Template · Staffing agency documents
Recruitment agency terms of business
In short
Recruitment agency terms of business are the contract that governs permanent placements between a recruiting firm and a client: the placement fee, when it is earned, the guarantee if a hire leaves, how long the agency owns an introduction, and payment terms. This template covers contingency and retained search, with notes on the clauses that cause fee disputes.
Terms of Business for Permanent Recruitment Services template
Terms of Business for Permanent Recruitment Services
These terms apply to every candidate [Agency Name] introduces to [Client Name] for permanent or direct-hire employment. Replace the bracketed items, delete the option you do not use in section 4, and have both parties sign. Temporary and contract staffing is covered by a separate staffing agreement.
1. Parties and acceptance
These Terms of Business are between [Agency Legal Name], [Agency Address] (the Agency), and [Client Legal Name], [Client Address] (the Client), effective [Effective Date]. The Client accepts these terms by signing below or, if unsigned, by interviewing, engaging or otherwise using any candidate the Agency introduces after receiving these terms. If these terms conflict with any purchase order or Client form, these terms apply unless both parties sign a written change.
2. Definitions
Introduction means the Agency giving the Client a candidate's name, resume, profile or any information that identifies the candidate, by any means, or arranging an interview. The date of Introduction is the date that information is first sent. Engagement means the Client, or any parent, subsidiary, affiliate or person to whom the Client passes the candidate's details, employing or engaging the candidate in any capacity, whether as an employee, contractor, consultant or through another agency. Start Date is the candidate's first day of work. First-Year Remuneration means the guaranteed annual base salary for the role at the Start Date plus [guaranteed sign-on bonus / guaranteed first-year bonus / car allowance / other], excluding benefits, equity and discretionary bonus. For hourly roles, First-Year Remuneration equals the hourly rate multiplied by [2,080] hours.
3. Agency services
On receiving a job order, the Agency will source, screen and introduce candidates it believes fit the Client's stated requirements. The Agency will confirm each candidate's interest in the role and consent to be represented before Introduction. The Agency will take reasonable care to check candidate information but does not guarantee the accuracy of information supplied by candidates or referees. The Agency will not knowingly introduce a candidate it has been told is unsuitable or not authorized to work in [Country].
4. Fees
Option A, contingency: a fee becomes due only when a candidate introduced by the Agency is Engaged. The fee is [20]% of First-Year Remuneration for roles up to [$100,000] and [25]% for roles above [$100,000], subject to a minimum fee of [$8,000]. Option B, retained search: the Client pays a total fee of [30]% of the estimated First-Year Remuneration of [$Estimated Salary], in three installments: one third on signing, one third on delivery of a shortlist of [3 to 5] interviewed candidates, and one third when the selected candidate accepts an offer. The final installment is adjusted to reflect actual First-Year Remuneration. Retainer installments are non-refundable once the related work is delivered. Fees are exclusive of sales tax, which is added where applicable. If the Client engages the candidate in a different role from the one discussed, the fee is calculated on the role actually filled.
5. Invoicing and payment
The Agency will invoice on the candidate's acceptance of an offer [or: on the Start Date]. Payment is due within [30] days of the invoice date. The Client will tell the Agency in writing within [2] business days of an offer being accepted, with the agreed First-Year Remuneration and Start Date. If the Client does not give this information, the Agency may invoice on its reasonable estimate. Late payments carry interest of [1]% per month or the maximum allowed by law, whichever is lower. The guarantee in section 7 applies only if the invoice was paid in full by its due date.
6. Ownership of introductions
A fee is payable under section 4 if the Client Engages a candidate within [12] months of the date of Introduction, for any role, whether or not the Agency arranged an interview for that role. This applies even if the candidate was later introduced by another agency or applied directly, unless the Client shows written records that the candidate was already in active consideration for a role with the Client within the [6] months before the Agency's Introduction and tells the Agency so in writing within [2] business days of that Introduction. If the Client passes a candidate's details to a third party who then Engages the candidate within [12] months, the Client pays the fee as if it had Engaged the candidate itself.
7. Guarantee
If a candidate leaves, or is dismissed for reasons other than redundancy, restructuring or a change in the role, within [90] days of the Start Date, the Agency will at its option search for a replacement for no further fee, or refund part of the fee on this scale: [leaves in days 1 to 30: 75% refund; days 31 to 60: 50%; days 61 to 90: 25%]. To claim, the Client must tell the Agency in writing within [7] days of the departure. One replacement is offered per placement; a replacement candidate is not covered by a further guarantee. No guarantee applies to retained search fees unless stated in writing.
8. Offer withdrawal and cancellation
If the Client withdraws an offer after the candidate has accepted it, other than because the candidate failed a lawful pre-employment check disclosed in advance, the Client pays [50]% of the fee that would have been due. If the Client cancels a retained search, installments already due remain payable. If the Client fills the role through any source during a retained search, the remaining installments become due.
9. Client responsibilities
The Client is responsible for: making its own hiring decision; verifying work authorization through Form I-9 and, where it participates, E-Verify; obtaining references, background checks, drug tests and licenses it requires, in line with the Fair Credit Reporting Act and applicable state and local law; complying with equal employment opportunity laws in its job requirements and selection; and setting pay, which must meet minimum wage, overtime and pay transparency laws in the work location. The Client will not ask the Agency to screen candidates on any basis protected by law.
10. Confidentiality and candidate data
Candidate information is supplied in confidence for the sole purpose of considering the candidate for employment. The Client will not copy it, pass it to third parties or use it for any other purpose, and will keep it secure and delete it when no longer needed, in line with applicable privacy laws including [CCPA / GDPR / other]. Each party keeps confidential the other party's fees, business information and client lists.
11. Expenses
The Client reimburses pre-approved expenses, including candidate travel for interviews and paid advertising for retained searches, at cost. The Agency will get written approval before incurring any single expense over [$500].
12. Liability
The Agency is not liable for any loss arising from the Client's engagement of a candidate, including the candidate's conduct, performance or absence, except to the extent caused by the Agency's negligence or willful misconduct. Neither party is liable for indirect or consequential loss. The Agency's total liability under these terms is limited to the fees paid for the placement concerned.
13. General
These terms are governed by the laws of [State]. Disputes go first to good-faith discussion between senior contacts for [30] days, then to [mediation / the courts of County, State]. Changes must be in writing and signed by both parties. If any clause is found unenforceable, the rest remains in effect. These terms remain in force until either party ends them with [30] days' written notice; fees for Introductions made before termination remain payable under section 6.
Signatures
- For the Agency: name and title
- Agency signature
- Date
- For the Client: name and title
- Client signature
- Date
- Client accounts payable contact and email for invoices
How to use this template
- Pick contingency or retained search in section 4 and delete the other option, then set the fee percentage, any tiers and a minimum fee.
- Define First-Year Remuneration to match how your client pays: include guaranteed bonuses and allowances, exclude benefits and discretionary bonus, and set the hours multiplier for hourly roles.
- Set the ownership period and the window the client has to claim a candidate was already known to them; 12 months and 2 business days are common.
- Agree the guarantee: length, refund scale or replacement, and the conditions such as on-time payment.
- Send the terms before the first resume, get them signed, and keep the signed copy with the client record so every recruiter can see the agreed fee.
- Confirm the fee and guarantee in writing again when each offer is accepted, then invoice on the trigger date in section 5.
When to send terms of business
Send them before the first resume leaves your desk. The strongest fee claims come from a signed agreement that predates the introduction; the weakest come from terms attached to the submittal email after the client has already seen the candidate. Many agencies send terms with the job order confirmation email or a standalone terms of business email and refuse to submit until they have a signature or at least a written acceptance.
This document covers permanent and direct-hire placements. Temporary and contract workers, where the agency stays the employer and bills hourly, belong in a staffing agreement with its own conversion fee and co-employment clauses. Some agencies combine both in one master agreement with schedules; that works as long as each fee model has its own section.
Setting the fee and what it is calculated on
Contingency fees for US permanent placements typically run 15 to 25% of first-year base salary, with 20% the most common anchor, rising to 25 to 30% for hard-to-fill technical or senior roles. Retained search usually sits around 25 to 35% of first-year cash compensation, paid in thirds. Volume clients often negotiate a lower rate, for example 15% across 40 hires a year, which can make sense if the roles are similar and the client gives quick feedback.
The percentage matters less than the base it applies to. Worked example: a client hires a plant controller at $110,000 base with a guaranteed $10,000 sign-on bonus. At 20% on base alone, the placement fee is $22,000. If guaranteed first-year cash counts, it is $24,000. Spell out what is in and out. Discretionary bonuses, equity and benefits are usually excluded because nobody knows their value on day one, and arguing about them later damages the relationship.
A minimum fee protects you on lower-paid roles where the work is the same. For hourly roles, state the annualization multiplier (2,080 hours is standard for full-time) so a $22 an hour supervisor converts to $45,760 without a debate.
Guarantees, refunds and replacements
A guarantee period of 60 to 90 days is standard for contingency placements. The choice between a sliding refund and a free replacement is commercial. Replacements protect your cash but tie up recruiter time; refunds are cleaner for clients with stop-start hiring. Most agencies offer replacement first and refund only if they cannot fill within a set period.
Three conditions keep the guarantee fair to both sides: it applies only if the invoice was paid on time, it does not apply when the client eliminates or changes the role, and the client must notify you within days of the departure. Without that last condition, you hear about a 30-day leaver four months later.
Candidate ownership and fee disputes
Most fee disputes come down to who introduced the candidate first. The ownership clause should define introduction broadly (a name alone counts), cover hiring into any role, and include affiliates and third parties the client passes details to. Equally, give the client a short window to say a candidate was already in their system. That clause looks like a concession but it removes the most common objection and makes the rest of the clause easier to enforce.
Pair the contract with good practice on your side: get the candidate's written right to represent for each client before you submit, timestamp every submittal, and never send a resume to a client who has not accepted terms. Twelve months is the usual ownership period; longer periods are harder to defend.
Common mistakes
- Terms that never get signed. An email trail where the client keeps interviewing your candidates helps, but a signature is much stronger.
- Vague fee base. Base only or total cash, and how hourly roles convert.
- No clause for direct applications. Candidates often apply directly after an agency introduction; without the ownership clause you have little recourse.
- Guarantee with no conditions, so a client who pays 90 days late can still claim a refund.
- Mixing temporary staffing terms into a permanent placement contract, which blurs who employs the worker.
- Fee clauses that cannot be enforced under local law. Some states and countries regulate placement fees or restrict charging candidates entirely. Never charge candidates a fee for placement, and check the rules where you operate.
This template is a starting point, not legal advice. Have counsel in your state review it before you rely on it.
Managing terms across many clients
Agencies with dozens of active clients usually end up with several fee rates and guarantee variants. Record the agreed terms against each client account, not in a shared drive folder, so the recruiter submitting a candidate and the person raising the invoice see the same numbers. Review terms annually, and flag clients who have never signed before anyone submits. For billing workflow, see the staffing invoice template, and for the in-house versus agency trade-off from the client's side, this guide to agency vs in-house recruitment is useful background.
Frequently asked questions
What is a recruitment fee agreement?
It is the contract that says when a client owes a recruiting agency a fee for a hire, how much it is, what it is calculated on, when it must be paid and what happens if the hire leaves early. Terms of business, placement fee agreement and contingency recruiting agreement usually mean the same document.
What is a typical placement fee for a contingency recruiting agreement?
In the US, contingency fees are typically 15 to 25% of first-year base salary, with 20% the common starting point. Specialist and senior roles often run 25 to 30%. Volume clients usually negotiate lower rates in exchange for consistent work.
How does an executive search agreement differ from contingency terms?
An executive search agreement is usually retained: the client pays part of the fee up front and the rest at milestones, often in thirds, in exchange for exclusivity and a defined search process. Contingency terms pay only on a hire and are rarely exclusive.
Do terms of business apply if the client never signed them?
Possibly, if the client received the terms before the introduction and then used your candidate, but it depends on the facts and state law. A signed agreement is much easier to enforce, so get a signature or written acceptance before submitting.
How long should a candidate ownership period be?
Twelve months from introduction is the most common. Six months is sometimes agreed for high-volume clients. Periods longer than 12 months are harder to justify and to enforce.
Can a recruitment agency charge candidates a fee?
Many US states restrict or prohibit employment agencies charging job seekers, and the norm is that the employer pays. Check your state's employment agency rules before charging candidates anything.