Reviewing agencies' terms of business

Recruitment agencies are often used by businesses to find and recruit employees, particularly temporary workers.

Often, these agencies will provide the businesses with a copy of their terms of business, which will govern their contractual relationship with them.

With the pressure to fill vacancies as quickly as possible, or where you are considering moving agency workers into employed roles, the key provisions of the recruitment agency’s terms and conditions can be overlooked. This may lead to many businesses having to pay high transfer fees upon making an offer of employment.

Before agreeing to any terms, or making offers to agency workers to employ them, the document should be thoroughly read to ensure that every point is fully understood.

Below is a brief overview of some common terms found within a recruitment agency’s terms of business.

Introduction

It is important to understand what is deemed as an ‘introduction’ as this will determine whether you will be required to pay a fee for taking on a candidate.

In most situations, receiving a CV or information from the agency that identifies a possible candidate or arranging an interview with a candidate put forward by the agency are both interpreted as an introduction.

Engagement

The term ‘engagement’ is commonly used to describe the employment or use, by you or a third party, of a candidate that has been introduced to you by the agency.

Once a candidate has been ‘engaged’, a fee will be payable to the agency. It is advisable to read this section carefully to avoid unexpected charges.

Remuneration

The candidate’s remuneration is used to calculate the introduction or transfer fee payable to the agency.

Remuneration is not always limited to the candidate’s salary. It can also include bonuses, commission and/or additional allowances such as the benefit of a company car.

Introduction fee

An ‘introduction fee’ is the fee payable to the agent upon a candidate’s engagement with you within the restriction period.

There are often options available to enable for you to reduce this fee dependent upon the amount of notice that you provide to the agency when making the offer of employment. If you are considering appointing a candidate, it is worth checking with the agency to negotiate the costs where possible.

Restriction period

The ‘restriction period’ refers to the period that you are bound by the terms to pay the agency a fee for finding the candidate.

It can sometimes be possible to avoid these costs by noting the end date and postponing the recruitment process until it has passed and then re-approaching the candidate independently.

Transfer fee

In circumstances where a candidate is introduced to you and is then employed by a third party on your recommendation, for example at another company within your group, a ‘transfer fee’ may be payable to the agency.

This fee is to cover the initial time invested in introducing the candidate to you and also to cover any future loss in revenue that they may have made from introducing that candidate to other businesses.

In this situation, you should be provided with the option to extend the period of hire to avoid having to pay the transfer fee. If you opt for this, the agency must supply the worker to you for the entirety of that period. Without such an option a transfer fee may be unenforceable.

Notice

Is there anything within the terms of business that requires you to give notice to terminate the contract between you and the agency?  If so, you should make a note of the notice period and ensure this is provided correctly to avoid any unnecessary penalties.