting a client create a direct relationship with an employee I've trained and mentored and had working on the project for over 8 months?
>
> Thanks!
>
> ----------
> Mark E. Stephan
>
> Managing Partner / Founder
>

> Ruby On Rails Web Application Development Services
> Austin, Texas
>
> Http://www.calcedon.com
>
> Austin Office: +01-512-961-6059
>

> Email: mstep...@calcedon.com
>
> IM: markestephan (Skype)
> IM: markestep...@yahoo.com (MSN/YAHOO)
> IM: markestephan (AIM)
> IM: markestep...@gmail.com (Gtalk)

[Stirling Olson]

Without wading into the retention debate, I wanted to set one thing straight. I believe what Mark was actually describing below was a non-SOLICIT between his company and his client which is quite a different thing from a non-compete. Non-solicits are, as far as I know, enforceable in all 50 states (Warning: I'm not a lawyer and don't play one on TV). Bi-directional non-solicits are very common and have been an important part of service agreements for a long time, helping to stabilize both client and vendor workforces. Many clients want this protection too so you can't hire their great project managers, etc. This isn't to say that either party can't hire the other's employees just that it will require permission and (probably) some compensation.

-Stirling

[Josh Knowles]

On Tue, Nov 30, 2010 at 10:28 AM, John Trupiano <jtru...@gmail.com> wrote:

Our contract stipulates a fee of 30% of annual salary and requires our approval.  Never actually done it though.  Regarding why you'd let your employee go, I can only imagine that you don't have your sales pipeline filled enough to keep him working?

Agree with John that typically I've seen these contracts have a fee around 30%. That said the fee is usually stated in the contract up-front and may be difficult to get after-the-fact. 

[KenP]

I'd definitely echo Josh's and other points in looking at the grand
scheme of things. Not only just within your own company (e.g. what
can you do to make people want to stay with you), but also with the
client. If they are trying to hire the whole team away from you and
you're built mainly around that one team it might not make sense and
you can likely keep on good terms with the client if they understand
that. If you're confident of being able to replace the team and
business, then it probably makes the best business sense long-term.
Has that client or other exposure helped you out in other ways? Long-
term back scratching is the best way to do things if you feel the
client is trust-worthy in the end.

Litigation is almost not worth it in these cases - sucks if you get
screwed over, but hopefully you have a good network of people to
rebuild as well as share the client's habits with others. Strong
candidates in the programming community tend to know each other and
word will get around...

If you do end up negotiating some fee, going rates are anywhere
between 10-30%, though I'd likely push for closer to the 20-25% if
it's multiple people and a significant portion of your full team.

Kenneth