When your business is growing, you will need to hire more employees to keep up with client demand. A recruitment agency can help you with hiring the best talent to accelerate your growth. Before signing up to their services, you should review their recruitment agreement. This article explains what your business should look out for in a recruitment agreement.
Nature of Arrangement
Your arrangement with your recruitment agency depends on the time you wish to invest in the hiring process. Recruitment agencies usually provide their services through:
- an end-to-end process, where the agency advertises your candidate specifications, provides you with potential candidates and interviews them on your behalf; or
- mass recruitment, where the agency may help to advertise your job, but allows you to shortlist and interview candidates.
If a recruitment agency has specialist industry expertise, they may help to train and hire out employees to your business in an arrangement known as a labour hire agreement. However, that is different from a standard recruitment agreement.
The recruitment agreement should set out:
- the services that you will expect the recruiter to perform;
- the cost of those services;
- when you have to pay for those services.
Some recruitment agencies require that you only use them to recruit for a specific job, especially if they specialise within an industry. Exclusivity means that you will not engage any other recruitment agency to recruit on your behalf.
Decide if you would agree to such an exclusive arrangement. If you do agree, you should carefully review the terms of that arrangement. Be realistic about whether your business can comply with the terms of that exclusive arrangement. You should avoid any restrictions on your ability to recruit employees yourself if the need arises.
Introduction of Job Candidate
Recruitment agencies obtain their fees from “introducing” you to candidates. The recruitment agreement should set out when a recruitment agency has “introduced” a candidate.
For example, you want to avoid paying any fees if:
- you had already spoken with the candidate before the agency’s introduction;
- another agency has already introduced you to the candidate;
- the candidate has already approached you directly; or
- the agency fails to provide details about the candidate.
The recruitment agreement should outline when you have to pay a fee to the recruitment agencies. In general, you will need to pay their fees if you hire their proposed candidate. However, a recruitment agreement could state that your business needs to pay fees if you:
- introduce the candidate to a third party (such as a different part of your business);
- if you engage a candidate and re-engage them within a certain time, where re-engagement means you have to pay another set of fees; and
- if you engage a recruitment agency on a retainer, which means you must pay a set amount of money to the agency even if you do not hire their proposed candidate.
Disbursements are additional costs that an agency incurs for carrying out their services. For example, agencies must pay a fee to online job platforms such as Seek to list your job position. If that fee is classified as a disbursement, you will have to pay that fee on top of the usual recruitment fees.
Replacement Guarantees and Refunds
Recruitment agencies may include a “replacement guarantee” in their recruitment agreement. A replacement guarantee requires the recruitment agency to replace the hired candidate if they leave the job early in limited circumstances.
Alternatively, the agency can provide a refund of the recruitment fee if the candidate leaves their job early, such as during the probation period. However, the recruitment guarantee or fee refund may not apply if the candidate leaves the job because of voluntary or involuntary redundancy or you have substantially changed the job description.
A good recruitment agency can boost the growth of your business by helping you hire great employees. Before you engage a recruitment agency, you should review your recruitment agreement to determine the:
- nature of the arrangement;
- reasons for exclusivity;
- definition of introducing job candidates;
- total fees payable for services;
- cost of disbursements; and
- scope of replacement guarantees and refunds.
If you have any questions or need assistance with reviewing your recruitment agreement, get in touch with LegalVision’s contract lawyers on 1300 544 755 or fill out the form on this page.
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