Author: Fay Hansen

Microsoft rocked the business world in July 2007 when it announced it would open a new software development center in Vancouver, British Columbia.

    Microsoft’s explanation included a sharp warning that U.S. visa caps preclude the company from hiring the workers it needs at its U.S. locations. New hires recruited by Microsoft but denied H-1B visas can take positions in Vancouver; current Microsoft employees with expiring H-1B visas can relocate across the border in Canada.

    Microsoft’s Vancouver move underscores the untenable position companies face in trying to recruit top talent for their U.S. facilities.

    “It’s rare for any company to stand up and point to one factor that caused it to make a large business decision,” notes Bonnie Gibson, managing shareholder of Littler Mendelson’s global corporate migration law group in Phoenix. “But the immigration issue and the skilled labor availability problem is now a factor in business considerations at many companies.”

    Few companies can adopt Microsoft’s solution to the U.S. H-1B shortage, however.

    “Shifting facilities across borders is an expensive business move that is only suitable for large companies that need to have a physical team in place,” says Frieda Glucoft, partner and chair of the immigration and naturalization practice at Mitchell Silberberg & Knupp in Los Angeles.

    She warns, however, that the U.S. may see more companies shifting work outside the borders.

    “How to plan for recruiting foreign workers in 2008 is the million-dollar question for employers,” Glucoft says. “H-1Bs will be a lottery again, and the number of applications will be even higher than in 2007. We are recommending various approaches, but they are expensive and some don’t work.”

    Glucoft and other immigration experts advise recruiters to look at specific techniques for maximizing the utility of H-1Bs and to explore alternative visas for skilled workers.

H-1B techniques
   When recruiters face shortages for skilled labor, they turn first to foreign-born MA and Ph.D. graduates from U.S. universities, but the volatility of the immigration issue erases any distinction between students already living in the U.S. and foreign workers coming in from abroad.

    “Politically, there is no understanding that we are talking about employers’ ability to hire these graduates,” Gibson says.

    The H-1B problem flows into this issue because postgraduates are allowed only one year of employment under current law and then have to move to H-1B status.

    “There is legislative activity around this issue, but the current political environment in the United States is toxic,” Gibson notes.

    “Employers may find some relief in 2008 if the Department of Homeland Security looks at areas where it could make changes at the margins without statutory amendments,” Gibson says. “The one-year limit on employment for postgraduates is one possibility. The point is to take pressure off the H-1Bs. It is critical for companies to push for this.”

    Gibson advises HR executives and recruiters to develop a solid strategy that allows the company to identify which candidates the company will sponsor for H-1Bs early on. She also stresses the importance of looking at December graduates rather than May graduates because H-1B applications can only be flied after all the pre-requisites for graduation have been completed.

    Companies can hire May graduates for only one year, but can’t file for H-1Bs until the next April for work beginning in October, so May graduates are caught in a period when they are not authorized to work. December graduates can move from their F-1 status during their one year of employment to H-1B status without entering a period when they are not authorized to work.

    Also, recruiters can focus on lateral recruiting that targets current H-1B holders who are not counted against the cap.

    “Lateral recruiting is now extremely active,” Gibson says.

    Betsy Stelle Morgan, partner at Baker & McKenzie in Chicago, advises recruiters to analyze each skill set needed and consider rotating F-1 employees out to their home country or to Mexico or Canada with the hope that they can return in October under an H-1B. Alternatively, F-1 status employees caught in the gap period that occurs when their visa expires in May can pursue additional academic courses and continue their student status until H-1B status is achieved.

    “Each situation has to be analyzed on its own merits,” Morgan says. “There is no expectation for a H-1B cap increase, so recruiters must plan now, beginning with an audit of the workforce for F-1 status employees who may be eligible for H-1Bs.”

    A 2007 modification in the H-1B visa rules allows H-1B visa holders to retain their status after they leave the U.S. and creates a new opening for recruiters looking for foreign nationals.

    “This is a nice break for employers, but it has been underutilized because both employers and foreign nationals are often not aware of the 2007 change,” says Irina Plumlee, partner at Gardere Wynne Sewell, Dallas.

    Recruiters can now look overseas for workers who hold H-1B visas and did not exhaust their six-year limit. Before the 2007 change, workers with time remaining on their H-1B visas lost it as soon as they left the United States. If a new employer wanted to bring the worker back into the U.S., the employer would have to file for a new H-1B that would be subject to the cap.

    Under the 2007 revision, the H-1B visa number stays with the worker even if he or she leaves the U.S. and the worker can re-enter for a new job for the length of time remaining under the original visa.

    If an employee working under an H-1B visa for two years loses his job and returns home, for example, a new employer could request restoration of the H-1B and bring that worker into the U.S. for the four years remaining. Also, if a worker with an H-1B visa is no longer employed and returns to school in the U.S. under a student visa, a new employer can hire that worker under the original H-1B visa for the amount of time remaining on it without being subject to the cap.

    Glucoft also reminds employers that they can use H-1B extensions to keep the employee in the U.S. for up to eight years, but to move to a green card, the employer must file an application before the employee’s fifth anniversary date.

    “We are seeing employers rush to file these,” she says. “And we have seen and continue to see a lot of lateral recruiting.”

Alternatives
   “Traditionally, H-1B visas have been in the center of employers’ attention for skilled workforce needs,” Plumlee notes. “However, the current situation calls for a broader outlook and careful consideration of lesser-known work permits, such as the L, E, O and others.

    “With comprehensive immigration reform failing in 2007 and our economy strong enough to warrant interest in skilled foreign workers, U.S. employers continue to face significant challenges planning their labor needs and recruitment efforts.”

    Plumlee advises recruiters to look more closely at O visas for workers with extraordinary abilities. Recruiters and candidates may assume that the O visa is not available because of its language concerning “extraordinary” skills, but it has broader applicability.

    “O visas are an excellent alternative to the H-1B,” she says. Recruiters and foreign nationals should look carefully at this option and not discount it.

    “We look at all the options,” Glucoft says. “Recruiters have to work through every possible box, looking at every possible route.”

    If candidates in professional occupations can qualify for an E visa, recruiters should pursue that option. If the company has an affiliate outside the U.S., it can use inside transfers, which cost much less than filing for an H-1B. If not, employers will have to try for H-1Bs, unless they can qualify under one of the special NAFTA or individual country visas.

    “H-2B visas for seasonal workers are capped at 66,000 and closed within 48 hours,” Glucoft notes. “Companies in the hospitality industry and other industries that rely on seasonal workers have barraged Congress, so it’s possible that there may be some relief for H-2B visas and returning workers. It’s become a very emotional topic.”

    Glucoft also advises recruiters to look at J-1 visas for management trainees. “Sometimes recruiters can use these and companies can benefit,” she notes. “J-1 visas may have been underutilized and can be useful for positions that require collaboration.”

    For companies with foreign subsidiaries, Gibson advises recruiters to look at the talent pool and match up the most attractive candidates with the countries where they can get visas.

    “Recognize that some of the best candidates will not obtain H-1Bs and make these priority hires at foreign locations,” she says.

    Without national reform, the U.S. continues to drift away from the global move toward greater labor mobility. Other nations, including Canada and the United Kingdom, now use point systems designed to pull in the most talented workers without an existing job offer.

    The U.K. also automatically grants visas to MBA graduates from the world’s top 50 business schools, more than half of which are located in the United States. Unlike these merit-based systems, the U.S. H-1B process is a lottery that increasingly discourages the top candidates from looking for work in the U.S.

    “For recruiting skilled labor, there will be much more heavy sledding for H-1Bs and other visas in 2008,” Gibson notes. “The government won’t turn back the existing numbers, but it can continue to increase the filing fees. As it becomes more costly and difficult, the U.S. with lose its competitiveness and the best jobs will leave the country.”

As the workforce ages and more Americans are screened and treated for serious illnesses, a growing number of job candidates enter the hiring process with pre-existing health conditions and serious questions about insurance provisions during a change in employment.

At the same time, the rising number of uninsured Americans means that more job applicants have no health coverage and need information about waiting periods and exclusions.

These trends put recruiters and hiring managers in a difficult and potentially dangerous position. They want to sell the company, including its benefits programs, and they need to build rapport with candidates by responding to their questions and concerns.

But they must not engage in any conversation that might reveal information about the candidate’s health. To do so would open the door to a discrimination lawsuit under the Americans With Disabilities Act.

Responding to candidates’ concerns without running afoul of the ADA requires an understanding of the protections generated for candidates under both the ADA and the Health Insurance Portability and Accountability Act of 1996, or HIPAA.

“Recruiters should be wary of any situation where a candidate provides health information in case there is a later charge that the information colored the offer decision,” warns Phyllis Kupferstein, partner and head of the West Coast labor and employment practice for McDermott, Will & Emery in Los Angeles.

ADA prohibitions
   The ADA sharply prohibits recruiters and hiring managers from asking questions about the applicant’s health or questions that are likely to reveal the existence of a health problem or disability before making a job offer. This prohibition covers applications, written questionnaires and inquiries made during interviews.

Examples of prohibited lines of questioning during the pre-offer period include any query or comment that refers to health conditions, injuries, sick-day usage, medical insurance coverage, workers’ compensation claims, prescription drug use or mental health problems. In short, a recruiter should make no reference to a candidate’s health and carefully steer any conversation to avoid situations where the candidate offers health-related information.

A more complex situation arises when a candidate needs a modification in the recruiting process to accommodate a disability. Recruiters and hiring managers must exercise extreme caution in learning only the health- or disability-related information that is necessary to determine the modifications needed, and no more.

Under the ADA, employers are required to provide reasonable accommodation for disabled candidates. An employer does not have to provide a specific accommodation if it would cause an undue hardship, which the ADA defines as a significant difficulty or expense. However, an employer cannot refuse to provide an accommodation solely because it entails some financial or administrative costs.

If the requested accommodation causes an undue hardship, the employer is still required to provide another accommodation that does not. Reasonable accommodation can take many forms during the hiring process, including providing written materials in accessible formats, such as large print, Braille or audiotape; providing readers or sign language interpreters; ensuring that recruitment, interviews, tests and other components of the application process are held in accessible locations; providing or modifying equipment or devices; and adjusting or modifying application policies and procedures.

Responding to concerns
The difficulty recruiters face in dealing with candidates with health concerns is exacerbated by the complexity of HIPAA, which protects most workers from losing their health care coverage when they change employers. A little more than a decade ago, real concerns about labor mobility fueled support for legislation that would ensure continued coverage for workers changing jobs.

HIPAA’s passage quickly quelled concerns about job lock among economists and employers, but many job candidates remain unaware of HIPAA’s protections.
Consequently, recruiters and hiring managers may be faced with candidates who ask questions about the employer’s health plan and most commonly any waiting periods or exclusions for pre-existing conditions. Candidates may not understand that HIPAA rules out exclusions for pre-existing conditions for candidates that have coverage under their current employer’s plan or under COBRA, Medicare, Medicaid or an individual health insurance policy unless the candidate has had a significant break in coverage.

HIPAA defines a significant break in coverage as a break of 63 days or more. This 63-day break period may be extended under state law if the candidate’s coverage is insured through an insurance company or offered through an HMO.

Recruiters cannot respond to candidates’ coverage questions without full information on current and past coverage, which would put them into troubled ADA territory.

“But recruiters can tell candidates that they are generally protected by HIPAA and refer them to the Department of Labor Web site, which offers good materials on HIPAA and answers frequently asked questions,” Kupferstein says.

Recruiters can also tell candidates to contact the benefits department with specific questions about the employer’s plan, but they should instruct the candidate not to provide any health information.

“Recruiters should be very general in any discussion of the health plan and defer any questions to the post-offer phase,” Kupferstein says.

Recruiters can also offer to provide the candidate with a copy of the plan and promote the employer’s health insurance plan as part of their broader effort to sell the company, but the effectiveness of this strategy clearly hinges on the strength of the plan.

“Health coverage varies from employer to employer, and this can have an impact on recruiting,” says Tom Billet, senior benefits consultant at Watson Wyatt Worldwide in Stamford, Connecticut.

“Recruiters generally should not try to sell candidates on the basis of benefits unless the package is a differentiator,” Billet warns. “Most companies prefer to strike a middle-of-the-road position with their benefits, so recruiters can’t press the package as a positive point, but they can help ensure that it’s not viewed as a negative point or a detractor.”

Billet notes, however, that some companies have developed leading-edge health management tools and health improvement programs, and many of these are particularly useful for employees with chronic conditions.

“Recruiters can promote these tools and programs as an indication of the company’s commitment to employees’ health,” he says.

Most companies provide candidates with full information about benefits at the time of offer, but some companies are providing more information on their Web sites as part of the upfront recruiting process. This is a positive trend, Billet notes, and should take some of the pressure off recruiters.

Hiring the uninsured
With a growing number of uninsured workers applying for jobs, recruiters are encountering more candidates who are concerned about waiting periods and exclusions for employer coverage. Although the largest employers often do not impose a waiting period, many do.

At companies with more than 200 employees, 73 percent of covered workers face a waiting period before coverage is available, according to the 2007 Kaiser Family Foundation survey of health plans. In the retail industry, 94 percent of workers face a waiting period.

The average waiting period is three months in retail and 2.2 months across all industries, but some of the big-box retailers impose yearlong waiting periods. Although HIPAA effectively eliminates these provisions for workers with prior coverage, the uninsured are not protected.

“What employers are worried about in hiring people who have not had health care coverage is adverse selection, because we know these new hires use more health services,” says Helen Darling, president of the National Business Group on Health in Washington. “In retail, where many of the high-turnover jobs are based, employers often use a waiting period to protect against this.”

For jobs at the low end of the wage scale, Medicaid is considered credible coverage and new hires would have to be covered under the employer’s policy, according to Darling. For older workers, Medicare is also considered credible coverage under HIPAA.

As insurance has become more expensive, employers have pushed for longer waiting periods, Kupferstein reports. Any pre-existing condition exclusion period begins on the same day that the waiting period begins.

Some companies are rethinking their waiting periods, however.

“It is becoming a more competitive environment, and there has been more media scrutiny of the benefits provided for low-wage workers, so some companies have improved their benefits offerings,” Billet notes. “Wal-Mart and other companies are attempting to provide some kind of health care coverage for part-time workers, and recruiters can use these benefits to help recruit for these positions.”

Retiree bottleneck
Although HIPAA relieved labor mobility issues arising at the hiring end of the health benefits issue, an extremely serious mobility problem is building at the retirement end. Recruiters and hiring managers who would like to bring in fresh talent increasingly encounter a shortage of job openings because workers without defined-benefit plans and retiree health coverage are unwilling to leave work even when it’s clear to everyone that they are no longer fully productive.

“The biggest labor mobility issue for employers is the question of retirement,” says Darling. “If you want a free flow of workers and real labor mobility, this problem must be addressed. If you don’t provide retiree health coverage—and most employers don’t—employees may stay on the job until they are Medicare eligible purely because they don’t have health coverage.”

The NBGH strongly recommends that employers provide health accounts for retirees to alleviate this problem.

According to the 2007 Kaiser survey, only 33 percent of all firms still offer retiree health benefits. Even among companies with 5,000 or more workers, only 52 percent provide retiree health plans, and most of these are concentrated in the state and local government sector. Health benefits have always been an effective two-pronged tool for recruiting employees into the organization and then easing them out, but with the discontinuation of retiree health benefits at most companies, the second prong is no longer effective.

Workforce management executives will have to shift their focus from recruiting top candidates to managing employees who postpone retirement too long.

Under heavy pressure to pull in a top candidate, a recruiter exaggerates the pay and promotional opportunities for a position or conceals financial difficulties at the firm.

    The candidate leaves a secure, lucrative job to accept the position, only to discover that the recruiter overstated the opportunities. After a few months, the whole deal goes sour, and the employee sues.

    “These lawsuits are tort claims, and damages may include economic damages that may be almost unlimited,” says Peter Golden, partner in the Atlanta office of Hunton & Williams.

    Damages may cover lost job opportunities and lost salary. In addition, there may be compensatory awards for damage to reputation and emotional distress. In the most extreme cases, where a jury finds the statements made in the hiring process were clearly made in bad faith, there may be punitive damages intended to send a message to other employers.

    “We’ve definitely seen a rise in the number of truth-in-hiring lawsuits,” Golden says.

    Two trends are driving the increase. First, because top-notch candidates are in high demand, employers are competing aggressively for the best applicants and recruiters feel pressured to “sell” the company when they talk to candidates. “Misrepresentation claims arise out of these situations,” Golden notes.

    Second, the employment-at-will doctrine has become so strong in many states that employees who have been terminated often have no recourse stemming from the termination itself, so they reach for other vehicles that do not fall within the bounds of employment-at-will.

    “They go back and look at the employment situation from the very beginning and turn to tort claims,” Golden says. Many truth-in-hiring lawsuits arise after employment has been terminated.

    “Representations that originate with the recruiter or the hiring manager can come back to bite them,” Golden warns. “These lawsuits can sully a recruiter’s good name.”

    Golden reports that the most common scenario for these lawsuits arises when an employee is induced to leave a lucrative position for a new job, often because the recruiter or hiring manager told the candidate that a promotion to a higher position would occur within a short time frame.

    A candidate accepts a job in sales, for example, because during the interview the hiring manager stated that sales manager positions would open up within a few months. The new hire begins employment only to discover that none of the sales managers has any intention of leaving in the near future and no managerial positions will open up.

    These suits may also arise when a candidate leaves a job with a company that is financially stable for a new position at a company that the recruiter claims is also financially stable. In short order, the new hire learns the company is in trouble and layoffs may be imminent. “Typically in these situations, the employment relationship goes sour, and the employee quits or is terminated,” Golden says.

Trouble spots
    To avoid these lawsuits, employers should focus on two trouble spots, Golden advises. The first occurs during the interview process when a recruiter or hiring manager oversells the company.

    “At best, the end result is that the exaggerations get the candidate in the door, but they don’t stay in the job,” Golden says. The employer bears the cost of having to replace the employee and there is also a cost to the employer’s reputation. The worst-case scenario is that the employee leaves and files a lawsuit.

    The second trouble spot commonly occurs after the company has made an offer. The company learns the candidate is weighing multiple offers and the recruiter or hiring manager steps back in to try to sell the company again.

    “When recruiters and hiring managers are in the middle of a conversation with a candidate who is weighing multiple offers, these exaggerations may not seem like a big deal,” Golden says. “But they can bring trouble down the road.”

    Recruiters and hiring managers can avoid the risk of a truth-in-hiring lawsuit by following a few simple rules.

    “Tell the truth about the job and the company,” Golden advises. “Don’t make false promises. If you can’t bring the candidate in with the truth, then he or she is not the right fit.”

    Recruiters must avoid the temptation to tell candidates what they think candidates want to hear. “Recruiters should talk with the candidate about the good and the bad of the company,” Golden advises.

    Golden notes that the offer letter should contain details on the salary and job duties, but it should also contain disclaimer language and make it clear that the conditions outlined in the letter constitute only the expectations of the company.

    “Of course, if the disclaimer goes too far and the language is too strong, it can drive away top candidates,” he cautions. “So employers have to be careful on both ends. It’s a sticky situation.”

Covering contingencies
   Stephen Fox, principal in the Dallas office of Fish & Richardson, describes other situations that may trigger a truth-in-hiring lawsuit. Some employers choose not to run a background check until they know the candidate will accept the offer. The employer makes the offer, the candidate accepts, the employer runs the background check, the check reveals a problem, and the employer withdraws the offer.

    “The employee may assume that the information revealed by the check was incorrect or that the employer is using the background check as a pretext for withdrawing the offer,” Fox says. The employee may sue for breach of contract or discrimination.

    “Employers can easily avoid these cases by including in the offer a statement that the offer is contingent on a clean background check,” he advises.

    In another situation, the employer makes an offer, the candidate accepts, and the employer then withdraws the offer because the business that required new hires does not materialize or a contract is not awarded and additional employees are no longer needed.

    “In many cases, senior leadership may be aware that the business or the contract may not materialize, but recruiters have received instructions to hire new employees and senior leaders have not communicated the contingency to the recruiters,” Fox reports.

    Employers can address this situation by including employment-at-will language in the offer letter.

    “The employee may attempt to get around the employment-at-will defense by arguing that the employer made a representation and the employee accepted the offer, but the employer had some doubt about the work,” Fox says. “However, this is difficult to prove.”

    In many states, the employment-at-will doctrine is so strong that the courts will simply not allow this challenge, but courts in some states, including California, Massachusetts and Minnesota, welcome the chance to challenge the employment-at-will doctrine, Fox notes.

    Employees may sue for breach of contract, with damages equal to the pay not received during the time until the employee finds a new job, or the net difference in pay between the job offered and the new position.

    “Courts vary in how long they allow the net difference to continue, but one year is common,” Fox says. “There may also be exposure to attorney’s fees.”

    Fox advises employers to use a written offer for every position and include statements on any contingencies in the offer. He also notes that any statement on compensation and benefits provided should state the amount on a pay-period basis, such as the biweekly or monthly pay, not the annual salary. “Some Texas courts have held that a salary offered on an annual basis implies guaranteed employment for one year,” he says.

    Also, if the employer asks the employee to sign a confidentiality or non-compete agreement, the employer should reference the agreement in the offer letter as a necessary condition for beginning employment.

    “Otherwise, the employee may begin the job and then refuse to sign the agreement because it is more onerous than the employee expected,” Fox says. “The employer may then withdraw the offer, and the employee may sue based on lost opportunity.”

Pay and promotion promises
   Truth-in-hiring or fraudulent inducement lawsuits are common in the securities industry and other sectors that use commissions and high amounts of variable pay, according to Todd Hale, partner and co-chair of the labor and employment group in the Tucson, Arizona, office of Lewis and Rosa.

    “A recruiter or hiring manager tells a candidate that they will make a certain amount of money and the candidate leaves a good job under that promise,” Hale says. “Competition for brokers leads firms to dangle promises, and then it turns into a swearing contest about whether the promises were made.”

    A recruiter persuades a stockbroker to leave one large firm for another with promises that the broker will be provided with certain marketing tools that will allow the broker to earn much higher commissions. The employer does not provide the tools, the broker is not successful, and the broker sues for misrepresentation and asks for the difference in the compensation earned and the compensation that would have been earned if the tools had been provided.

    The key for employers is to ensure that recruiters are not allowed to make statements about how much the candidate will earn in commissions or variable pay.

    “Also, the employer should use written documents or offer letters that specifically disallow any promises or statements made during the recruiting process,” Hale advises. “The offer letter should explicitly state the terms of employment and stipulate that no variable pay is guaranteed.”

    “Employers must ensure that recruiters maintain a clear delineation between the potential in a particular job and the actual job,” Hale says. The best protection is a document that includes a disclaimer that all terms are spelled out in the document and no other terms are in effect.

    These documents are helpful but not a guarantee that a lawsuit will not occur; oral promises may still apply. Most important, employers need to educate recruiters and hiring managers to never make a promise that the company may not be able to keep.

Multinationals based in the U.S. are investing most of their money where they always have—in Europe.

    Almost 60 percent of U.S. foreign-direct investment still flows to the United Kingdom, France, Germany and other major European nations, where U.S. firms have time-tested methods for recruiting new staff. Most of the direct investment in Asia still flows to the advanced nations of Japan, Singapore and Australia, where recruiting operations are well-established.

    But 2006 marked a watershed in the amount of U.S. firms’ direct investment in China, India and a new tier of less-developed markets. As investment spreads geographically, recruiting functions must evaluate the approach to candidate attraction for each new market.

    The investment boom in China and India is driving up wages and generating recruiting and retention problems for multinationals. Towers Perrin reports that 59 percent of employees in China and 63 percent in India are either actively looking for a new job or are open to offers. Massive hiring by both multinational and domestic firms is quickly draining the candidate pool for some skill sets.

    India’s engineering schools produce about 400,000 graduates a year, but in 2007 the best 125,000 will snapped up by the five big IT companies—Infosys, Tata Consultancy Services, Wipro, Satyam and Cognizant—according to a report by the Hay Group. Smaller software firms recruit an additional 100,000, leaving a limited number for all other sectors. In recognition of the challenge that the skills shortage presents, Infosys recently moved its finance director into the top HR position.

    Multinationals are now moving into China’s and India’s third-tier cities and turning to relatively untapped regions for fresh labor markets where employee retention is less troublesome and costs are lower. Intel’s 2006 move into Vietnam signaled the beginning of this trend, which is taking hold across Southeast Asia, Africa and Latin America. In Vietnam alone, foreign direct investment is set to double this year to $10 billion.

    Although investment in Latin America is still limited by relatively high risk factors, call center investment is booming. In Central America, the number of call center agents will rise from 21,000 in 2006 to 40,000 by the end of 2007, according to the Zagada Institute. Nine call centers are already up and running in El Salvador, operated by companies such as Dell, GMC and Sykes. Datamonitor predicts that the number of call center agents working for outsourcing firms in Mexico will rise from 33,500 agents in 2006 to 80,000 by 2010. Argentina, Brazil, Chile and Mexico are also moving into IT outsourcing.

    The emergence of new outsourcing markets continues within Europe’s nearshore, with Ukraine hosting new IT facilities and Malta positioning itself as a location for multilingual call center services, according to Datamonitor. In Mongolia, new tax incentives for multinationals, proximity to both Russia and China and low labor costs provide strong inducements for multinationals expanding into Central Asia.

    Instead of small procurement or marketing operations staffed by expatriates or local partners in the more remote locations, multinationals are setting up full-scale operations staffed by local nationals, with substantial recruiting required. Although the most effective candidate attraction models for these regions bear more similarity to the models for China and India than established Western models, recruiting in the new markets requires a fresh look at attraction drivers.

New recruiting markets
   “Among the major multinationals, we see rapidly growing interest in locations beyond India and China, especially Vietnam, [the] Philippines and South Africa,” says Pramod Khera, CEO of Aptech Ltd., a Mumbai, India-based IT training company. “Latin American locations such as Peru and Colombia and eastern European locations such as Ukraine are also drawing more interest.”

    In many ways, training firms such as Aptech and staffing firms like Manpower serve as leading indicators of trends in foreign direct investment because they must be operational in new locations before their client companies begin staffing there. Manpower’s revenue from emerging markets hit $136 million in 2006, up from just $15 million in 2003.

    Aptech’s global expansion and its experience in recruiting staff for its new training centers bear out the new trend. From its base in India, Aptech moved into China seven years ago and now commands 32 percent of the market share for IT training there. In recent years, Aptech expanded its operations into Vietnam, Nigeria, Syria and other less developed markets. In 2006, the company added training centers in Russia, the Philippines, Malaysia, Mexico, Thailand and Turkey. In the first quarter of 2007, the company opened new centers in Mongolia, Iran, El Salvador, Kuwait, Dubai and Iran.

    To staff its training centers in the less developed markets, Aptech recruits locally and brings in trainers from India as needed. Khera reports that locations such as El Salvador and Mongolia provide a solid education system for engineers and provide high-quality IT candidates, but Aptech must still train them on the newest technologies to upgrade their skills.

    With Aptech’s global growth in staffing up 12.3 percent over 2006, the company is constantly recruiting. Aptech’s in-house function employs 16 recruiters, divided into IT and non-IT teams. Based on the required profile for employees for the new centers, Aptech’s recruiters source through job portals and postings, existing databases, networking and community sites, institute and skills-related sites, mass mailers and print ads. Aptech also uses campus recruiting and job fairs and taps outside recruitment firms when necessary.

    Recruiting the training faculty for each center is governed by a process designed to ensure that uniform standards are maintained in candidate selection and new hires adhere to the norms set by the global parent. Managers at each center review résumés and conduct interviews.

    Candidates who are short-listed by the center undergo online aptitude tests, with the results reported to the central office in Mumbai. Managers there conduct telephone interviews or videoconferences with applicants and forward their recommendations back to the center.

    Candidates are screened based on skills, education, experience, relocation preferences and communication capabilities. Testing includes aptitude, functional and language tests, psychometric tests and an additional assessment of candidates’ potential to grow and their awareness of the industry and technology. Finalists take technical-skills tests with fixed minimum score requirements.

Attraction drivers
   In the new locations now drawing heavy U.S. direct investment, recruiters must refocus job offerings to meet the interests of local nationals. New survey data from Towers Perrin confirm a fundamental difference in the primary concerns of the top job candidates in the advanced nations and those in the developing regions. The key to effective recruiting on a global basis is to tailor job offerings to meet the needs and interests of candidates in local markets.

    Candidates in the developing regions do not share the same concerns that recruiters encounter in the U.S. markets, where pay and benefits remain the key attraction drivers. Pay remains the top issue for candidates in the U.S. under the age of 55, when benefits become the primary concern, according to the Towers Perrin data. In the advanced nations of Europe, challenging work and work/life balance are the two most important factors in attracting employees, followed by pay. Career opportunities rank fourth.

    In the developing markets, however, career advancement opportunities and learning and development opportunities often hold the top spots as the key factors in attracting employees, with pay ranking second or third. In Brazil, for example, career advancement ranks first, followed by learning opportunities and then pay. In Mexico, career advancement ranks first, followed by pay and learning opportunities. In China, leaning opportunities rank first, followed by pay and career advancement.

    The key challenge for Aptech in staffing its own operations is recruiting and retaining employees who place a high value on career opportunities and learning and development. “All companies suffer from high attrition in the markets where we are located, so we look specifically for candidates who see training as a career opportunity,” Khera notes.

    Aptech’s recruiters focus on finding candidates who have both the communication skills necessary for a trainer and knowledge of technology.

    “We find people with a good technology background and provide them with training, but the risk of them leaving is high, so we motivate them to stay by providing them with the opportunity for ongoing training in the latest technologies,” Khera says. “These incentives are important to them.”

    In India, retention is particularly difficult. The Towers Perrin survey reports that 28 percent of employees in India are actively job hunting. Wages in the IT and business process outsourcing centers are rising 10 percent to 20 percent annually. For top computer engineers, annual increases in first-tier cities are running 30 percent.

    Aptech redoubles its retention efforts at its Indian centers. “We try to bind employees with a written agreement that they must reimburse us for training if they leave the organization,” Khera says. “It looks good on paper, but it’s not very effective. Legally, it is very difficult to enforce, so it really only enforces a sense of moral obligation.”

    Aptech also offers its trainers the opportunity to move into management and charts out a career plan for them.

    “We are much better equipped to hold on to our trainers than our client companies, which view in-house training as a core activity and cannot offer trainers as much of a career opportunity,” Khera notes.

    Companies expanding their operations in China and India or moving into relatively untapped sites in Asia and Latin America may have to mimic Aptech’s emphasis on career development and ongoing training as the key attraction drivers for recruiting the best candidates.

R ecruiters looking for IT talent are hitting the wall in Detroit, Philadelphia, Phoenix, St. Louis, San Diego, Washington and other labor markets where more than 20 percent of the companies plan to boost their IT staffing in the second quarter of 2007.

    “Near term, we don’t see any change in the IT labor market,” says Mike Valek, vice president of Hudson’s IT practice. “Longer term, technology has become so prevalent in every business that we don’t see any major pulling back in IT hiring.”

    In a recent survey of 1,400 chief information officers by Robert Half Technology, CIOs reported that it now takes an average of 56 days to hire a staff-level IT employee and 87 days to land a new IT manager, well beyond acceptable time-to-fill rates for companies where IT talent is already stretched too thin. Recruiters are spending more time sourcing but reaping fewer results; time-strapped hiring managers are unable to devote additional effort to recruiting and evaluating candidates.

    Nationwide, 14 percent of companies plan to increase IT hiring in the second quarter of 2007 and 2 percent plan to decrease hiring, according to the Robert Half survey. In the second quarter of 2006, 12 percent of companies planned to increase hiring and 4 percent planned a decrease.

    For the past eight quarters, the proportion of companies projecting increased IT hiring has remained in the 12 percent to 16 percent range, with projected decreases running between 1 percent and 4 percent.

    The most active hiring is at companies with more than 1,000 employees, where one-fifth are planning to expand IT staffing in the second quarter of 2007. The finance, insurance and real estate industry leads all sectors in hiring projections, with 38 percent of the CIOs planning to hire on additional IT staff in the second quarter and only 1 percent projecting a decrease, according to the Robert Half survey.

    With supply already tight and high levels of hiring projected for the year, recruiters will face extraordinarily tough competition for IT candidates. Company recruiters working to meet the need for higher internal IT headcounts are competing against outsourcing and technology vendors, consulting firms and staffing agencies for the same talent.

    Heavy hiring at the technology companies will wipe out a large part of the available pool. Culpepper’s survey on hiring plans for 2007 reports that 53 percent of technology companies with more than 1,000 employees plan to increase staffing this year, with 27 percent reporting that they plan to increase headcount by 20 percent or more.

    Smaller technology companies are recruiting at an even faster pace, with 90 percent planning to increase staffing in 2007 and almost one-third reporting that they will expand headcount by 20 percent or more. With the supply of H-1B visas already exhausted for the year beginning in October, recruiters will not be able to source abroad for IT talent.

Converting contractors
    Employers are increasingly anxious to convert IT contract workers into permanent hires, but the supply is limited, especially for the advanced work that is most in demand. In Hudson’s IT practice, one out of every three of contract employees converts to a permanent hire.

    Among those with highly specialized skills, however, the conversion rate is only 10 percent to 20 percent. “Some senior-level subject-matter experts are contract mercenaries,” Valek says. “They enjoy the financial benefits, and they are difficult to bring into permanent positions. We see more conversions among junior and midlevel employees.”

    For high-level free agents, temp-to-perm is always a possibility, Snelling COO Dan Glazier notes. “But this is a candidate-driven market,” he says. “If a worker has been on contract for many years and is older, his or her perspective on benefits may have changed and the temp-to-perm offer may be more attractive.” With other contract employees, however, employers may have to work hard to make the conversion attractive.

    At the higher skill levels, workers earn 15 percent to 30 percent more as contract employees. “The benefits for permanent positions tend to be slightly better, especially if it’s a Fortune 500 company, so contract workers will weigh this tradeoff,” Glazier notes. Snelling’s studies show that benefits are important to temp workers, but not as important as wages.

    “With contract rates 15 percent to 30 percent higher for technology jobs, there’s not much an employer can do to convert a candidate,” says Scott Ragusa, president of Winter, Wyman. “Another 5 percent to 10 percent in salary is not going to do it. Also, the client company should be aware that it is selling the firm to the candidate and should be sure to offer the candidate challenging work.”

    Valek reports that Hudson has seen some upward momentum in salaries for permanent positions. “With the tight labor markets, more employers are going straight to permanent positions instead of looking at contract employees,” he says.

    Don Weis, vice president of national recruiting for Spherion, advises HR executives to exercise caution in trying to convert contract employees. “It can be a great opportunity, but there may be difficult issues involved in trying to convince a passive candidate to accept a permanent position.”

    The salary difference between contract and permanent employees is an integral part of the negotiation process. “Companies that do it right have it all worked out in advance, with details on the benefits and bonuses offered, so they can sell the offer to the candidate and get the employee on board,” Weis says.

    The key is to determine what is important to the candidate at that particular time. Benefits may not be appealing, particularly if the candidate has coverage through a spouse. “You must find what appeals to that individual,” Weis notes.

    In response to tighter labor markets and the need to convert contractors, employers began raising wages for permanent positions in the last half of 2006, reports Eric Buntin, managing director of Randstad USA. “The 15 percent to 30 percent wage differential for contract workers is shrinking to 10 percent to 25 percent, and some temps are beginning to respond to this by becoming more willing to look at permanent positions,” he notes.

    Raising wages to turn temps into permanent hires or to bring in new hires often creates problems down the road when internal pay equity falls apart. Hourly wages for technology workers rose 3.1 percent in 2006, according to Yoh. Overall technology wages are up 15 percent from 2002, restoring most of what was lost when wages crashed during the 2001 recession.

    Starting salaries for IT project managers will rise 4.1 percent in 2007, with the range running from $72,750 to $106,250, according to Robert Half Technology. But high-demand skills such as service-oriented architecture and business process re-engineering could see starting salary increases of 10 percent or more.

    Culpepper reports that half of all technology and life sciences companies are using signing bonuses to bring on talent. Among firms with more than 5,000 employees, three-quarters are offering signing bonuses. The vast majority pay a flat dollar amount.

    For technical managers and professionals, a slim majority of companies pay signing bonuses of $1,000 to $4,999, but one-third pay $5,000 to $10,000. For executive positions, signing bonuses may exceed $50,000.

    At 54 percent of the technology and life sciences covered in the Culpepper report, signing bonuses are paid in one lump in the first paycheck. Among companies that split the payout, most provide full payment after three months.

    Data from the first quarter of 2007 indicate that labor markets for technology employees will continue to tighten. From February to March 2007, employment in computer systems design jumped 7.1 percent, according to the U.S .Bureau of Labor Statistics.

    Unemployment for workers with a bachelor’s degree or higher dropped from 1.9 percent in February to an even lower 1.8 percent in March. For the information industry as a whole, unemployment is a low 3.2 percent.

    The IT skill sets most in demand— Microsoft Windows administration, network administration, database management and other specialized fields— exist in relatively fixed quantities that are quickly depleted during an expansion.

    “Employers are quickly coming to the realization that the market is tight and they are reviewing the skill sets they require,” Valek notes. In Hudson’s IT practice, contract work represents 80 percent of the business, and its recruiters must constantly pull in new employees to replace the contractors lost to permanent positions. “The supply problem is in the senior positions,” Valek says.

    “We use all available techniques for sourcing. When I walk past our recruiting bullpen, it’s not uncommon for me to see people using LinkedIn or other networks. IT professionals are the first adopters of any technology developments, so we have to stay ahead of them.”

    Hudson’s recruiters are having a particularly difficult time filling positions for project managers and subject-matter experts. “We have to be more proactive and invest more in the recruiting base,” Valek says. “We are becoming more specialized so that we know the right person to call from the beginning.”

    For internal recruiters, short-term solutions to the IT labor market squeeze include rotating in employees from other parts of the business and training them into IT positions, pulling in third-party recruiters or dedicating internal recruiting staff to IT hiring. In the long term, careful staff development, succession planning and building internal recruiting resources with a deep knowledge of the company’s IT needs will be necessary.

    Experts agree that CIO involvement is essential. Recruiters are only fully effective when they can evaluate all the alternative methods for meeting staffing needs—permanent hire, contractor, outsourcing—and the CIO must set the guidelines for this process.

Annual job growth at CDW Corp. is clocking in at 15 percent. The technology products and services provider, headquartered in Vernon Hills, Illinois, reported revenue of $6.8 billion for 2006, up 7.8 percent from 2005, with fourth-quarter sales up 13.5 percent from a year earlier. To support this rapid ongoing growth, the company plans to hire 800 to 1,200 account managers and more than 100 IT specialists and engineers this year.

    In the first three months of 2007, CDW met its recruiting goals and hired more than 300 new account managers, using a new recruiting process launched in December 2006. The new process is the result of more than a year of hard work to restructure the company’s approach to sourcing, assessment, onboarding, training and retention.

    CDW has long benefited from a solid employment brand and a strong total rewards program. As a member of Fortune’s “100 Best Companies to Work for in America” for nine consecutive years and one of Fortune’s “America’s Most Admired Companies,” CDW pulls in more than 20,000 applications a year.

    The company offers competitive salaries, health benefits, 401(k)s, profit-sharing and stock purchase plans, on-site day care at headquarters, free meals for second-shift workers, subsidized on-site cafeterias, product discounts and other highly desirable benefits. CDW’s 5,480 employees are referred to as “co-workers” to reflect the egalitarian corporate culture.

    The recruiting process overhaul began in September 2005, when CDW brought in Dennis Berger as senior vice president of co-worker services and chief co-worker services officer. Berger initiated an evaluation of CDW’s recruiting process in the context of the company’s growth trajectory.

    “When we looked at what our job growth would be over the next few years, we knew we had to change,” Berger recalls. “Particularly for a technology company, we weren’t doing a good job of driving people to our site and then providing the right materials there.”

    Berger led CDW into a six-month process designed to identify weaknesses in its recruiting program and develop solutions.

    “We took a deep dive into our process for selecting talent,” Berger recalls. “We found that it was very recruiter heavy—a lot of muscle but not very smart.”

    Berger and his team began by taking a close look at the qualifications needed to succeed in the account manager position. Under the old recruiting process, a college degree was not required, but recruiting was heavily focused on eight to 10 college campuses.

    “We were recruiting in the wrong places,” Berger notes. Beyond the college visits, recruiters tapped Monster and Yahoo HotJobs, but little else.

Rebuilding the front end
    After a careful re-evaluation of the requirements for the account manager job, Berger and his team found that a high school degree and two to four years of job experience were sufficient basic qualifications, and systematically revised the sourcing approach to reflect those requirements.

   Now, in addition to traditional job boards such as CareerBuilder, Monster and HotJobs, CDW is using radio ads and sourcing solutions such as direct e-mail campaigns through MySpace, Google, LinkedIn, American Student List and other networking sites. Initial results indicate that sourcing through the networking sites is productive.The radio ads are extremely effective on the East Coast, but less so in the Chicago area.

    “We are currently assessing all of this,” Berger reports. “We are pleased with the results. What we have heard back from our recruiters is that they see a huge improvement over the days when we relied on eight to 10 campuses and Monster and HotJobs.”

    CDW also invested heavily in the infrastructure for recruiting account managers. The company hired on more sourcing specialists dedicated to filling the pipeline for account manager candidates, and more recruiters for the account manager positions. CDW now has 25 in-house recruiters who are trained sourcing professionals. It also calls on outside agencies to provide contract recruiters as needed.

    In addition to the re-evaluation of the account manager position and its sourcing methods, CDW conducted an extensive study of turnover. The study revealed that turnover was very high in the first few weeks and at the six-month mark, and then gradually declined up to the two-year mark, when it dropped to near zero.

    “We are now spending more time on the front end of the process to reduce turnover,” Berger says.

   To address the problem of high turnover early in the job, CDW now puts new hires for account manager positions through an extensive onboarding and training program that begins with a daylong orientation focused on the company’s values and goals, and then moves new hires through six weeks of training.

   The fact that turnover was so high early in the job signaled a potential problem with job expectations and fit.

   “We found that we were bringing in people who really didn’t know what the job was about,” Berger notes.

   To reduce this early turnover, CDW increased its focus on ensuring that potential candidates truly understand the job. The company developed a three-minute realistic job preview video that showcases current co-workers describing their roles, responsibilities and the working environment. This video is embedded in CDW’s careers home page for potential candidates to view prior to applying online.

   In addition, CDW abandoned its paper-and-pencil assessment process, which was never customized for the specific skills and traits needed for productive account managers. In January 2007, the company installed a robust online assessment process from PreVisor, an employee selection solutions provider.

    The assessment tools are fully customized to reflect CDW’s requirements on a detailed basis. The assessment was developed through a study of top-performing sales account managers to determine the common behaviors and professional competencies that led to their success. The PreVisor assessment screens candidates on sales aptitude and the work ethic needed to be a successful account manager at CDW.

    “We have feedback from managers that the quality of the new hires is much higher,” Berger says.

    Following the online assessment, candidates go through two interviews, including a behavioral interview with the managers they will work with if hired. Under the old recruiting process, the managers who were building the account manager teams were not heavily involved in selecting the new team members. Now the managers are directly involved and build a relationship with the candidates before the candidates come on as new hires.

Managing attrition
   After six weeks of training, the new hires spend their first six months on the job working in the CDW “sales academy,” where they perform the actual duties of an account manager and receive one-on-one skill development training from sales learning specialists.

   With new hires trained and coached through the early months on the job, attention turns to meeting the two-year mark.

    “We know with certainty that if employees stay with us for two years, they are basically here for life and very productive,” Berger says. “And we want to make sure that we don’t extend the attrition rate beyond 20 to 24 months.”

   CDW brought in consulting firm Watson Wyatt Worldwide and learned that high-performing sales organizations have a natural filter of attrition and a natural attrition rate. New hires who find it difficult to achieve aggressive sales goals actually self-select out of the organization. Once this natural filter runs its course, the organization can have a high degree of confidence in the long-term success and productivity of the sales professionals who made it through.

   CDW is not alone in its efforts to build a more effective approach to hiring by building up the front end of the recruiting and selection process and then following through with thorough onboarding, training and on-the-job coaching. New-hire turnover, a common gauge for quality of hire, is a good departure point for evaluating the entire recruiting process.

    New-hire turnover metrics are based on the number of separations during a time frame that varies by industry. In high-turnover industries such as retailing, the length of service for measuring new-hire turnover might be as short as one month, while health care organizations often use a 90-day mark and other industries use six-month or one-year measures. As CDW discovered, however, the best analysis of recruiting effectiveness may come from a hard look at turnover at all points within the first years of employment.

    Pushing information through to candidates before the application process begins, providing realistic job previews, customizing candidate assessment tools and bringing managers into the selection process can improve quality of hire and reduce early attrition.

    “You have to look at who you need to hire and how you can do it,” Berger says. “We went all the way back to sourcing and then all the way through onboarding to the two-year attrition filter. The point is to understand your process and its gaps and tackle those gaps.”

The percentage of accounting temps converted to permanent hires jumped 40 percent in 2006 at Vedior North America, one of the largest staffing firms in the U.S. “The shortage of talent in accounting and finance is well known, and employers are trying to grab labor while they can, CEO Greg Netland says. “From a fee perspective, employers are essentially paying the permanent placement fee, but on a prorated basis.”

    The temp-to-perm strategy, preferred by many employers as a low-risk approach to recruiting, is still effective for some positions, but increasingly counterproductive for skilled positions in candidate-driven markets.

    Unemployment in accounting, nursing and other skilled occupations that require specific degrees and certifications is now less than 2 percent. For IT positions, the time to fill full-time permanent positions now stands at 56 days for staff and 87 days for managers, according to Robert Half Technology.

    “Temp-to-perm is a fantastic avenue for employers when you have great pools of candidates and a candidate-rich environment,” says Dan Glazier, COO of Snelling Staffing Services, with 200 offices across the U.S. “But demographically, we now have very low unemployment in the major labor markets. Temp-to-perm becomes the least advantageous path for job candidates. Under the current market dynamics, it may not be the best approach for employers.”

    Employers who rely on temp-to-perm as a fast and effective way to pull in candidates may have to rethink their position. “Particularly at the higher skill levels, temp-to-perm is counterintuitive and not a way to get the best candidates,” Glazier says. Snelling, along with many of the major staffing firms, has redirected its focus to straight recruiting.

    “We do a disservice in the industry if we don’t steer both candidates and employers in the right direction,” Glazier says. “Right now, many candidates are receiving multiple offers for full-time permanent positions, and a temp-to-perm offer goes to the bottom of the heap.” He believes that labor markets will continue to tighten, even for lower-skilled jobs. He reports that in manufacturing, for example, finding skilled and semi-skilled workers, even line workers, is now a major hurdle for employers.

Understanding markets
    “Temp-to-perm and permanent placements are totally driven by the talent pool on a market-to-market basis,” says Eric Buntin, managing director of marketing and operations for Randstad USA, another staffing giant. “In contrast to what we saw in 2002-2003, we now see a critical shortage of certain skills.”

    Beginning in the first quarter of 2006, the availability of certain skills sets dropped drastically, so employers shifted away from temp-to-perm and toward permanent hires, Buntin reports. The key skills needed for the position and the availability of those skills should drive the decision about whether to fill the position through temp-to-perm or direct hire. At Randstad USA, permanent placement work has grown sharply while temp-to-perm orders have remained roughly constant.

    The biggest change that Randstad USA has seen in its temp-to-perm arrangements is that companies are moving toward earlier conversions. The timing of conversions is based on the position and the onboarding and training process required. For a relatively simple job, onboarding and training may take be three to four months. For a more complicated position, it may be six months.

    At Spherion, which places 375,000 workers annually, clients would take on more high-skilled temp-to-perm employees if they could, but the supply is limited, reports Don Weis, vice president of national recruiting. “The trend at the lower levels is still ‘Try before you buy,’ and many temporary workers in the lower levels are active candidates,” he says. “In the more highly skilled positions, employers would like to use temp-to-perm candidates, but there is a much more limited pool of active job seekers.”

    At Vedior, the highest levels of temp-to-perm occur in accounting and finance positions, where there is a huge demand for quick onboarding. “It may take one day to hire and onboard a temp, compared with six weeks for a permanent hire,” Netland reports. Most of the accounting employees are sent out as temps, but with the understanding that the position may be considered for temp-to-perm.

    “We don’t want to lose the asset, so we have a nine-month scenario with a prorated fee,” Netland says. There is no fee after the temp has been on the job for nine to 12 months.

Pricing pressures
    Like most staffing firms, Vedior is feeling pricing pressures. “It’s an odd market because every measure shows that labor supply is down, but staffing firm pricing is still under pressure,” Netland says. “If clients push too hard, however, we have to serve other clients first.”

    Although there is pricing pressure, in some fields where there is essentially zero unemployment, such as engineering and nursing, bill rates have gone up. “We have an extremely hard time recruiting nurses and bill rates are rising, but hospitals are still struggling, and other businesses are still under cost pressures,” Netland says.

    Snelling structures its temp-to-perm arrangements based on the components included in each account. Its recruiting costs are rising, but clients are pushing back on prices. “It’s only a matter of time before pricing will have to move up for clients who want the best candidates,” Glazier says. He advises employers to look at whether they are getting the results they need from their temps instead of focusing only on transactional pricing.

    The transactional focus comes from the overwhelming emphasis on lower price, Glazier reports. Line mangers have budgets they have to hit, so they are very price-conscious. Some of the pressure comes from finance and procurement, which focus only on the contract. “CFOs look at total cost equations for everything except people,” he says. “When we talk to them, they understand total costs, but sometimes there is a misalignment with procurement.”

    Snelling avoids working with companies that only measure price because it leads to miscalculations of the total value of the work. “It may take 15 people to do the work of 10 if a company looks only for the lowest price and ends up with low-quality employees,” Glazier says. “Hiring under-skilled people and low-end workers in a tight labor market will cost the company over time in productivity and output.”

    Snelling recognizes that it is hard for any company in any industry to raise prices, so it works with clients to reduce its costs. “We try to educate clients about how we work,” Glazier reports.

    Winter, Wyman, a staffing firm based in Waltham, Massachusetts, saw a fairly dramatic uptick in temp-to-perm two years ago, but demand has remained basically steady since then. The firm’s temp-to-perm arrangements vary from client to client based on the volume of business and whether the client is looking for lower or higher skill level candidates. “The fee structure is part of the negotiation,” reports Scott Ragusa, president.

    Winter, Wyman’s fee structure generally starts at 25 percent and decreases 1 percent for every two weeks, down to a minimum of 20 percent. For large clients, the fee may be waived after the temp has been on the job for an extended period.

    “Our clients do not view temp labor as a commodity and we have had some ability to raise prices to cover higher recruiting costs,” Ragusa says. “This is a candidate-driven market and will remain so for quite some time. For the higher positions, it is becoming harder to replace the workers we lose to permanent jobs.”

Setting objectives
    HR executives can help produce an effective temp-to-perm arrangement by letting the staffing firm know upfront that the company is looking for a permanent employee, Ragusa says. “It’s a different pool of candidates,” he notes. Also, the client company should be aware that it is selling the job to the candidate and should be sure to give the candidate challenging work. Finally, the HR executive should keep the staffing firm informed of any changes in the status of the position.

    Buntin advises HR executives to define the core workforce and the flexible workforce, and actively manage both. “This is far more effective than letting line managers hire temps on a one-off basis,” he notes. “We have seen this development in our client companies.”

    HR executives must look at the tradeoff between the fully loaded cost of in-house recruiting compared with the fees paid to the staffing agency, Buntin advises. “Companies are still trying to drive out costs,” he says. “But if the market drives the fees too low, the quality of the workers provided will suffer.” He notes that it is more challenging now to recruit workers who will take temp work.

    The key for HR executives is to really look at the objectives, the skill sets required, and the availability of those skills in the marketplace. “It may be that a temp-to-perm strategy cannot be part of a permanent recruiting strategy, but only a temporary strategy under certain market conditions or for certain positions,” Buntin says. For now, employers in high-demand labor markets may have to chose between direct hires or temps, and forgo the comfortable temp-to-perm middle ground.

Vault.com is a well-established hunting ground for job candidates looking for U.S. job postings and inside information on employers. Recruiters post 500,000 openings a month on the site’s job board and monitor the message boards to track candidate and employee postings about their company.

    Vault analyzed its traffic data in 2005 and discovered that many of the users on its U.S. site were job seekers in Asia looking for career information and insider perspectives on U.S multinationals. To meet this obvious need, Vault launched its Asia site a year ago. Vault Asia now averages more than 200,000 unique visitors a month and posts jobs for employers across Asia.

    Recruiters and job seekers can now find detailed information on the interview process for a technician at Ikea in Shenzhen, China, or the signing bonus for engineers at Qualcomm in Hyderabad, India. New hires freely report their experiences with the recruiting process and salary offers at major companies.

    This year, Vault will break up the Vault Asia site into targeted sites for individual countries, with new sites for India, China and South Korea going live in the first quarter of 2007.

    “Hiring is through the roof in Asia, particularly in China and India,” says Edward Shen, general manager of Vault Asia.

    Vault is part of the boom in career sites and job boards that is sweeping Asia. Internet recruiting has become a primary recruiting method in China and India, where economic growth is fueling nonstop hiring across all industries.

    Recruiters are posting on the sites as soon as they appear. On January 11, NewChinaCareer.com went live. One month later, postings on the site for jobs in China included 296 positions at Microsoft, 320 at IBM and 492 at GE. Recruiters are using the site to source candidates with fluency in English for jobs in all the major cities in mainland China plus Hong Kong, Taiwan and Singapore.

Growing access
    Job growth is explosive across Asia. China’s major cities generated 12 million new jobs in 2006, according to the National Bureau of Statistics of China. GDP growth in China hit 10.7 percent in 2006, a full point above expectations.

    India reported GDP growth of 9.2 percent for 2006 and surpassed South Korea to become Asia’s third-largest economy, after Japan and China. Job growth is soaring at both foreign and Indian multinationals.

    “Accenture is hiring 500 people a month in Bangalore alone,” Shen says.

    This volume of hiring is possible only when sourcing is fully automated through employment sites. The major players are job boards such as ChinaHR.com, which posts nearly 1 million jobs each day and offers 10 million registered job seekers. ChinaHR, the oldest employment site in China, sold a 40 percent stake in the site to Monster.com in 2005.

    Recruit.net, a fully trilingual job search engine based in Hong Kong, posts 2 million jobs a month in English, Chinese and Japanese for positions in China, Japan, Australia, India and Singapore.

    “Throughout Asia, the major job sites are becoming very important parts of the culture of each country,” Shen says. “They have a major presence through advertising.”

    The number of Internet users in Asia is approaching 400 million, up 241 percent from 2000, according to Internet World. Although the Asian Internet penetration rate is only 10.5 percent overall, penetration in South Korea, Singapore and Japan is roughly equivalent to the U.S. rate of 69.6 percent.

    China had 137 million Internet users by the end of 2006, up 23 percent from 2005, according to the China Internet Information Center. In Beijing and Shanghai, penetration is approaching 40 percent; in Hong Kong, it is 68.2 percent.

    “In India and China, Internet use among the younger generation is at the same level as in the United States,” Shen reports. “Our surveys of Vault’s Asian members show that they are starved for information about careers and employers. The focus on careers among recent graduates is greater than what we see in the United States.”

    Rapid growth and high turnover drive constant recruiting. “Young professionals in China will change jobs two or three times a year and leave a company for a small salary increase at another company,” Shen says.

    Private-sector wages in China rose 11.4 percent for the year ending in the third quarter of 2006, according to the National Bureau of Statistics of China.

    High demand is balanced by a high supply. Vault’s recruiting contacts in China and India report that the supply of candidates is strong and that many companies say they have too many applicants.

    “InfoSys in India had 1.3 million applicants in 2006, with a large portion of this coming in through the company’s Web site,” Shen notes. “Young professionals are focused on brands, so a company like InfoSys receives many résumés.”

    In China, multinationals and top domestic companies are looking for specific skills from native Chinese with English-language skills, so the challenge is to identify the right people, Shen says. Multinationals recruiting for professional positions on local job boards receive an extraordinarily large volume of responses and need to be prepared to target individuals.

Global partnerships
    The online recruitment market in Asia is still far behind that of the United States, according to Maneck Mohan, director of Recruit.net. In Recruit.net’s markets, Australia is the most mature and China the least developed in the transition from traditional offline media job postings to online postings.

    “In the United States, 80 percent of the Fortune 500 companies now accept only online job applications,” Mohan says. “For the Asia 500, this number is just below 25 percent, and we expect it to reach 40 percent by the end of 2008.”

    Because the site drives targeted job seeker traffic to the job listings on the company’s Web site, all information flows directly into the employer’s application tracking system.

    Companies that use Recruit.net’s premium services can tap the site’s pay-per-click system. The companies define their own budget and then only pay for job seekers that click through to their job listings instead of paying for each posting.

    Recruit.net also offers job-seeker analytics to measure the effectiveness of job advertisements and to collect information on job seeker behavior.

    “For example, companies can track the keywords that job seekers used to find their job, how many times the job was displayed and the percentage of displays that resulted in a job seeker click-through,” Mohan reports.

    The jobs are also syndicated across a network of partner sites and distributed to niche sites, forums and blogs.

    “This dramatically increases the reach and visibility of the jobs to a passive, highly targeted job seeker audience,” Mohan says.

    In November 2006, Recruit.net entered into a partnership with the U.S.-based DirectEmployers Association, which maintains JobCentral.com, an employer-owned search engine. Many of DirectEmployers’ members are large U.S. multinationals. Jobs posted on either of the two sites now automatically appear on both.

    “U.S. employers with operations in Asia are the primary users,” says Bill Warren, CEO of DirectEmployers. “It gives them another outlet and a much more cost-effective way to reach job seekers in Asian locations.” More than 140 U.S. employers are now using the Recruit.net site for posting jobs at their Asian locations.

    The flat membership fee of $12,500 a year for DirectEmployers companies includes international job postings. Non-member companies can post a position for $25.

    Job seekers who are interested in a job posted on JobCentral.com are automatically routed to the company’s Web site, so DirectEmployers does not have information on the final outcome for candidates or employers.

    “But the member company renewal rate is 95 percent, indicating a high level of satisfaction with the offerings,” Warren says.

    Warren believes that the rapid expansion of global recruiting conducted through the Internet will continue.

    “Over the next few years, we’ll see more of the upward spiral in usage,” he says. He notes that both Monster and CareerBuilder are pushing for an international presence. The number of employment Web sites stands at 40,000 worldwide, according to the International Association of Employment Web Sites.

    “Also, international job listings will become a commodity as they are now becoming in the U.S, with no charge for the listings and all revenues for the site driven by advertising,” Warren says. “We see this approach now with the rise of Google, which will have a huge impact on Internet recruiting over the next few years. Developments overseas lag three to four years behind the U.S.”

    The technology is in place for global recruiting and true workforce mobility, but it’s difficult to project political developments with respect to visa regulations, Warren says. With Asian multinationals now investing heavily in the U.S. and Europe, however, the push for simultaneous job postings across all regions will accelerate.

    As Asian multinationals continue their cross-border merger-and-acquisition activities and buy up more U.S.-based companies, job postings will flow out from the Asian firms and create new opportunities for global job boards and for recruiters working in the U.S. and abroad.

When Jake Randall needs to recruit a mechanical engineer in the oil and gas industry, he must contact 75 to 100 potential candidates before he can fill the position. In 2004, contacting 25 to 30 potential candidates sufficed.

    “It’s three times harder now to find a candidate who is qualified, interested and ready to take a new job,” he says.

    Randall is a top recruiter for Futurestep and project leader for its oil and gas division, specializing in filling engineering and geoscience positions for client companies that range from the largest integrated oil companies to small independents. Salaries for these positions start at $90,000. Job growth in the U.S. oil and gas industry hit 11.3 percent in 2006.

    “The market is absolutely incredible,” Randall notes. “There’s a severe shortage of candidates, and a huge push coming from the industry because of high oil and gas prices. And as more companies snap up more candidates, the talent pool shrinks.”

    Futurestep is a Korn/Ferry company that focuses on recruiting for middle management positions. It organizes its 454 recruiters into practices that cover the consumer/retail, finance, government, health care, life sciences, technology and industrial sectors.

    The industrial practice includes oil and gas. In Futurestep’s Houston office, a dedicated staff of six reports to Randall, and he scales the team based on client demand. The metrics he uses to evaluate the effectiveness of each recruiter working under him include placements secured, interviews per month, the number of people networked per day and the number of outbound calls per day.

    Randall’s recruiters typically handle 10 positions at a time, and each recruiter has full responsibility for those positions.

    “They receive extensive support from me and from our staff of research assistants, dialers and sourcers looking for active candidates,” he notes. “Futurestep has huge resources and capabilities.”

    The oil and gas industry now represents a worst-case scenario for recruiters. High job growth, an acute lack of candidates and the inability to find similar skill sets in sister industries create near-impossible conditions for filling critical positions. Randall’s approach is instructive for any recruiter working in tight labor markets.

Sourcing far and wide
   Randall begins every search with a kickoff call to the client. He talks directly to the hiring manager to gain a better understanding of the intangibles of the job. He may also speak with the HR executive to review the process he plans to use. “The goal is to get the best sense of what kind of candidate will deliver real value to the company as soon as possible and fit the company’s culture,” he says.

    Randall’s most productive outreach method is classic sourcing. “We select 25 to 50 competitor companies depending on the specific sector we are looking in, and note their locations,” he says. “This allows us to geographically locate the talent.” Randall’s research staff generates the names of potential candidates at other companies, their location, title and contact information.

    “Passive candidates are typically the best qualified for the positions we need to fill, and they are also less susceptible to multiple offers, which has become a huge problem in this market,” he notes. The geographic area may be very broad, so Randall must determine whether relocating the new hire is realistic.

    The position requirements are often quite specific. “We want to create the largest candidate pool possible,” Randall says. “But it’s a balancing act. If we create a pool that is too broad, we won’t able to fill the position efficiently, and if we go too narrow, we won’t produce a sufficient number of candidates.”

    In addition to classic methods designed to reach passive candidates, Randall makes use of industry associations such as the Society of Petroleum Engineers, the American Association of Petroleum Geologists and the American Society of Mechanical Engineers.

    “Using the industry associations is imperative in our line of business,” he reports. “We hold memberships and access their directories.” The industry associations represent a large portion of the labor supply for oil and gas professionals.

    Randall also makes heavy use of LinkedIn, which he says is an effective tool, and other online networks. He also taps the major job boards and niche boards such as Rigzone.com, Oilcareers.com and Worldwideworker.com.

    “Oil and gas is a flat industry with few geographic barriers,” Randall notes. “In addition to sourcing in the United States, we also source abroad for U.S. citizens who are working in other countries. We may find a U.S. engineer in Russia just as easily as Indiana.”

    Among U.S. citizens working abroad, Randall sees a growing interest in returning to the United States. “The sizable differential in compensation that originally took them away— higher pay and large hardship premiums— is smaller now because there is some global equalization of compensation,” he reports.

    If the differentials are lower, candidates are more willing to think about retuning to the United States. Randall leverages Futurestep’s overseas offices for support if a candidate is in their location.

The ‘contact sport’
   With potential passive and active candidates identified for a position, Randall begins to work through the pool. “From this point on, recruiting is a contact sport,” Randall says. “The more people you touch, the more effective you will be.”

    If Randall introduces 100 potential candidates to a specific opportunity by phone or e-mail, he will typically receive a response from 50 to 60. “We are looking for three to five fully vetted candidates for each position,” he says.

    “Once we have an interested candidate, we must sell the client. Because we have a retained arrangement with our clients, we have a deeper relationship with them and know them well. When we talk to the candidate, we sell the company, the compensation package, the location, and education and career opportunities, which are very important to engineers.”

    Randal then presents the three to five candidates to the client. “In addition to all the information we have gathered from the candidate and the vetting process, we also present intangibles that may have come out in our interviews,” he says.

    On average, client companies ask for interviews with 80 percent of the candidates he presents—a very high interview ratio. After the presentation, Randall follows up with phone calls to the candidates to pursue any questions the client raised.

    Before the candidate goes for the face-to-face interview with the hiring manager, Randall ensures that potential deal-breakers have been discussed. “If relocation is involved, we make sure that the candidate has already initiated a conversation with his or her family about the potential move,” Randall notes. “We also make sure that the compensation expectations have been addressed.”

    If the client is satisfied with the candidate, Randall steps back into the process to begin the negotiations about what it will take for the client to secure the candidate. “I’m constantly on the phone with the candidate and the client and push the process along when needed,” he says.

    “Any solid blue-chip candidate will receive multiple offers. To combat this, we are in a continuous process of talking to the candidates. We are very focused on candidate care and take a consultative approach that centers on their fit and their career progression. It’s a selling atmosphere.”

    Randall drops the hard sell and backs away from a candidate, however, if he is concerned that the candidate might not stick with the position. “We want to see a minimum of three years with every employer when we look at a candidate’s work history,” he notes.

    “The only thing worse than not being able to close a deal is to close one with a candidate who leaves after 60 days on the job. But we have a great track record for finding candidates who stick.”

    With the labor shortage bearing down, Randall is beginning to look at new graduates for some clients, but they are also in short supply. “During the oil and gas downturn that began in the late 1980s and continued through the 1990s, new industries emerged and attracted talented students,” he says.

    According to Randall, the number of new graduates in petroleum engineering has dropped from 10,000 to 12,000 a year in the 1980s down to 2,000 a year now. “Today, new graduates are wooed by multiple companies while they are still in college,” he says.

    The Futurestep oil and gas group also fills international positions. “Right now, we are filling positions in Dubai and Brazil,” Randall reports. “We also do some sourcing abroad for foreign nationals to fill jobs here, but there is some pushback from our clients.”

    Clients are reluctant to look at foreign nationals because few H-1B visas are available and the process is expensive. “In addition, U.S. oil and gas companies are long established and generally prefer U.S. talent for continuity and communication reasons,” Randall says.

    He notes, however, that if the labor markets continue to tighten and Congress raises the H-1B visa cap, U.S. oil and gas companies will be more receptive to hiring foreign engineers. “We’ve already seen lower resistance, and it will continue to drop,” he says.

Intel founder Andy Grove was born in Hungary. Yahoo Inc.’s Jerry Yang was born in Taiwan. Google’s Sergey Brin was born in Russia. EBay founder Pierre Omidyar was born in France to Iranian parents. Recruiters looking for the next Andreas Bechtolsheim and Vinod Khosla, the co-founders of Sun Microsystems, might find them in Germany, Bechtolsheim’s home country, or India, where Khosla was born.

    During the past 15 years, immigrants have launched 25 percent of all venture-backed U.S. public companies and 40 percent of venture-backed public companies in the high-tech sector, according to a study commissioned by the National Venture Capital Association. These immigrant-founded high-tech companies have generated half of the jobs in the sector.

    Recruiters working to bring in the next generation of immigrant innovators face new obstacles in their attempt to attract both non-immigrant candidates who want to become permanent U.S. residents and immigrants who want to enter the U.S. with green cards in hand. The most talented employees worldwide are increasingly unwilling to tolerate the long waits and uncertainty entailed in immigrating to the United States. Instead, they are going to Europe, Canada, Australia and other countries where knowledge workers face fewer immigration difficulties.

    A total of 1.1 million people obtained legal permanent-resident status in the U.S. in 2005, including 246,878 workers who achieved permanent status under employment-based preferences. The 2005 number was significantly higher than the 155,330 who achieved permanent status under employment-based preferences in 2004 and almost three times the 81,727 who achieved permanent residence in 2003, but shortages of knowledge workers have increased dramatically in the past year.

    Of those who received permanent residence, 220,000 achieved it through an adjustment in their immigration status, a much higher proportion than in past years, but a path still filled with uncertainties. Only 26,878 were new arrivals, the lowest number in five years. Although employers have improved their ability to import talent under non-immigrant visas and then convert them to permanent-resident status, the extremely low number of new arrivals who receive permanent status indicates that U.S. recruiters still face a hugely imperfect playing field.

Recruiting requirements
    Despite the arduous requirements for labor applications and the time-consuming recruitment and documentation process required, employers looking for top talent in hard-to-fill positions need to integrate permanent-residence immigration into their recruiting process to create a solid pipeline of foreign candidates.

    The National Science Foundation and a dozen other research groups have documented the fact that U.S. immigration policy is out of step with global trends in science, engineering and business. Recruiters for U.S. companies will find it increasingly difficult to do their job unless basic immigration policy is revised, starting with the labor certification process.

    The labor certification process requires that the position must be for a permanent full-time employee and the employer must attest to the qualifications, wages and conditions of employment. The employer must also meet requirements for specific recruiting efforts for the position, including advertising for the position with specific content about the job and the employer.

    For professional positions, the recruiting efforts must include at least three out of 10 standard recruiting outreach methods, and none of these can be used more than 180 days prior to filing the application. The recruitment report describing the recruiting efforts for the position must detail the number of U.S. workers rejected and the reasons for the rejections. Experts agree that the recruiting requirements are time-consuming, expensive and incompatible with best practices in recruiting.

    The employer must submit detailed job information to the Department of Labor’s PERM (Program Electronic Management Review System) centers, where the applications are routinely approved unless the agency’s anti-fraud or audit procedures trigger a delay. Records related to the labor certification, including the recruitment report, must be maintained for five years. Failure to provide the documents during an audit may result in up to two years of supervised recruiting—a penalty that no employer wants to incur.

    Under the new PERM rules for all labor certification applications filed since March 28, 2005, the Department of Labor set a goal for making decisions on electronically filed applications within 45 to 60 days, but this is only a goal and the DOL is not bound by it. Although application-processing times have improved under PERM, the improvement has generated more backlogs at other steps in the process in the Citizenship and Immigration Services.

    “The permanent-residence process is still deeply flawed, but for the most part, PERM has worked well for moving cases through the system,” notes Ted Ruthizer, partner and immigration chair at Kramer Levin Naftalis & Frankel in New York. “Employers must, however, meet the recruitment guidelines. Even with PERM working well, it still takes six months of recruitment and three months for approval.”

    “If only a bachelor’s degree is required for the position, the employer may face backlogs going back five years,” Ruthizer says. “For the advanced-degree candidates or those with a bachelor’s degree plus five years of experience, the process can be managed in one year unless the candidate is Chinese or Indian, in which case the applications are backlogged for years.”

    “The PERM attempt to streamline the process for permanent status has made some improvements, but achieving permanent status is still an uneven process and delays still occur,” says Ian Band, partner and business immigration law expert at Hunton & Williams in Washington. “The visa backlogs for many countries are still years long, and there is no way to predict when a green card will be issued. Employers and candidates can go straight for a green card, but it can take one to five years, and predicting when the card will be issued is impossible.”

H-1B and L-1 adjustments
    Immigration experts agree that the best immediate solution to the obstacles recruiters face is to continue to push for an expansion of the H-1B visa cap by Congress in 2007.

    “The most pressing issue is the H-1Bs,” Band says. “Employers have tried using the H-3 and J-1 training visas and the O-1 visas, but these are difficult.”

    In 2006, Congress created 20,000 emergency exemptions from the H-1B caps for foreign students who received an advanced degree from a U.S. university. In 2005, U.S. universities awarded 55 percent of master’s degrees and 67 percent of Ph.D.s in electrical engineering to foreign nationals, according to the American Association of Engineering Societies.

    In computer sciences and related fields, foreign nationals make up one-half to two-thirds of the graduate students at U.S. universities. Many remain in the U.S. under temporary work visas, but recruiters for U.S. companies cannot fully tap this significant talent pool given the caps on temporary visas and restrictions on green cards.

    “There has also been talk about exempting all advanced-degree holders no matter where they received their degree, which would free up a large number of H-1Bs,” Band reports. “Many H-1B employees want permanent status, but achieving that can take four to five years, and it’s still a crapshoot.”

    For H-1B employees, Ruthizer advises employers to prepare to file for H-1Bs in April and begin working toward permanent-residence status for the employee as soon as possible.

    Permanent status can be reached through adjustments to L-1 visas, which are issued for intra-company transfers for up to five years for workers with specialized knowledge or seven years for managers or executives.

    “There is no cap on L-1 visas, but some members of Congress think there should be, and this would be an absolute nightmare for companies,” Band says.

    Band advises companies to obtain a blank L-1 petition for the company and all of its subsidiaries.

    “The company files a blank petition listing all of its related firms,” he says. “Then the company and the subsidiaries that have been approved can file directly at the embassy for L-1 visas without having to go through the immigration service.”

    Band notes that some of his clients are recruiting abroad for the purpose of bringing employees into the U.S. after the one year of employment that the L-1 requires before these employees can be transferred to the United States.

    “L-1s for executives and managers are not problematic, but L-1s for workers with ‘specialized knowledge’ have become more tricky,” he notes. “More of these requests are challenged to see if the workers have knowledge that is specific to the company.”

    Recruiters who hope to use L-1 visas to bring employees into the U.S. are hampered by their inability to promise them that the L-1 can be converted to permanent residence. When key professional workers know they may encounter five-year delays in obtaining a green card, U.S. employers may simply fall out of the running for recruiting top candidates on a global scale.

    A decade ago, when the U.S. was still the undisputed leader in many high-tech industries, foreign national job candidates may have been willing to endure the hardships of the U.S. immigration system. Today, they have access to equally compelling opportunities in countries where uncertainties and time required to complete the immigration process are less burdensome. U.S. employers will have to continue to address this serious problem at the political level as the new Congress turns to immigration issues in 2007.