With the shift to remote work, companies unlocked a global labor pool. Job posts began receiving hundreds of applications each. In the past months, AI tools accelerated this problem by enabling candidates to spray-and-pray applications to hundreds of jobs at a time. Companies are struggling to hire amid a sea of noise.
According to the Paradox of Choice, when faced with multiple options, people either approach the problem as “maximizers” seeking the best option or as “satisficers” who settle for a “good enough” choice. The status quo is fine for companies looking for “good enough” candidates, such as big corporations. But for startups and small businesses that care about finding the best talent, hiring in the current environment is a nightmare.
Sometimes, unexpected answers can be found by looking at how things are done in other industries. In the case of tech hiring, the solution might be Hollywood. Movie studios don't hold open castings for the starring role of every film. Instead, they seek out proven talent. To find that proven talent, studios go to talent agents.
Compared to ten years ago, far more startups hire contractors instead of employees. This shift started with the rise of remote work, where companies structured almost all foreign hires as contractors to simplify compliance. The recent tech downturn drove more contractor and fractional hires because these workers were more flexible and expendable than employees. The slashing of middle management across companies like X and Meta further reduced incentives to hire "good enough" employees because managers became judged on output instead of headcount.
As AI has driven a recovery in the tech industry, many companies have stuck with contractors because they get work done. Contractors tend to be experienced professionals who focus on output instead of politics. And, the contractor process bypasses the slow and bureaucratic process of hiring or firing an employee.
Historically, companies leveraged external recruiters to find employees. These recruiters earned a sizeable fee per hire - typically 25% of the employee’s first-year salary. This pricing made sense in an era when employees expected to stay at a company for years. However, over time, recruiters became incentivized to have candidates change jobs frequently. By the mid-2010s, as companies such as DeveloperAuction offered employees $2,000 and a bottle of Dom Perignon to switch jobs, companies began pushing back on high recruiter fees. Recruiters have been struggling ever since.
Modern recruiting fees are rooted in US tax law. Companies can write off the fee as a business expense, but employees can’t. So, it’s cheaper for the company to pay the cost because it comes from pre-tax dollars.
Attempts to have employees pay the recruiter fees have largely failed. Lamba School popularized Income Share Agreements (ISAs), and Free Agency tested them in tech recruiting. Both companies struggled because fees were calculated on pre-tax salaries but paid post-tax, leaving employees with sticker shock as their 25% ISA ate up 40% of their take-home pay.
Hollywood originated the talent agent model. Talent agents help their clients find work, negotiate better terms, and navigate their careers. In exchange, they clients pay the agent 10% of all of their earnings. (If you work in tech recruiting, definitely read Powerhouse).
Pricing is inexact for freelance labor in tech, deal flow is inconsistent, and career growth is uncertain. A talent agent could help with all of these—setting the right price, avoiding feast-or-famine work cycles, and finding the best opportunities instead of taking the first one that comes along. The value of those services offsets a 10% fee for an independent contractor, and the contractor can classify the fee as a business expense.
Tech companies aren’t used to working with talent agents. But, they act like no-fee recruiters who can curate the best matches for a company. And that’s what startup hiring managers want right now - a curated selection of two to four outstanding candidates. Talent agents can provide the Goldilocks zone between the noise of job boards and the high fees of recruiters, with a more personal and human relationship than any marketplace can provide.
I think it’s time for people to try becoming tech talent agents. With a 10% fee, you only need to represent nine clients to make the same income as them. Finding nine clients seems more straightforward than building a job board or making one-off placements, and the revenue is recurring. Start by finding freelancers, offering to help find them clients, and setting up a deal referral agreement.
Remote work has flattened the global labor market, and hiring managers need help navigating a world of candidates. Recent tech layoffs began shifting knowledge work to be more transactional—hiring managers are no longer sitting in an office with their team, so performance matters more than “culture fit” when hiring. The most exceptional talent has realized they have more leverage than ever and can demand higher rates and more flexible terms. Companies seeking the best talent will increasingly find that talent agents are the best way to hire them.
Thanks to Aaron and Emma for reading drafts of this.
