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Staffing and Recruitment in the

Blockchain World - Process


Improvements and Efficiencies
A Whitepaper

Published By: Quantilus Inc. and Appliqant


Author: Debarshi Chaudhury
dc@quantilus.com, info@quantilus.com
www.quantilus.com, www.appliqant.com
(212) 768-8900 @quantilus
Blockchain based Staffing
and Recruitment – a Whitepaper

Staffing and Recruitment in the


Blockchain World - Process
Improvements and Efficiencies
Published By: Quantilus Inc. and Appliqant
Author: Debarshi Chaudhury

What is Blockchain?
The objective of this whitepaper is not to explain Blockchain in depth, since the scope of that is
enormous and it has been done in much greater detail elsewhere. Rather, what we want to
cover in this document is the practical application of Blockchain to a specific set of
business processes relevant to the staffing and recruitment industry.

That said, at a very high level, Blockchain allows us to have a shared, distributed, and
encrypted ledger of transactions - that everyone in a business process accepts as the “truth”.
Each of these terms requires some explanation:

Shared - all players in the process have access to the ledger and all transactions in the ledger.
Distributed - the data is distributed across thousands of computers. This ensures that
hacking/changing data on one computer will not impact the overall truth. As long as 50%+ of the
nodes are unhacked, the truth is secure.
Encrypted - the data is encrypted and secured by a sequence of private and public keys,
ensuring that players outside the chain cannot view the data.

Blockchain is the core technology behind bitcoin and other cryptocurrencies. However, the use
of the technology can revolutionize processes beyond the financial transactions that
cryptocurrencies support.

General Projected Benefits of a Blockchain


Ecosystem
As a result of the inherent technology, Blockchain is projected to bring significant improvements
to business processes across multiple industries. At its core, the primary benefit that
blockchain introduces into business processes is trust between all the parties. This trust
is enforced by the blockchain - essentially all parties in the process believe (or should believe)

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Blockchain based Staffing
and Recruitment – a Whitepaper

that transactions in the blockchain are the absolute truth. They are immutable, secure and
unhackable. Based on that essential premise, blockchain technology promises the following
benefits:

1. Transparency - by its very nature blockchain transactions are transparent. That is, every
player in the process has full visibility into the transactions that are occurring. A point to
emphasize here is that not all key data will be exposed to everyone, but everyone will
know when a transaction has occurred based on a contract between two or more
parties.
2. Speed - Transaction speeds are near-instantaneous. If contractual conditions are
fulfilled, then transactions are managed by the blockchain and initiated automatically.
There need not be approval processes or gateways to cause any delays. To be clear –
this refers to process speed and not system speed. Business processes become faster,
as opposed to the actual system transaction, which by the very nature of the blockchain,
are slower.
3. Reduced Transaction Costs - third parties in the process can either be eliminated
entirely or their role can be severely curtailed, leading to reduced transaction costs.

We will now apply this knowledge to an exercise to bring efficiencies to the Staffing and
Recruitment process.

Staffing and Recruiting Today - Processes and


Issues

Step 1: Finding and Submitting Candidates for Jobs


The staffing and recruitment process for temporary labor is currently rife with inefficiencies, and
this is caused mainly because of a lack of trust between the parties. This is a process that is
optimally suited for blockchain disruption.
Staffing and recruitment for temporary workers is a very fragmented market, with a small
number of large companies and a very large number (tens of thousands) of small companies -
many of them sole proprietorships. Most large organizations - or End Clients - work with a select
group of Prime Vendors. Each Prime Vendor works with their own groups of Sub Vendors. Sub
Vendors are not uniquely associated with a Prime Vendor - that is, each Sub Vendor may be
working with more than one Prime Vendor servicing the same End Client.
A Sub Vendor for End Client A could be a Prime Vendor for End Client B and vice versa. Sub
Vendors may have their own Sub Vendors in a chain with n links. These relationships can be
represented as in Figure 1.

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Blockchain based Staffing
and Recruitment – a Whitepaper

End Clients End Client A End Client B

Vendors ABC Co. DEF Co.

PQR Co. GHI Co. JKL Co.

MNO Co.

Figure 1: Simple Example - End Client and Vendor Relationships

In Figure 1, solid arrows represent Prime Vendor relationships and dotted arrows represent Sub
Vendor relationships. So, End Client A has Prime Vendors ABC and DEF. ABC has Sub
Vendors PQR and GHI, who both have a common Sub Vendor MNO. JKL is a Prime Vendor to
End Client B but a Sub Vendor to DEF, which is a Prime Vendor for End Client A.
This is a simple example with 2 End Clients and 6 Vendors. In reality, the complexity of the map
is much greater - with thousands of End Clients and tens of thousands of Vendors.

End Client Objectives


In the entire temporary staffing process, the End Clients’ objectives can be summarized as:

1. Find the most qualified and cost effective temporary worker available in the market for
the open position.
2. Pay the least possible amount of markup on the temporary workers’ direct wages.
3. Ensure all contractual obligations are clearly defined and met across the Vendor supply
chain, so there is no liability.
4. Ensure fairness in the recruitment process, so there is no long term loss of goodwill.

Competing objectives are at play in the process. In order to maximize the chances of fulfilling
objective 1, the End Client should distribute the job requirement to as large a network as
possible – thereby increasing the pool of recruiters looking for the right candidate. However, a
larger network chain also leads to a higher total markup (working against objective 2), and
higher oversight and process costs to meet objectives 3 and 4.
The current decision problem that most End Clients are faced with is: “How can the outreach
for potential candidates be maximized, while limiting markup and oversight/process
management costs?”

Provisional patent applied for with USPTO. 3


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Blockchain based Staffing
and Recruitment – a Whitepaper

Current Process for Finding and Submitting Candidates – Issues


End Client A

ABC Co. DEF Co.

GHI Co. JKL Co. MNO Co. PQR Co.

STU Co. VWX Co. YZA Co. BCD Co. EFG Co.

HIJ Co. KLM Co. NOP Co. QRS Co. TUV Co. WXY Co.

Figure 2: Hypothetical Movement of a Job Requirement and Subsequent Submission of a


Candidate. Orange boxes represent the vendor network for End Client A. In a typical example
demonstrated in the Figure, requirement path is in green, candidate submission path is in red.

Any of the Vendors in the chain could theoretically find one or more candidates for the job. They
will then submit the candidate up a tier the chain. As it exists, the submission process is
completely sequential. That is, a Sub Vendor can only submit the candidate one tier up the
chain.
When a Prime Vendor receives the candidate profile, they can decide to submit it to the End
Client. The End Client will then decide which candidates to call for an interview.

The major problems in the process can be identified here:

Issue 1: Since a Sub Vendor can receive the same requirement from more than one Vendor
“higher” in the chain, submitting a candidate up the chain is not deterministic. As an example,
consider NOP Co. They are receiving the same requirement by the route ABC-GHI-YZA-NOP,
the route DEF-JKL-YZA-NOP, the route ABC-MNO-VWX-NOP and the route ABC-MNO-BCD-
NOP. So which of the Vendors higher up the chain should OPQ submit the candidate to? In
most cases, the path chosen will be sub-optimal from End Client A’s perspective, since NOP will
choose the higher tier vendor based on the greatest markup offered. So at each step, the
greatest markup is chosen by the lower tier vendor.

Issue 2: The candidate now has to be screened or vetted through every step of the chain. This
is fine if the Prime Vendor finds the candidate. However, if say, NOP finds the candidate, he or
she will be vetted by 4 Vendors before reaching the End Client. Each step of the vetting process
is entirely repetitive.

Provisional patent applied for with USPTO. 4


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Blockchain based Staffing
and Recruitment – a Whitepaper

End Client A

ABC Co. DEF Co.

GHI Co. JKL Co. MNO Co. PQR Co.

STU Co. VWX Co. YZA Co. BCD Co. EFG Co.

HIJ Co. KLM Co. NOP Co. QRS Co. TUV Co. WXY Co.

Figure 3: Multiple Possible Paths Traversed by a Requirement to reach NOP Co.

Issue 3: The End Client has no control over the markup applied on each candidate’s wages.
The markup will vary depending on the length of the chain, since each link in the chain will apply
its own, arbitrary, markup. The End Client can control the markup by arbitrarily shortening the
chain – for example, by limiting candidates to only Prime Vendors’ direct employees. However,
this drastically reduces the pool of available recruiters and candidates – making the task of
finding the right candidate at the right price (the primary objective of the End Client) all the more
difficult.

Issue 4: Once a candidate is submitted up the chain by a Vendor, the Vendor loses all visibility
into the rest of the process. Continuing the earlier example, let us say NOP submits the
candidate up the chain to YZA and then YZA submits to GHI. At that point NOPs link to the
process is broken. They have no visibility into whether GHI will submit the candidate further up
the chain or not.

Issue 5: There is a major issue of trust in this process. Essentially, Vendors lower down in the
chain do not fully trust that the higher tier Vendors will not “poach” the candidate, or claim that
they found the candidate and cut out the lower tier Vendor(s) entirely. In our example, if GHI
claims to the higher tier that the candidate was sourced by them, NOP will, in most cases, never
find out about the poaching.

Step 2: Contracting After Candidate Selection


Once the End Client interviews and approves a candidate for the open position, the parties in
the chain have to enter into contracts. Depending on the length of the chain, a number of

Provisional patent applied for with USPTO. 5


Application Number: 62612750.
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Blockchain based Staffing
and Recruitment – a Whitepaper

different contracts have to be entered into, with varying degrees of uncertainty for each. In our
example, End Client A has to sign a work order with Prime Vendor ABC. Similarly, ABC and
GHI, GHI and YZA, YZA and NOP, and NOP and Candidate have to agree on and sign
individual work orders.

Issue 6: Signing multiple work orders and contracts before the commencement of the
assignment invariably adds time and uncertainty to the process. Any step in the process can be
a point of delays or failure.

Step 3: Post-Contractual Processes


Once the contracts have been signed, the candidate can start working on the assignment. After
the candidate (now consultant) starts the assignment, his or her work can be quantified by
timesheets. Timesheets are submitted periodically by the consultant to the End Client’s
representative (usually the consultant’s immediate supervisor). Once a timesheet is approved, it
sets off a chain of events:
1. Consultant sends the approved timesheet to the different links in the contract chain (i.e.
NOP, YZA, GHI, ABC).
2. NOP invoices YZA, YZA invoices GHI, GHI invoices ABC, and ABC invoices End Client
A based on the timesheet.
3. End Client A pays ABC in accordance with the bill rate.
4. Sequentially, ABC pays GHI, GHI pays YZA, YZA pays NOP, and NOP pays the
Consultant.

The following issues are prominent in this process:

Issue 7: The Consultant who performs the work is the last entity in the process to get paid. This
causes ongoing stress in the process, since in many cases the Consultant is an individual who
can least afford to wait for his or her payment.

Issue 8: There is no transparency in the process, so it is easy for one of the links in the chain to
delay the entire process. In our example, if say, GHI informs YZA that they have not been paid
for a specific timesheet, there is no way for YZA (or NOP further down the chain) to validate that
that is indeed the case. GHI could easily introduce days or weeks of delay in the process
unilaterally to mitigate their own cash flow issues.

Provisional patent applied for with USPTO. 6


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Blockchain based Staffing
and Recruitment – a Whitepaper

Recommended Changes to Existing Processes


Based on a Blockchain Ecosystem
In order to mitigate the 8 issues identified above, we recommend the following Blockchain-
based process for the industry. This will, of course, be a significant change to existing job roles,
but we believe it will bring a level of efficiency and transparency that can only be beneficial for
all parties involved.
Our recommended solution consists of six parts:

1. Distribute a fixed markup between different nodes in the process chain.


2. Allow different companies to set automatic bids on markups paid to downstream
vendors.
3. Publish and track the Job Requirement and Submissions.
4. Use Smart Contracts to generate work orders between parties automatically.
5. Publish timesheets as work transactions.
6. Make split payments simultaneously to all parties in the process and publish transaction
history.

Part 1: Distribute a fixed markup between different nodes in the


process chain
One of the major objectives of the End Client is to pay a low, deterministic markup on the direct
wages of the temporary worker. This is impossible to achieve with the current process unless
the End Client limits submissions to 1 level (only Prime Vendors). Unfortunately, this also
severely jeopardizes the End Clients’ first objective - which is to find the most suitable
candidates - by limiting the pool of recruiters looking for candidates.
We recommend that the End Clients publish a fixed markup for each job. This markup will be
distributed to each link in the chain, thereby keeping the total markup fixed for the End Client.
As an example, the End Client could set a fixed markup of 25% for a job. So if the direct wages
paid to the consultant are, say, $100 per hour, the End Client will always pay $125 per hour
irrespective of how many Vendors are in the chain. The $25 markup will be distributed to the
Vendors in the chain based on our recommendations in Part 2 of this section.

Benefit 1: End Client pays a fixed deterministic markup for each job.
Note: This solves for Issue 3.

Part 2: Allow different companies to set automatic bids on


markups paid to downstream vendors
This part deals with how the fixed markup will be distributed between the multiple Vendors in the
chain. We want to achieve two goals here:

Provisional patent applied for with USPTO. 7


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Blockchain based Staffing
and Recruitment – a Whitepaper

1. Requirements/submissions/contracts should only follow one fixed path. There should be


no confusion about, say, which Prime Vendor a Sub Vendor is working with on a
particular job requirement.
2. Decisions on which path to choose should be deterministic, so as to eliminate the
possibility of personal biases.

As such, we propose that:


1. Each Vendor in the chain publishes a Maximum commission rate (to pay) and a
Minimum commission rate (to receive) for each job requirement. The Sub Vendor in the
next tier of the chain automatically picks the Vendor with the highest pay commission
rate, as long as this is greater than their receive commission rate.
2. Vendor assignment is done through an automated bidding system, so the process
respects the economic leverage each party in the transaction has. If a Sub Vendor
receives a specific requirement from only 1 higher tier vendor, then it has no leverage in
the bidding – it can only pick the 1 higher tier vendor. However, if the Sub Vendor
receives the requirement from 2 or more higher tier vendors, then the Sub Vendor has
greater leverage and the higher tier vendors have to bid for it’s services.

Here is a full example to demonstrate both Parts 1 and 2.


1. End Client A publishes a job with a maximum markup of 25%.
2. Prime Vendor ABC gets the job and passes it on to their Sub Vendors with a maximum
pay commission rate of 50%. This means that 50% of ABC’s share of the overall markup
will go to the Sub Vendor.
3. Prime Vendor DEF also gets the same job and passes it to their Sub Vendors with a
maximum pay commission rate of 60%.
4. Vendor PQR is a Sub Vendor for both ABC and DEF, and has set a minimum receive
commission rate of 25%.
5. Since both ABC and DEF are offering more than the minimum rate, the system will
automatically bid and assign PQR to Prime Vendor DEF, with a commission rate of 51%
(or 50.1%, or the minimum incremental amount as set in the system).
6. This assignment is only valid for that one job. The same process will be repeated for
every job.
7. Now lets say, PQR finds a candidate with a direct wage rate of $100. This candidate is
selected by End Client A and starts on the project.
8. End Client A will pay $125 per hour ($100 + 25% markup).
9. Of this, PQR will receive 51% of $25 = $12.75. DEF will receive $12.25.

Here is another example, where the Prime Vendor has the leverage.
1. End Client A publishes a job with a maximum markup of 25%.
2. Prime Vendor ABC gets the job and passes it on to their Sub Vendors with a maximum
pay commission rate of 50%.
3. Vendor PQR is a Sub Vendor for ABC, and has set a minimum receive commission rate
of 25%.

Provisional patent applied for with USPTO. 8


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Blockchain based Staffing
and Recruitment – a Whitepaper

4. Since PQR has only received the job from ABC, no auto-bidding is required. The system
will set the commission rate for PQR at 25%.
5. Now lets say, PQR finds a candidate with a direct wage rate of $100. This candidate is
selected by End Client A and starts on the project.
6. End Client A will pay $125 per hour ($100 + 25% markup).
7. Of this, PQR will receive 25% of $25 = $6.25. ABC will receive $18.75.

The same process will be followed n links down the chain. When a Vendor submits a candidate
there will always be only one pre-determined path to the End Client for the submissions and
eventual contracts.
What makes this workable is that this data is available to all the Vendors in the process - so
everyone knows who they are working with and how much money they stand to make for finding
the selected candidate.

Benefit 2: Vendors continue to be incentivized to share jobs with Sub Vendors, because if any
link in the chain succeeds in the given task (of finding the candidate) all links above it in the
chain benefit.
Note: This maximizes coverage of the requirement and helps satisfy the End Client’s primary
objective.

Benefit 3: There is never any confusion about the path followed for submissions. The path is
determined even before a Vendor starts looking for candidates, and it is published to everyone.
Note: This solves for Issue 1.

Part 3: Publish and track the Job Requirement and Submissions


When an End Client publishes a new job requirement, we propose it be published openly to the
group of Vendors working on it. This group is expandable based on the distribution of the job by
Prime and Sub Vendors.
The process will work in the following manner:
1. End Client publishes a new job requirement, shares it with Prime Vendors.
2. Prime Vendors set maximum commission rates and share it with their Sub Vendors.
3. Sub Vendors can choose to accept the job. If they do, they are allocated to a Prime
Vendor based on the process described in Part 2.
4. By accepting the job Sub Vendor gets full access to all job details in the group, including
submissions.
5. Sub Vendors can further share job with their own Sub Vendors. Each Sub Vendor that
accepts the job will be included in the group.
6. Any Sub Vendor that finds a suitable candidate can submit his or her profile directly to
the group. There is no need to go through the full chain since the payment/contract
hierarchy is already established.
7. If a candidate has already been submitted through a different Vendor/Prime the system
will not allow a second submission.

Provisional patent applied for with USPTO. 9


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Blockchain based Staffing
and Recruitment – a Whitepaper

8. Submitted candidates will also be part of this group, and can track that their profile has
been submitted by the company that they have contracted with.

A major assumption here is that the screening process for different Sub Vendors and Prime
Vendors is qualitatively similar. This may not be true initially, but our contention is that
eventually the screening and vetting will also be automated to a degree that this will become the
case. The system will also self-regulate bad Vendors (indiscriminate submissions of poorly
qualified candidates) since their submission history will be visible to everyone.

Benefit 4: Irrespective of the number of links in the staffing chain, candidates only need to be
screened and submitted by a single company.
Note: This solves for Issue 2.

Benefit 5: Introduces trust in the process, because all parties know which candidates were
submitted by which companies, what the contract path is, and what everyone’s share in the
process is. There is no possibility of poaching, or of cutting out one of the links. There is full
visibility and transparency throughout the process.
Note: This solves for Issues 4 and 5.

Part 4: Use Smart Contracts to generate work orders between


parties automatically
Once a candidate is interviewed and selected by the End Client, the only party that needs to
accept the assignment is the candidate himself/herself. All the intermediary Vendors have
already implicitly accepted the assignment by agreeing to work on the job requirement. Also, the
financial terms of each contract have already been set through Parts 1 and 2. As such, we
propose that immediately on the candidate’s acceptance of the assignment, the system creates
automated Smart Contracts between all the parties in the chain.

Benefit 6: Eliminates any delays in the process while multiple parties agree on contract terms.
Contract terms are set when the Vendor agrees to work on the job requirement. The smart
contract triggers the same terms.
Note: This solves for Issue 6.

Benefit 7: Negotiations after the fact can be handled entirely between only two parties, the End
Client and the Consultant. If these two parties agree on a negotiated amendment to the wage
rate, all other contracts will get adjusted accordingly.
Note: This solves for Issue 6.

Provisional patent applied for with USPTO. 10


Application Number: 62612750.
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Blockchain based Staffing
and Recruitment – a Whitepaper

Part 5: Publish timesheets as work transactions


Timesheets generated by the consultant and approved by their supervisors at the End Client are
considered proof of work in the temporary staffing industry. We recommend continuing with that
system, with one significant change.
All timesheets and their approval statuses should be published and available to all parties in the
Vendor chain. This allows everyone in the process to plan and react to any changes.

Benefit 8: Timesheets as proof of work will be available to all parties. Any approval delays can
be tracked and resolved with the End Client.
Note: This solves for Issue 7.

Part 6: Make split payments simultaneously to all parties in the


process and publish transaction history
Payments will be initiated based on timesheet approval. Since approval of a timesheet is
contractually taken as proof of work done, there is no need for further payment approval.
We recommend a significant change to the payment process itself. The current process is that
of sequential payments - the End Client pays the entire billable amount to the Prime Vendor,
then the Prime Vendor pays a contracted amount to the Sub Vendor, and so on until the
Consultant gets paid.

We recommend that each party in the contract chain get paid their respective share of
the total billable amount simultaneously.

As an example, say the Consultant’s direct wage rate is $100 per hour, the share for the Sub
Vendor is $12.50 and the share for the Prime vendor is $12.50 for total markup of $25. On
approval of a timesheet, End Client will pay $125, the Consultant will receive $100, and the two
Vendors will receive $12.50 each. There is no need for sequential payments.
All the transactions are published in the public ledger for the job, without the actual dollar
amounts. This way all parties know exactly when payments were made and to whom.

Benefit 9: All parties get paid instantaneously once End Client approves work. No Vendor can
hold or delay payments to lower layers.
Note: This solves for Issues 7 and 8.

Provisional patent applied for with USPTO. 11


Application Number: 62612750.
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Blockchain based Staffing
and Recruitment – a Whitepaper

Technical Implementation
We will not delve deeply into the technical implementation details of the solution in this
document. Given the newness of the concept and technology, there are multiple evolving ways
of implementing the recommendations presented here – for example, Ethereum or IBM’s
Hypervisor platforms - and we leave it up to the responsible system implementation teams to
pick the most suitable platform for their needs. In general, the architecture will comprise of a
blockchain platform and a set of RESTful APIs that can be used to connect the platform to
existing Applicant Tracking (ATS) or Vendor Management Systems (VMS). As a point of
reference, the Appliqant solution is built using the Ethereum platform, and we use AWS API
Management to expose the blockchain to our user-facing applications.

HireCoin (TBD) – Cryptocurrency to Drive the Appliqant


Blockchain
A natural next step for the environment is to enable cryptocurrency transactions within our
blockchain. Since Appliqant is built on the Ethereum platform, we can already use Ethereum as
a means of transaction. However, in order to further improve efficiencies and reduce transaction
costs, we will be moving to a lightweight crypto that only enables money flow in the Appliqant
hiring process.

Summary
To summarize, our new blockchain-based business process addresses all of the major issues in
today’s staffing and recruitment industry. The specific benefits of the process are:

1. End Clients will pay a fixed deterministic markup for each job.
2. Vendor network is incentivized to share jobs across tiers and pool in resources.
3. Submission path/hierarchy is pre-defined before Vendors start working on sourcing.
4. Candidates only need be screened and submitted by one company.
5. Establish full trust and transparency in the process.
6. Eliminates delays in creating contracts/SOWs between various entities in the chain.
7. Negotiations can be limited to only the End Client and the Consultant.
8. Timesheets as proof of work accessible to all stakeholders.
9. All parties get paid instantaneously once work is approved by the End Client.

It is obviously and definitively beneficial for End Clients and Consultants/Temporary Workers.
However, we can expect some resistance to change from the staffing industry as their
processes and job roles will be significantly impacted. The technology exists already, but
adoption will have to be driven by End Clients who can break through the change-resistance of

Provisional patent applied for with USPTO. 12


Application Number: 62612750.
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Blockchain based Staffing
and Recruitment – a Whitepaper

many Vendors. Over time, we believe most Vendors will also realize that this is a fairer, more
equitable process which will be to their benefit.

The Appliqant platform offers this process in addition to its core interview automation features.
Companies using Appliqant can easily switch to this model for their recruitment needs.

Contact
Debarshi Chaudhury
Quantilus Inc., 111 Broadway, 12th Fl, New York, NY 10006
Ph: +1 (212) 768-8900, Email: dc@quantilus.com
Twitter: @quantilus, LinkedIn: Quantilus
www.quantilus.com, www.appliqant.info, www.appliqant.com

Provisional patent applied for with USPTO. 13


Application Number: 62612750.
All rights reserved.