Recruitment Agencies: the Battle for Introduction Fees
At EMW, we regularly advise our recruitment sector clients on battles over introduction fees. This is the first in a two-part series of articles covering the types of disputes over fees that we often see and steps you can take to avoid them.
Where a client company hires a candidate who has been introduced to them, the contract between the recruitment agency and the client company will commonly entitle the agency to payment of an introduction fee. But what happens when, in the fast-paced world of recruitment, two agencies claim to have introduced the same candidate to a client company and both demand an introduction fee? We often receive requests for advice from agencies who have introduced candidates at an earlier stage only to find that that candidate has been hired further down the line after being reintroduced by a second agency. Both recruitment agencies find themselves arguing over a fee and the client company is faced with the prospect of having to pay the fee twice over to both agencies
The starting point for these disputes is often to review any contractual terms in place and assess whether they are effective. It is also likely to require an assessment - not of which agency was first to introduce the candidate - but of which of the agencies’ efforts were the ‘effective cause’ of the candidate being hired
Generally, a recruitment agency will not go far wrong in showing it was the effective cause of the hire if it can prove that it actively created a professional relationship between the client company and the candidate, which ultimately brought about the hiring. In a scenario where one agency has merely sent the CV of a candidate to dozens of client companies but a competing agency has clearly done far more by way of introducing the candidate to the client company, ‘the effective cause’ of the candidate being hired could more easily be shown to be the work of the second agency and they would most likely be entitled to payment of the introduction fee.
Here are some of our practical tips for recruiters to reduce the risks of these types of dispute and to increase your charges of being the “effective cause” of any hire:
- When sending a CV to a client company, attach and refer to your terms of business, including “‘effective cause” clauses as express terms. Ensure that the terms are drawn to the attention of the client company and ideally that you receive evidence of their acceptance.
- Ensure that your terms set out the procedure your recruitment company will be carrying out to introduce the candidate. A strong definition might set out the step-by-step procedure of introducing candidates, setting up interviews and instigating the eventual hiring.
- Make sure the interview is set up between your recruitment company and the client company, not the client company and the candidate directly. Keep in contact with the client company and the candidate by email and telephone until employment starts. Check in with an email to the client company and the new employee after employment has started.
- Ensure that all of your agents are trained on the procedures and are keeping clear records and paper trails of their interaction with candidates and clients throughout the process.
If you would like to discuss any of the issues raised in this article, or need any advice, please contact Olivia Morton or give us a call on 0345 070 6000.
Alternatively, click here to find out what our Recruitment team can help you with.
This article was prepared by Tom Revitt.