Recruitment Contracts – The importance of terms & conditions

23rd August 2023

We are often instructed to advise on disputes in recruitment contracts either by the Recruiter who wants to ensure they are paid for a candidate they believe to have placed with an employer or by the Company/Business who maintain that the Recruiter was not the introducer of the candidate.

Recruitment contracts – what to look out for

Recruiters’ contracts over the years have become more and more specific and watertight to avoid disputes regarding the introduction of candidates. The definition of an “introduction” has become very tight, and it is this clause that should be the first one that any prospective employer of a candidate should review carefully.

  • The Terms & Conditions (T & C’s)

What often happens in practice is that a Recruiter may or may not have been directly instructed to find a candidate and T & C’s may not have been agreed in advance. Often a Recruiter may send prospective businesses an indication of a candidate who may be suitable on a “cold speculative basis” to invite a response. If a positive response is received and the employer asks to see the CV the Recruiter almost always will send the CV together with their T & C’s stating that these are the terms of business on which they will trade with you going forward. Whether or not these are expressly agreed, these terms (more often than not) will provide that in the event that if the candidate is accepted in any capacity, then these T & C’s will apply.

In our experience we hear many times that the employer taking on the candidate says that they read the CV but not the T & C’s—this article should explain why this should never occur and should be ignored at your peril!

  • Payment provisions

The next crucial aspect of the T & C’s sent to you will be the payment provisions. Let us say the Recruiter will seek a percentage of the candidates first year salary and/or package. It would be sensible that if you are looking to hire a candidate from a recruiter that you should review carefully what the Recruiter is to charge and to ensure you agree the terms at the outset. Recruiters may be willing to negotiate on their payment terms, but this should be done perhaps before you agree to receive the CV’s or certainly before interviewing any candidates—it is always harder to negotiate later in the process.  These T & C’s will usually specify that their fees  are payable within a short period following the candidate being accepted or following the invoice being sent out. However, the situation often arises that the Recruiter may not in fact find out that the candidate has been taken on until some considerable time later.

Recruiters have become more and more sophisticated in finding out where candidates are employed to establish whether a recruitment fee could be payable. For example, recruiters may view a candidate’s social media posts or search a business’s website to view the list of employees. Some even go as far as employing private investigators to find out whether it will be commercially viable. If, for example, a Recruiter is charging between 20-30% of a starting salary/package the figures are quite significant so in many instances, the cost /benefit analysis for bringing a claim for the introduction fees are often well worth the effort.

Responding to non-payment of fees

The Recruiter may send an Invoice and see what happens and see if the business will simply pay.

In some instances, the business may say that there was no introduction at all which then forms part of the dispute and the specific wording of the introduction clause must be carefully examined. Often a business may run the argument that the candidate was already known to them or even introduced by another agency or argue the Recruiters T & C’s were never accepted. All these scenarios need careful examination and cross- referring to the T & C’s themselves and the specific facts of each individual case.

In some instances, the Business may say that the candidate was unsuitable and only stayed for a short  period of time, so the fee is not appropriate at all or certainly not payable in full. This brings in a whole different set of issues.

Often T & C’s include terms that provide for candidates leaving a business for whatever reason within a short period of time and provide a rebate scale dependent upon how long the candidate was in fact employed. However, the “sting in the tale” from the business’s perspective is that usually a rebate is only given if the original invoice has been fully paid within the contractual payment period. If the invoice has not been paid, then the rebate clause would not be offered at all and regardless of how long the candidate stayed for would not be relevant and the Recruiter would seek its full payment.

In our experience Recruiters are very well versed in dealing with all the arguments or disputes that are put forward and if a Business  continually seeks to avoid payment then unless an acceptable compromise can be achieved they will not hesitate to pursue formal recovery proceedings via the courts .

How can Kuits assist?

The Recruiter — we will ensure that your T & C’s are watertight anticipating all the scenarios which can arise. We will also advise on the method to ensure your T & C’s are incorporated in your trading contracts with prospective businesses. If businesses seek to challenge your entitlement to a recruitment fee we are very experienced in quickly assessing the merits of the arguments put forward.

The Hiring Business — usually Kuits are instructed when an issue has arisen. We will then work with you to review the issues and the circumstances of the claims being made and to sensibly advise whether there are any proper arguments or defences open to you. We would then work with you to find a commercial solution with the Recruiter or to see if the claim could be avoided altogether. However, our advice to any business looking to hire a candidate whether on a structured and pre- planned basis or as a result of a speculative enquiry is to ensure that you do not get caught by onerous T & C’s by not properly reading and understanding them.

  • Always read the terms and conditions!

Please also bear in mind that not all Recruiters T & C’s are the same. Many have different variations and any subtle nuances need to be properly understood.

Kuits’ dispute resolution team are here to assist in this complex area and given that the value of the claims can often be quite sizable, ensuring you get proper advice at an early stage is crucial.

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