More and more of the recruitment business owners and leaders in my network are experiencing a growing phenomenon. What is it?

Their clients (the end-hirers) are insisting that they work under their terms of business for suppliers, rather than the ones issued by the agency.

And that is to be expected, as employers are recognising the potential risks of allowing line managers to commit the company on recruiters’ terms without oversight.
These employers want to have confidence in their whole supply chain, often because there are vicarious responsibilities under other acts and regulations (like modern slavery, GDPR, etc).

And, frankly, because some of them are big, kick-ass brands who know that almost all recruiters would be delighted to have their business.

BUT…

You’d be naïve to think that their terms are fair and balanced to both parties. It’s natural for a business to want the advantage tilted towards itself.

And the procurement department, or in-house counsel, that wrote them is unlikely to grasp every detail of recruitment regulations like the Conduct Regulations, AWR, IR35.

So they omit a lot of the stuff that you need to be in there.

And they will (usually) attempt to make you liable for lots of things that are not in your control because of the unique, triangular arrangement in recruitment.

Worst of all, recruiters assume they have absolutely no opportunity to discuss amendments, or sign blindly without realising how they have exposed their recruitment business. They swallow hard and think of the fees.

NOW, if it’s a big potential account for you, you should definitely engage a lawyer with wide experience in recruitment to review them for you. You can sue a lawyer if they are negligent in this. The very best will explain the risk and have a clear view on the real-world likelihood of that risk turning into reality, as well as the technical points.

But a number of the clients I have worked with have found my guidance on this very useful as a first line of defence.

Ready?

Here goes:

1. Who are the parties to the contract? Is it absolutely clear who you will be invoicing and if any PO numbers/authorisations are required? From who?

2. Definitions: We use a lot of terms in contracts in a different sense to the way we use them in natural language. If a contract is referring to an “Introduction” of a Candidate, for example, does it say clearly what constitutes an Introduction? Does it cover you for when a Client claims “prior knowledge” of that Candidate, to your satisfaction?

3. Payment terms: money is not free. Terms that allow the client to sit on your invoice for 30 days, or 30 days from month end (worse), in effect turn you into a free loan business. That needs to cost them money (e.g. increased fee by a %) and there is absolutely a need to spell out the consequences of late payment in terms of loss of rebate and attraction of interest. After all, most recruitment businesses have to pay fees for invoice discounting, so why wouldn’t you try to pass on some of that cost?

4. Invoicing point: will the fees become invoiceable on start date, or offer/acceptance date, or a bit of both? If you are agreeing a retainer, when will the work start?

5. Rebates and refunds: see point 3. Make sure these are conditional on timely payment of invoices. But also, if you are not offering a rebate, you have to say so explicitly. If you are offering a free replacement as an alternative, stipulate a minimum timeframe you need to be given on this. I’d also make clear that you will only replace drop-out candidates once.

6. If your agreement is to cover temps/contractors, and you want the right to charge a transfer fee if the client engages them directly, you have to offer the alternative of an Extended Period of Hire. Google it.

7. Liabilities: client terms will tend to load all of these on to you. You can ask them to be mutual. And remember to expressly discount liability where it is caused by the Client’s own actions (or their employees and agents). A good example would be a breach of candidate confidentiality by a client, which leads to a claim from the candidate. Another would be a claim of “employee status” from a temp worker that is caused by the Client’s personnel treating them like an employee, e.g. by putting them through a disciplinary process. Do not end up paying that claim for your client.

8. Clients quite like putting other conditions on recruiters’ performance, like time to submit suitable CVs. But if fulfilling these requirements means that you are dependent on the Client personnel to complete something quickly, get that put in as well.

9. Scope creep: there is room for a lot of misunderstanding about who is responsible for checks on candidates, for example. Don’t let the client assume you are doing things you are not, and ensure you know what the law requires you to check, and when.

10. Insurance requirements: I’ve seen a lot of employer-issued terms that require vast insurance coverage on the part of the supplier (that’s you, the recruiter) in a way that is massively disproportionate to the service you are engaged for. A contractor building a new facility will need loads of cover, but a recruiter will require lower PI insurance and often no public liability insurance at all.

11. Auto-renewal and notice: We are in such a volatile climate these days that the commercial terms which seemed appropriate 12 months ago are wildly inappropriate for you now. Don’t sleepwalk into that. Set an end date and keep a searchable log so you can renew agreements in a timely way.

12. Cancellation fees: if you work on a results only model, this will be tricky. But if you have done all the work, and got as far as offer/acceptance when your client “changes their mind”, you have probably tied up a lot of resource in delivering that service. Consider what you could reasonably require as a cancellation fee at that point.

13. Recruitment-specific clauses: the Conduct Regulations require you to collect some basic info on a job to brief the candidate. Clients don’t always give it. So most recruiters’ terms include a clause that says they must. Likewise, if supplying contractors, you probably know just how hard it can be to get an SDS from a client. But without that, you can’t compliantly supply. So make sure there is a clause in there requiring your client to do so when they brief you.

So now you’ve at least got on the front foot when a client of yours wants to impose their terms on you.

In my experience, a rational response, ideally with some suggested alternative wording, will expedite the issue in the majority of cases. The commercial aspects (fees, rebates, payment terms) are of course down to you to decide if you can make them work. But signing something because you didn’t understand it, or didn’t realise you could ask for changes?

That’s a fool’s game.

I’ve saved many of my clients (recruitment business owners and directors) from making potentially ruinous mistakes. And accelerated their progress towards their goals. If that is something you’re interested in, book in a call or reach Alison at – alison@recruitmentleadership.co.uk