Understanding Recruitment Agreement Formats: An Introduction

What is a Recruitment Agreement?

Recruitment agreements are not common in the United Kingdom employment landscape, with many employers preferring to proceed on the basis of a verbal agreement with a recruitment agency. However, this is not advisable, and for those companies who do wish to enter into an agreement with a recruitment agency relating to the provision of recruitment services, we recommend that you do so in writing.
A recruitment Agreement sets out the terms and conditions upon which a recruitment agency agrees to source and provide candidates for particular roles within your business, usually in return for a fee. The agreement will set out the type of roles for which the agency will need to find candidates, the geographical location(s) of the roles, the fees payable to the agency and when they are due, and information about whether you have any exclusive rights to receive candidates sourced by that agency.
Recruitment agency fees can be costly, and in order to avoid disputes, it is helpful to have an agreement in place setting out the services to be provided by the agency, any additional costs for which they may charge, and the fees payable to them . Often recruitment agencies will charge an upfront retainer, an additional fee after a certain period has elapsed and/or following the introduction of a candidate to a role. There may also be other fees and costs incurred that will be charged to you as the client (e.g. for the candidates to attend interviews, background checks, psychometric testing, etc.). It is important that the exact fee structure is agreed in advance.
Sometimes the fees will be payable if a candidate is introduced to you, even if you do not hire them (e.g. if they refuse to accept the position, or if you decide not to appoint them). It is worth ensuring that there is a clear distinction made between the role you wanted to fill, and the person you ended up hiring. If, for example, you intended to appoint a Sales Director, but ended up hiring someone far more senior, it seems unfair that you would have to pay the same fee for the appointment of a Global Sales Director as you would have for the Sales Director.

Essential Components of a Recruitment Agreement

It is important that you understand the agreement you are entering into with your Recruitment Consultant BEFORE you engage them on any terms. Below are a few guidelines as to what should be covered:
The parties to the Agreement
This is often overlooked but is important. This may seem obvious but be clear as to who is instructing the Recruitment Consultant. The Recruitment Consultant may just be dealing with an individual (as opposed to a company) in your organisation and the Consultant may be well known to the individual but you may want to protect the position of the company, rather than of the individual. You also want to know who you are entering into an agreement with and who it is that you will subsequently be paying.
Scope of Services
There is a tendency amongst some Recruitment Consultants to lump all services together into a single lump sum fee. This will often suit the Recruitment Consultant as it protects the position of the Recruitment Consultant and guarantees an income at the expense of the Employer.
However, this may not be the most beneficial arrangement for the Employer. For example, if the Recruitment Consultant is working on a contingency basis (such as a ‘no placement, no fee’ option), then the Employer may well want to ensure that its interests are protected by requiring the Recruitment Consultant to provide a replacement candidate if the original candidate leaves the Employer within a 3 month period. This is possibly not a solution that the Recruitment Consultant would be happy to agree to.
Alternatively, if the Recruitment Consultant is being engaged to carry out the full Recruitment and Assessment process, the Employer will want to ensure that they pay a fee for the service that they receive.
A Recruitment Consultancy Agreement may be a combination of the above options or simply the provision of services only. What is important is that the Employer is able to clearly identify what it is that it is paying for, in order to ensure that the Recruitment Consultant is providing services that go beyond sending CVs. The quality of candidates should be considered. Does the Recruitment Consultant insist on the candidates they submit agreeing to a code of conduct? Are they expecting candidates to complete psychometric testing or spend time with a career coach prior to an interview?
Payment Terms
Employers will often seek to pay a Recruitment Consultant up front and have a sliding scale down to a ‘contingency fee’ basis for subsequent introductions from the Recruitment Consultant to reduce risk of placing money at risk. Beware of this particular route as it is not in the Recruitment Consultants best interests and could have negative repercussions for the Employer.
Be clear at the outset as to what fees you as a business need to pay. It may be that an upfront fee works for you. In any event, it is essential that the payment terms are clear and include both payment dates (i.e. date of invoice and payment terms) and clear details around interest payments.

Types of Recruitment Agreements

Employment agencies and recruitment consultants in the UK generally utilise three principal types of recruitment agreements:
a) Contingency recruitment;
b) Retained search; and
c) Exclusive recruitment.
In this section, we will consider each of these in turn.
A ‘contingency’ recruitment agreement is used when a company or organisation wishes to make use of a recruitment consultant only on a contingency basis. This means that the recruitment consultant receives no remuneration whatsoever for sourcing a prospective candidate, unless and until they have placed a candidate with the company or organisation (for which they will receive a fee). These types of recruitment agreements can be termed ‘no cure, no fee’ agreements, because the recruitment consultant will only be paid once they have achieved a favourable result.
When using a contingency recruitment agreement, there is generally no commitment on the part of the recruitment consultant to take active steps to fill the organisation’s vacancy. For example, there may be no obligation to advertise the role across the recruitment consultant’s database of suitable candidates, and neither is there an obligation to carry out any active marketing of this role. Instead, the recruitment consultant may simply be paid a fee for providing a CV which is passed on by the organisation to an individual who is appointed to the vacant role. As such, these agreements are frequently used by larger organisations in recruitment campaigns that will cost thousands of pounds, as this allows the organisation to ensure that they only need pay for successful placements. Such recruitment consultants may also use their database to filter CVs that are received from prospective candidates.
A ‘retained search’ recruitment agreement is an agreement under which a recruitment consultant is paid a certain sum in advance of placing a candidate with one of its clients. The client will agree to pay a fee to the recruitment consultant for every vacancy it is seeking to fill, whether or not that vacancy was successful and filled by the recruitment consultant. As a result, the recruitment consultant is under no obligation to ensure that a candidate is placed within a certain time frame or at all. The fee is typically fixed, and therefore regardless of the time spent by the recruitment consultant on filling the particular vacancy, this does not correlate with the fee it receives. Consequently, this type of recruitment agreement is commonly used for one-off roles or more senior roles for which the organisation will pay a premium as they may be hard to fill.
An ‘exclusive recruitment’ agreement is an agreement under which the organisation makes an express commitment to only use that recruitment consultant for the recruitment of a certain role. The recruitment consultant will try to ensure a placement within an agreed timeframe, and there may be a certain financial advantage to the recruitment consultant if it places a candidate with the organisation quicker, such as an early-bird bonus. As this type of recruitment agreement is the first of those listed in which the organisation is under an express obligation to use the recruitment consultant, it can be argued to be more like an employment contract, and therefore will create more legal obligations and impose more liabilities upon the parties than the other two methods of recruitment agreements.

Legal Aspects of a Recruitment Agreement

It is important that recruitment consultants keep themselves up to date with relevant employment law so as to ensure that they do not fall foul of the new rules. Recruitment consultants must also be particularly mindful of relevant data protection laws when dealing with the personal data of candidates, and recruiters that are in any doubt should seek legal guidance.
When considering a recruitment agreement, one of the most important legal aspects that the parties must give consideration to is the extent to which an introducer can be held liable for the acts of the client/employer. This principally arises in two contexts – headhunting and data protection.
In the context of headhunting, liability for the acts of a client or employer which may amount to a material breach of contract or allow the client to terminate an employee could arise for a number of reasons, including:
In the context of data protection, where a recruitment consultant is able to transfer a candidate’s personal data to the client/employer, as data processor, for the purposes of employment, the consultant will need a written data processing agreement, which complies with data protection legislation, governing its role. As the recruitment consultant would assume the role of data controller by sending candidate CVs/information to clients, it must ensure that there is a proper processing agreement between it and the client/employer before releasing that information.

Clauses Found in a Recruitment Agreement

When you are dealing with recruitment agreements, there are certain clauses you just tend to see fairly regularly. One of these clauses is often a confidentiality clause, which will commonly include a definition of confidentiality, stating what kind of information will be confidential, and confirm that this includes both proprietary information as well as personal information such as client details and information about staff .
Many agreements also include a termination clause, setting out the conditions under which parties may terminate the agreement, specifying a notice period for either party to end the recruitment agreement early from the date on which the agreement comes into effect. This clause will also confirm details such as how much notice would be required in the event that the recruitment consultant is engaging a candidate regardless of whether or not the client wants them.
A strict dispute resolution clause can also be included in some recruitment agreements, stating that disputes between the two parties shall be settled by arbitration in the confines of a particular jurisdiction.

Guide to Drafting a Recruitment Agreement

There are some best practice tips to keep in mind when drafting a recruitment agreement whether you are a business or a recruitment consultant. The overriding objective should be to ensure that all the parties’ interests are properly protected while striking the right balance between brevity and clarity of the agreement.

Written Terms- There is now a legal requirement for certain basic terms such as the identity of the parties, the date of engagement and information relating to the agreed position. Where there are further particulars such as the proposed start date or remuneration to be received, it is good practice these be provided in writing.
Term/Duration- Whatever the format of the recruitment agreement, it is important that the duration of the engagement is clearly specified.
Other Agreements- There may be other relevant agreements in place including nondisclosure and exclusivity agreements that may overlap with the recruitment agreement. If confidentiality is important, this should be clearly set out in the recruitment agreement but perhaps with a cross reference to the nondisclosure agreement which can expand on the points set out in the recruitment agreement.
Agencies including the REC Code of Conduct or ARP Code of Professional Practice- If the recruitment agency is a member of either of these, reference should be made to the relevant Code. Ideally there should be a specific cross reference to any sections which may be particularly relevant to the parties’ relationship.
Governing Law- This aspect is probably more relevant to international recruitment agreements. It is important wherever possible to include an express choice of law and jurisdiction clause even though the parties may be located in different jurisdictions.

Example of a Recruitment Agreement Format

The given below is a sample recruitment agreement format.
RECRUITMENT AGREEMENT FORMAT
This Recruitment Agreement is made at this _______ day of _______ between _________________________, a Body Corporate registered under the [Company Act/ Any other Act], having its registered office at ___________________ (hereinafter referred to as the "Company" which expression shall unless repugnant to the context include its successors and assigns) of ONE PART and _____________________ son/daughter of ____________ aged _____ years residing at ___________________ (hereinafter referred to as "Employee" which shall unless repugnant to the context include his / her heirs, successors and legal representatives) of the OTHER PART.
WHEREAS the Employee has applied to the Company for permanent employment in the ___________ department at "X" location of the Company.
AND WHEREAS the Company has agreed to employ the Employee on the terms and conditions below:
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS:

The Employee agrees to be employed by the Company as and from the ______________ and shall serve the Company till the ____________ unless the employment is terminated as hereinafter provided.
The Employee shall be in the Company’s service as per the period of probation as laid down in the service regulations. After successful completion of the probationary period the Employee shall continue as a permanent employee of the Company.
The appointment of employee is subject to the acceptance of the application by the Company and receipt of a satisfactory medical report by the Company and satisfactory reference from the former employer.
The Employee shall carry out such duties and exercise such powers in regard to the conduct and guidance of the Company’s business as are consistent with his/her position as too by nature and assigned to him/her from time to time by the Board of Directors through such officers as it may appoint. The Employee hereby agrees to obey the Company’s lawful instructions including that of senior officers (designated high in rank) and to work as required by them for such time as the Company may require. The Employee shall be obliged to work in any of the Company’s offices/establishments at any place in the country or abroad for such duration as the Company may require.
The Employee shall be entitled to the remuneration as a cost to Company basis as may be decided from time to time by the Company.
The Company shall pay to the Employee the remuneration on the last working day of the month.
The Employee’s remuneration is subject to statutory deductions and income tax as may be applicable from time to time.
The Company reserves the right to enhance or reduce the remuneration of the employee without specifying/revising the other terms and conditions of the service. The Company reserves the right to pay to the Employee bonus , commission, gratuity or any other benefits/rewards. The Employee shall be entitled to participate in any incentive schemes, bonus and/or leave based on performance and/or any health scheme that the Company may establish at its discretion from time to time.
When no longer required, the services of the Employee can be terminated by either side by giving a valid notice of ________ month(s) and must be given in the month preceding the month of separation.
Upon termination of employment on any account including termination by the Company, the Employee shall hand over to the Company all the property belonging to it along with the documents and other related records. The Company shall have the right to recover the value of such property not so returned.
The Employee shall not at any time during the continuance of his / her employment in the Company, divulge to any person, company, partnership, association or other organization without the prior consent of the Company, any information or knowledge relating to the Company’s business affairs, trade secrets, accounts and records or any other terms and conditions of the Employee’s employment with the Company. On discontinuance of his / her employment with the Company for any reason, the Employee shall cease immediately to be entitled to any of the benefits and privileges accorded by the Company to him/her during his/her employment with the Company.
The Employee is required to sign a declaration of secrecy and fidelity, a non-competition and non-solicitation agreement and Non-Disclosure Agreement upon joining the Company.
The Company may insert additional terms for the Employees from time to time in the Recruitment Agreement.

IN WITNESS WHEREOF, the parties hereto have set their respective hands and seals at the place and on the date first above-mentioned.