What is a recruitment agency contract?

A recruitment agency contract is a legally binding agreement between a recruitment agency and their client. Under English law, it is the primary instrument through which a recruitment business will provide services to the business or businesses that engage their services. The contract has the potential to cover all terms on which services will be provided (though not always), or some or all of those terms may be included in a separate, either oral or implied, agreement alongside the written contract.
A recruitment agency contract will typically offer a balance between the mutual interests of a recruitment agency and its client which is a commercial organisation.
The agency will want, amongst other things, a guarantee of payment by the client for their services (in the form of a clause which subjects the client to an obligation to pay the agency’s fee) and a restriction on the client’s ability to procure the services of the contracted candidate outside of the previously agreed terms (often this is achieved by a restrictive clause for a certain time period extending after the recruitment agency contract is terminated) .
The client will want, amongst other things, some surety that it will have some exclusivity in being the only party allowed to recruit the candidate for a period of time following termination so that their business interests are protected.
A recruitment agency contract will usually be formed in conjunction with the submission of CVs and other terms (whether oral or implied). The terms of the contract usually include the following:
Experience shows that different recruitment agencies operate different models for bringing candidates into contact with clients and the degree to which the stakeholder controls the manner in which the resultant employee of the client performs their work and the extent to which individual working arrangements are tailored to the client’s needs.
The contract should concede control over all relevant details of the relationship to the client: the candidate should only be offered at the client’s choice and they should be confirmed in the client’s employment and on the client’s standard terms. However, a properly drafted contract should be regarded as sufficient protection for the agency against a claim from the relevant client on the basis that it has performed the contract which the client has authorised it to perform.
Recruitment agency contracts are very often unenforceable or only enforceable in a limited way.

Key components of a recruitment agency contract

A recruitment agency contract will typically contain the following sections:
Terms of Engagement
This section sets out the terms under which the agency will provide recruitment services. It will generally contain the appointment details and list the responsibilities of both the client and the agency.
Fees
The contract should also set out how the agency will be paid, including any guarantees, retainer fees or additional sums that the client or candidates must pay.
Confidentiality
It is common for an agency contract to contain a clause confirming that all confidential information must be kept confidential by the client and the agency.
Termination
The recruitment agency contract should provide details of the conditions required for termination, both during the initial recruitment process and after the candidate has been placed.

Typical terms found in a recruitment agency contract

Recruitment contracts, like all contracts, are full of legalese, and their content can be highly complex. Yet there are key issues that recur in most contracts. Reading through your own recruitment contract with a candidate will often reveal the same common clauses that I address here.
Job Description
This is typically a breakdown of the nature of the work involved in the role, and the tasks to which the employee would be required to perform. It is useful to both employee and employer to provide a framework for the interchangeability and flexibility of roles, and can include overtime and on-call duties. While the job description can be helpful in this regard, it is also of significance when it comes to limiting liability for personal injury in the workplace – if the description of the role is too rigid, this can create a headache for employers when trying to shift personnel among roles.
Indemnity
This is a common clause and one with particular relevance to recruitment agencies who employ staff to provide services to clients. Generally speaking, if an employee causes loss or damage to the client or a third party, the recruitment agency would be liable, but clause may provide protection if the recruitment agency can demonstrate that the employee was carrying out a task unconnected to his or her employment. These types of clauses can be tricky, so if you want to include such an indemnity in the contract, draw it up with particular care to avoid unintended consequences.
Confidentiality
Recruitment firms and agencies are privy to a great deal of confidential information – about the candidates they place, and about the client they place them with. If the candidate is privy to information relating to the client, the employment contract should detail the limit of the confidentiality requirements. This clause is to protect an employing company from potential misuse of confidential information obtained from the recruiting agency.
Termination
Termination clauses are particularly important in terms of long notice periods, which should be kept to a minimum as it is not in the best interests of your business to have a departing employee tied into the firm for extended periods of time. While many employees would prefer longer notice periods, even at the cost of a higher payout, these should be avoided in your contract. While you must give an employee their statutory notice period (1 year of service entitles the employee to 1 week’s notice), anything above that is negotiable.
Sub-Contracting
If a candidate is hired to fill a specific role for a client on behalf of the agency, but then is moved from that specific role at the direction of the client, the agency may have no choice but to charge an inflated fee for retention of the employee. If this is something you anticipate and wish to protect yourself against, then the contract should include the consent of the client to the employment contract’s terms and conditions, including the fees payable.
Intellectual Property Rights
If a candidate was recruited to fulfil the role of software developer for your business, the contract should be clear about issues of intellectual property rights, which would typically be owned by the developers and not the recruitment agency. An agreement between the employing agency and the client can therefore be useful to protect both parties’ interests regarding the ownership of the intellectual property rights created in the course of the individual’s employment.
Restrictive Covenants
If a candidate has been placed in a high level position of trust and confidentiality, it is advisable for the recruiting agency to include a restrictive covenant to safeguard the client’s interests against the possibility that the candidate might leave and join a competitor. Pre-employment restrictive covenants are unfortunately unenforceable, but as soon as the employee starts the role, it is possible to implement a clause restricting the employee’s right to work for or do business with any company and they have been made privy to confidential information.

Legal considerations in recruitment contracts

Recruitment agency contracts must comply with a number of legal requirements. As there is much variation in the way these contracts are created, not all of these requirements will be met. Relevant legislation for both temporary and permanent employment includes: The Agency Workers Regulations 2010 which sets out extensive rights for temporary agency workers concerning: day-one rights, these include equal pay for similar work, entitlement to holiday pay, and health and safety access and training. The Equality Act 2010 – the contract will need to comply with the Equality Act 2010. The Working Time Regulations 1998 – these establish the working week, provide details on daily and nightly rest breaks, and minimum holiday entitlement. The Conduct of Employment Agencies and Employment Business Regulations 2003 – must be followed when establishing suitability of candidates. The Data Protection Act 1998 – if you are obtaining or processing personal information when recruiting through the agency , you will also have a number of responsibilities under the Data Protection Act including notification to the Information Commissioner by the data controller, and a responsibility for ensuring adequate measures are in place to protect the information. Modern Slavery Act 10015 – if you employ people directly you will be covered by the Modern Slavery Act 2018. Although it does not apply to agencies directly, it could apply to the client organisation for whom the agency employee works. Other legal issues which should be considered when entering into the contract include the following: Payment – the payments made to the employment business by the employer must not fall under the definition of ‘pay’ in the National Minimum Wage Act 1998. Overtime – time recorded by a worker as ‘overtime’ should be dealt with according to the regulations of the company.

Negotiating recruitment agency contracts

Negotiating recruitment agency contracts can be challenging, particularly with agencies that have such a myriad of other associated forms, paperwork, guidelines and contracts. Understandably, a desire to drive a business need through to completion can tempt an employer to accept a terms and conditions document which is neither suitable nor commercially viable. All too often, standard terms from agencies contain clauses which do not reflect usual practices in the industry and may result in increased costs to the hirer.
Heads of terms
Employers are advised to agree key points of principle before a recruitment agency is engaged. This is especially important when the business requires full discretion over the terms of an assignment and does not wish to commit to a particular fixed term or rate too early. Minor points of disagreement or some flexibility on contract terms can often be addressed at a later stage by consultation with the agency to strike a suitable deal.
In addition, there is nothing to stop an employer from issuing its own preferred heads of terms for the agency to consider. The agency is unlikely to complain if it avoids lengthy negotiations and the position of both parties can be improved.
Essential provisions
Alongside the essential points, this is a useful checklist for terms to be considered:
The next step
To ensure the provision of acceptable terms, employers should look to include the following protections in contracts:
Where an attempt can be made to reduce an element of risk for the hirer, or enhance levels of protection, without significant cost to the agency, the longer term relationship should benefit. This could be as simple as including a statement that the employer will be the primary point of contact and will deal directly with the temporary worker (imposing obligations on the agency to pass on information), or agreeing to contact the agency before any disciplinary action is taken.

Recruitment agency contract template: examples

Recruitment agency contracts are often not agreed in the detail which they should be. There are two main reasons for this:
Firstly, the template contract often does not fit the relationship between the client and the recruitment agency. There are lots of examples of inappropriate template contracts and it is key to look into the detail to ensure the requirements of both parties are fully and fairly set out.
Secondly, recruitment agencies sometimes use template contracts which are more favourable to them, leaving the client at a disadvantage. Embedding the recruitment agency ‘terms and conditions’ into a contract with no amendment may be a recipe for disaster. We will look at why below.
Recruitment agency contract example Below we provide an example of a recruitment agency contract template: Agreement made [insert date (to be inserted after signature)] between [insert name of Recruitment Agency] whose registered office is [insert address] ("Supplier") and [insert name of Client] whose registered office is [insert name] ("Client") for the supply of workers hereunder.
The Supplier agrees to supply to the Client such workers as may be required by the Client on the terms and conditions set out in this Agreement.

1. Definitions In this Agreement: 1.1 "The Act" means the Employment Agencies Act 1973 as amended from time to time; 1.2 "Agency Worker" means a person supplied by the Supplier to provide services to the Client; 1.3 "Business Day" means a day which is not a Saturday, Sunday or a public holiday in [insert country]; 1.4 "Charges" means the charges as contained in Schedule 1 of this Agreement from time to time; 1.5 "Client Introduction Fee" means the fee set out in the First Schedule below; 1.6 "Commencement Date" means [insert date]; 1.7 "Exclusivity" means the exclusivity set out in the First Schedule below; 1.8 "Event of Default" means any of the circumstances set out in clauses 16.3.1 to 16.3.5 (inclusive) on the part of a party to this Agreement; 1.9 "The Services" means the provision of workers to the Client; 1.10 "The Second Schedule" means the description of the territory or territories in which workers may be provided to the Client amended from time to time; 1.11 "The Third Schedule" means the geographical area of England , Wales and Scotland in which the Client may operate; and 1.12 "The Fourth Schedule" means the information with which the Supplier has been provided concerning the workers. 1. Terms used in this Agreement The following terms are used in this Agreement the definitions of which can be found in clause 1 above. They shall be applicable throughout all but the headings for the clauses and the Second, Third and Fourth Schedules: 1.6 "Employee" means a person engaged by the Supplier or any employee of a third party; 1.7 "Statement of Fitness" means the written medical confirmation as to whether the Agency Worker is safe to perform the duties and assignments to which he is assigned; 1.8 "Charges" means the charges as set out the Second Schedule to this Agreement as amended from time to time; 1.9 "Client Introduction Fee" means the fee set out in the First Schedule below; 1.10 "Exclusivity" means the exclusivity set out in the First Schedule below; 1.11 "Exclusivity Period" means the period the subject of exclusivity set out in the First Schedule below; 1.12 "Additional Charges" means the additional charges against which the Client has a right to set off as set out in the Third Schedule below; 1.13 "Workers" means any worker, consultant or person supplied by the Supplier; 1.14 "Period of Exclusivity" means the period of exclusivity set out in the First Schedule below; 1.15 "Term" means the term of this Agreement and contains the following terms: (a) The written agreement between the parties which shall be deemed to have commenced on the Commencement Date and (b) Where neither party gives written notice to terminate the Agreement, then this Agreement shall be deemed to continue unless the Term is terminated early in accordance with clause 16; and 1.16 "Terminating Party" means the party that terminates the Agreement.

This is just a sample template and taken from actual recruitment agency contract templates. It is advisable to really scrutinise and form an agreement direct with the recruitment agency to be in a position to protect your own position.