Fees owed to temp agencies when you hire someone they placed with your legal team

Law department managers who use temporary or contract attorneys may find that one of the lawyers does great work, fits right in, wants to join the department – and there is an open position. If the law department hires the lawyer, the department may owe the temp agency an extra fee. Paul Roy, Director of Finance & Administration of Time Warner Cable’s Law Department, points out that usually the temp agency carefully provides in its contract for a large charge for those who snatch away their talent. The agencies sometimes refer to this fee as the “conversion rate.”

Typically the conversion rate is a sliding scale, with lower payments the longer the person has stayed with the law department. For example, according to Roy, at the start you see conversion-rate charges of 20-25 percent of the person’s first-year compensation, then maybe 10 percent after three months (See my posts of Sept. 21, 2005: secondments and non-hire agreements; Dec. 17, 2007: temporary and contract lawyers; July 14, 2005: temporary staffing arrangements; and Nov. 26, 2006: contract lawyers and references cited.). In other words, the cost of a temp-to-full-time conversion amounts to roughly the same as the placement fee executive search firms charge (See my posts of Jan. 10, 2006: some cost comparisons on temporary staff; April 9, 2006: contract staff versus temporary staff; and Aug. 2, 2006: Sears’ experience.).