What to put in a recruitment agency client contract
Most fee disputes do not come from bad faith. They come from two people who agreed on the fee and never discussed anything else, and then something normal happened: the candidate resigned in week six, or the client hired them into a different role, or the invoice sat for ninety days.
This is a practical guide to the clauses that decide those outcomes. It is not legal advice, and the wording that works in your state and for your type of placement needs a lawyer who can see your actual business. What follows is what to make sure your lawyer addresses, and why each one matters commercially.
Fee basis: the sentence that causes the most arguments
"Twenty percent" is not a fee agreement. Twenty percent of what?
The gap is almost always between base salary and total remuneration. On a $120,000 base with superannuation, a car allowance and a bonus, those two numbers can differ by twenty or thirty thousand dollars, which at 20% is a real amount to discover you disagree about after the placement.
Define it explicitly: which components are included, whether superannuation counts, how a bonus is treated if it is discretionary, and what happens when the package includes a vehicle or an allowance. If the role is paid hourly, define the margin and whether it is a fixed rate or a percentage.
The second half of the same clause is when the fee becomes payable. The common choices are on acceptance of the offer, on the candidate's start date, or split. Each is defensible. Not specifying it is not.
Rebates and guarantees
A rebate period is the window in which you refund or replace if the placement does not stick. This is where small agencies most often agree to something that quietly makes a placement unprofitable.
The things to nail down:
How long, and what triggers it. Does a rebate apply if the candidate resigns, if they are dismissed, if they are made redundant, or all three? Redundancy in particular catches agencies out: the client restructured, which is nothing to do with your work, but a loosely drafted clause can still make it your problem.
Refund or replace. A replacement guarantee costs you a second search. A refund costs you the fee. Which one applies, and whether the client chooses, should be written down.
Sliding or cliff. A full refund on day eighty-nine of a ninety-day period is a cliff and it is brutal. A sliding scale, where the refundable share falls over the period, matches the work you actually did.
What voids it. If the client changes the role materially, does not pay the agreed salary, or dismisses without process, the guarantee should not survive. Say so.
Candidate ownership and the introduction period
This clause decides whether you get paid when a client hires someone you introduced, but not in the way you expected.
Two situations to cover. First, the client passes your candidate to a sister company, a subsidiary or a partner firm who hires them. Second, the client does not hire the candidate now, then hires them nine months later directly.
The usual mechanism is an introduction period: if the client engages a candidate you introduced within a defined window, the fee applies, regardless of which entity does the hiring or for which role. The window length is negotiable and the number matters less than having one.
The other half is what counts as an introduction. A CV sent by email is clear. A name mentioned on a call is not. Define it, because "we already knew about that person" is the single most common way a fee gets contested, and the defence is a dated record of the introduction rather than an argument about memory.
Payment terms, and the part that gets skipped
Agree the number of days, and then agree what happens when it passes. A payment term with no consequence is a suggestion.
Interest on overdue amounts, recovery of collection costs, and the right to suspend work on other roles until an invoice is settled are all normal. Including them does not mean using them. It means you have something to point at in a conversation you would otherwise be having with nothing behind you.
For temporary and contract placements this matters far more than for permanent, because you are paying the worker weekly while waiting on the client. A thirty-day term on a contract desk is a cash flow commitment, not a detail.
Exclusivity, and whether it is worth asking for
Exclusivity is worth having when it comes with something. On a retained or partly retained search, where you are paid in stages regardless of outcome, it is reasonable. On contingency, where you are paid only if you win, asking a client to use you alone is asking them to carry your risk.
A middle position that works more often than full exclusivity: a defined period of first look, where you have a set number of days to submit before the role goes wider. The client keeps their options, you get a head start, and nobody has to argue about it.
Liability, insurance and what each side is responsible for
Say who is responsible for what. The agency normally takes responsibility for the accuracy of what it passes on and for the checks it says it has done. The client normally takes responsibility for the workplace, for supervision, and for the decision to hire.
The checks clause is the one to be careful with. Promise only what you actually do. If you verify right to work and two references, write that. An agreement that says you confirm qualifications when you do not look at certificates is a liability you created with a sentence.
Where you place workers who are directed by a host business, compliance obligations may also apply to your agency depending on the state and the type of work. Those are statutory rather than contractual and sit outside this document, so confirm them with the relevant regulator and your lawyer rather than assuming the contract covers it.
Make it easy to sign
A twelve-page agreement sent to a small business owner who wanted one site engineer will sit unsigned for three weeks, and in the meantime you are working at risk.
Two documents solves this better than one. A short set of terms of business covering fee, rebate, introduction period and payment, which is the thing that gets signed before you start. Then a fuller services agreement for clients who want one or whose procurement requires it.
The short version should fit on two pages. If it cannot, the question is usually whether every clause is earning its place.
Where to spend your money
If you are going to pay a lawyer once, spend it on the terms of business rather than on anything else. It is the document that governs every placement you make, and a single ambiguous fee-basis sentence will cost you more than the drafting did, the first time it is tested.
Get it reviewed again when you change model: moving from permanent into contract, or from direct clients into labour hire, changes the risk profile enough that last year's document may not fit.
Common questions
What should be in a recruitment agency terms of business?
At minimum: the fee basis defined precisely, when the fee falls due, the rebate or guarantee and what triggers it, the introduction period and what counts as an introduction, payment terms with a consequence for late payment, and a clear split of responsibility between agency and client.
How long should a recruitment rebate period be?
It is negotiable and varies by market and seniority. What matters more than the length is whether it slides or ends at a cliff, whether it refunds or replaces, and whether it survives a redundancy or a dismissal that had nothing to do with your work.
What happens if a client hires my candidate months later?
That is what an introduction period is for. Without one, you are relying on goodwill. With one, the question becomes whether you can show a dated introduction, which is why the record of when and how you introduced someone is worth keeping properly.
Do I need a lawyer to write it?
For the terms of business, yes, once. It governs every placement and the cost of an ambiguous clause is far higher than the cost of drafting. Templates are a reasonable starting point for the conversation, not a substitute for it.
