Executive Summary A recruitment agency contract should be tight on four things: (1) scope of services, (2) commercial terms (fees, billing, refunds), (3) performance and governance (SLA/KPIs, reporting, replacement rules), and (4) legal/operational protections (confidentiality, IP, compliance, audit trail). Below is a practical “must-have” list you can use to draft or review.

Key Recommendations (What to Include)

1. Parties, definitions, and scope

• Parties: legal entity names, addresses, authorized signatories.
• Definitions: “Candidate”, “Submission”, “Interview”, “Offer acceptance”, “Placement”, “Commencement date”, “Working day”, “Active candidate”, etc.
• Scope of services (be explicit):
• Roles covered (job titles / job families), locations, employment type (perm/contract), required seniority/skills.
• Sourcing channel approach (job boards, database search, outreach) if you want transparency.
• Deliverables: candidate shortlists, interview scheduling, interview support, feedback collection, status updates.

1. Recruitment process and service levels (governance)

• Service Levels / SLAs (examples):
• Response time to requisition (e.g., within X business days).
• Shortlist timeline (e.g., first shortlist within X days).
• Candidate update frequency (e.g., weekly status report).
• Interview scheduling timelines.
• Communication rules:
• Dedicated recruiter contact, escalation path, reporting cadence.
• Decision rights:
• Who approves longlists/shortlists.
• Who can change role requirements and how that affects fees/timelines.

1. Commercial terms: fee structure (the core of the contract)

Include the fee model clearly—choose one model or combine with rules. Common options:

• Contingency fee (success-based)
• Fee payable only upon agreed “placement events” (usually candidate accepts offer and starts work).
• Retained / search fee (upfront or staged)
• Milestone-based payments (e.g., kickoff, shortlist delivery, final candidates).
• Hybrid model
• Retainer for effort + success fee for placement.

Specify fee calculation precisely:

• Fee percentage and fee cap (e.g., % of first-year base salary, total compensation definition).
• Define salary basis:
• Base salary only vs total package.
• Treatment of variable pay, allowances, bonuses, benefits.
• VAT/taxes: who bears them and how they’re applied.
• Payment terms:
• When invoices are issued (on acceptance vs commencement).
• Payment due date (e.g., Net 15/30).
• Late payment interest (if applicable).
• Currency.

1. Replacement / guarantee terms (to protect you)

This is where most contracts should be more specific than “best effort”.

• Guarantee period (e.g., 30/60/90 days from commencement).
• Trigger for replacement:
• Termination by employer for performance/fit (or specific reasons), or resignation within the window.
• Clarify exclusions (e.g., candidate quits due to misconduct, refusal to relocate, demotion not caused by role fit—make these objective).
• Replacement terms:
• Whether the agency offers a replacement at no fee or reduced fee.
• Whether the replacement candidate must meet the same requirements and interview standards.
• Rebilling rules if replacement fails.

1. What counts as a “successful placement” (avoid fee disputes)

Include clear event definitions and anti-double-dipping protections.

• Placement criteria:
• Candidate accepts offer and commences employment.
• Commencement date definition.
• “Previously submitted” rule:
• If candidate was submitted during the contract term but starts after term end, are fees still payable?
• Define the lookback period (e.g., up to X days/months after contract end).
• “Approached candidate” rule:
• If you hire a candidate the agency introduced vs one you sourced independently—how is precedence proven?

1. Client obligations (so agencies can’t claim “unreasonably delayed”)

• Provide job description, must-have requirements, compensation range and hiring process.
• Interview availability commitments (e.g., interview slots within X days).
• Feedback obligations:
• Provide rejection/feedback within agreed timeframe (e.g., 48–72 hours after shortlisting).
• Decision cycle:
• Clarify timeline expectations for offer approvals.

1. Candidate ownership, exclusivity, and conflicts of interest

• Non-circumvention (common, but define it fairly):
• Whether you can hire without the agency fee for candidates you independently sourced.
• Exclusivity:
• Do you grant exclusivity for the role? If yes, define scope and cost.
• If not exclusive, state whether the agency can work with other clients for the same role family.
• Conflict management:
• How conflicts are disclosed (e.g., agency staff recruiting for competing firms).

1. Confidentiality, data protection, and compliance

• Confidentiality:
• Treat client requirements and candidate information as confidential.
• Data protection:
• How candidate data is collected, stored, accessed, and deleted.
• Candidate consent:
• Responsibility for obtaining lawful consent for processing (confirm with your counsel based on your jurisdiction).
• Anti-bribery and ethical sourcing:
• Agency must not engage in prohibited or unethical practices.

1. Background checks and reference checks (define who does what)

• Who conducts reference checks, employment verification, background screening.
• Whether agency can substitute for client screening or vice versa.
• Cost allocation for checks.

1. Cancellation/termination and consequences

• Term and renewal:
• Contract term, renewal notice period.
• Termination for convenience:
• Notice period and settlement of outstanding fees/milestones.
• Termination for cause:
• Breach, non-performance, compliance breaches.
• Fee settlement upon termination:
• For contingent roles: payments due only for confirmed placements.
• For retained roles: treatment of work completed up to termination date.

1. Limitation of liability and indemnities

• Liability cap:
• Often tied to fees paid in the last X months (negotiate).
• Indemnities:
• For confidentiality breaches, data misuse, or misconduct by the agency.
• Exclusions:
• Make sure exclusions don’t erase indemnities for deliberate misconduct where not allowed.

1. Reporting, audits, and recordkeeping

• Reporting:
• Weekly/monthly dashboards: submissions, stages, conversion metrics.
• Audit trail:
• Candidate submission logs with dates and consent evidence.
• Measures of performance:
• % shortlist-to-interview, interview-to-offer, offer-to-commencement.

1. Dispute resolution and governing law

• Governing law and jurisdiction.
• Escalation steps:
• Internal negotiation → mediation/arbitration/litigation (as agreed).
• Payment during dispute:
• Whether you must pay undisputed amounts.

Immediate Next Steps (Practical)

• Create a one-page “Fee + Guarantee + Placement Definition” addendum and ensure all three are internally consistent.
• Add an SLA section and a reporting cadence so performance is measurable, not subjective.
• Require an explicit “candidate submission log” mechanism to reduce disputes on what was submitted and when.
• Align your internal hiring process (feedback cycle, interview availability) so the agency can’t attribute delays to you without evidence.

Business Impact

• Clear commercial and service terms reduce disputes, improve time-to-hire, and protect your spend through replacement/guarantee rules.
• Good governance terms (SLAs + reporting) increase accountability and improve candidate quality over time.

Risks to Manage

• Fee disputes due to unclear “successful placement” definitions or “previously submitted” rules.
• Ineffective guarantees if replacement triggers/exclusions are vague.
• Data/compliance gaps leading to reputational and operational risk.
• Weak termination settlement clauses that leave you paying for work you didn’t authorize.

If you need help implementing these recommendations or would like expert guidance tailored to your organization, the team at Zunavish would be happy to assist.