As an employer, working with a recruitment agency can be an expensive exercise. You need assurance that the agency will locate the perfect candidate for the position. Therefore, if a hired candidate does not stay in the job, you want the peace of mind that the agency will find a suitable replacement. This assurance is what we call a replacement guarantee, typically a part of the recruitment agreement. This article explains what you should look out for when reviewing a replacement guarantee when working with a recruitment agency.
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Why You Should Consider a Replacement Guarantee?
Ideally, when you select a candidate, they stay with your company long-term. However, sometimes candidates may accept a job offer only to resign shortly afterwards, such as during the probation period.
If your recruitment agreement includes a replacement guarantee, the agency will offer you another candidate at no extra cost if the one you hired does not work out.
It is important to note that there is no legal obligation for recruitment agreements to include replacement guarantees. However, if there is one, there are typically limited circumstances under which you can request a replacement candidate. It is crucial to review and understand the replacement agreement carefully.
Remember, a recruitment agency should help you find a suitable candidate. You make the final call on who to employ for your business, not the recruitment agency.
What Should the Replacement Guarantee Include?
Your replacement guarantee is an important clause in the recruitment agreement. The clause should give you confidence in finding the right candidate for your company.
Below are six factors to consider.
1. Timeline
Your agreement should outline how and when the replacement guarantee applies. Typically, this covers the first three months of the candidate’s employment. However, you can negotiate a longer timeframe based on your company’s standard probation period.
Your replacement guarantee should also define key timeframes. By highlighting these, you will know when to contact the recruiter and when to expect a response. Some key periods or milestones that you should pay attention to are:
- the period when you can notify the recruitment agency about a failed candidate; or
- how much time the recruitment agency will require to find a replacement candidate.
2. Exclusions
When a recruitment agency outlines exclusions, it clarifies when the replacement guarantee will apply. Before you sign up for the agency’s services, you should check to understand the exclusions and when you can rely on a replacement guarantee.
3. Redundancy
One important exclusion to note is when the recruitment agency excludes genuine redundancy from triggering the replacement guarantee. If genuine redundancy is excluded, the recruiter will not be obligated to find a replacement candidate if you carry out internal restructuring shortly after hiring new employees.
Genuine redundancy occurs when you do not intend to replace the employee and cannot move them into another position within the organisation. For example, you engage a recruitment agency to find a senior UX/UI Designer. Shortly after hiring the senior UX/UI Designer, you decide to restructure and realise you no longer need a UX/UI Designer. If you have restructured, you might not be able to rely on the replacement guarantee if the recruiter has excluded genuine redundancies.
4. Notice
If you require a replacement candidate, you must inform the recruitment agency. The replacement guarantee should specify the method for notifying the recruitment agency. You might have to reach out to the recruiter within a specified timeframe and offer an explanation. The recruiter typically requires a justification to determine if they are legally obligated to supply you with a replacement candidate. Keep in mind there might be instances where a recruitment agency expressly prohibits you from exercising your rights under the replacement guarantee.
5. Refund
Some recruitment agencies may provide you with a refund. You should understand the different circumstances where the recruitment agency may refund you all or a percentage of the recruitment fee.
You might get a refund if:
- the replacement candidate is on a lower gross salary than the ideal candidate. In this situation, you will typically receive a refund of the difference in the recruitment fee rather than the entire fee; and
- the recruiter is unable to find your company a suitable replacement candidate within an acceptable time frame. You should not expect to wait indefinitely for a replacement candidate to fill a role within your company. However, this would only occur if you have paid the recruiter a fee upfront.
Key Takeaways
Most recruitment agencies are not required to have a replacement guarantee. However, most recruiters include them in their contracts. If you do see a replacement guarantee, keep an eye out for:
- the timeline during which the replacement guarantee can play out;
- whether there are exclusions;
- whether the replacement guarantee applies to genuine redundancies;
- how and when you give notice; and
- whether you are entitled to a full or partial refund.
If you have any questions about the replacement guarantee for your business, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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