A guarantee generally implies that a recruiter may have to complete additional work for no extra cost if the first placement is not successful. In some instances, they may even be obligated reimburse the client depending on the terms of the contract and unfortunately for our industry this has become the norm.
To outsiders, recruitment seems so easy! You get a job, go to the database, call someone, interview them, and then send them to your client. If only it were so. New recruiters initially join also thinking that this is the case, only to quickly fall flat on their face – after all, there is a reason that this industry has an average of 40% staff turnover.
A process can take days, weeks, or months depending on the requirement. Now imagine working against an unknown number of competitors, to a short and undefined timeline, against a set of niche requirements and for free – and in the end, after you finally receive payment for all of the time and effort you have put into managing and delivering a great service, it is still not officially yours. Because depending on the terms of business, if the candidate doesn’t work out within a specified period, you have to give that money back, a credit or go through the entire ordeal again free of charge and this time without any incentive.
Why do these terms even exist? I mean, when a company outsources to an agency, what they are paying for is the service provided in the lead up to the decision to hire. They have assessed the opportunity cost of doing it internally versus externally or have a distressed recruitment process on their hands that they now need to farm out so they can spend time on more urgent aspects of the day to day operation.
By outsourcing they do not need to advertise across multiple platforms, sift through hundreds of resumes, complete all the phone screens. By doing this they have specialists concentrating on candidate attraction campaigns, research teams, access to a highly specialised database, a much larger network, a more structured process, head hunting capability and much more.
By the time a candidate is chosen, the service has been in full operation, in conjunction with hiring managers and under full scrutiny. In my opinion, when the candidate has been placed – the Recruiters obligation has been completed. Any after care provided is simply a bonus.
So why does the onus of compensation weigh rather heavily on the recruiter? The client makes the final decision after all. Recruiters essentially have no control or impact on the environment, leadership style or team dynamics after placement. The client has intimate knowledge of all of this, so they should stand by their decision and take the risk.
Some might argue that like when buying a watch, one must be able to reassure a potential buyer that their product (or in this case, candidate ) will work like it should. But the recruiter has already worked like it should. They have already helped find the candidate, have they not? So ultimately the question is, do we place the guarantee on the service of the recruiter to deliver a candidate? Or the service of the candidate? Hasn’t the benefit already been delivered once we get to placement stage?
As Recruiters continue to provide the guarantee period in their Terms –clients continue to have the impression that the advantage of outsourcing hasn’t truly been provided until that candidate is in the role for a lengthy period of time and exceeding expectations. But how much control does the Recruiter have past the point of the service of finding a candidate? There are so many variables that could impact attrition.
Regardless of individual perceptions, and although often questionable, the replacement guarantee has become almost like an insurance for clients – a risk-free commitment to finding the best candidate for the business. For this reason, it is likely to remain part of many recruiters’ sales toolkit so we have put together some basic considerations for when you are next reviewing terms and conditions with your supplier.
A replacement guarantee timeline may vary according to the probationary period. Usually however, it is valid for the first three months of the candidate’s employment. Some interesting tactics have emerged overtime though, with recruitment companies linking fee percentage to the guarantee placement to better position themselves for negotiations.
The terms and conditions will define situations when a replacement guarantee will be void. For example, if the hiring manager decides to drastically change the role then it will not apply.
If an internal restructure of the company occurs or the employee is moved into another position, and this leads to the parting of ways the recruiter is not obligated to find a replacement candidate.
There is normally a defined period (24 to 48 hours) whereby the hiring manager must inform the recruiter of the candidate leaving the job for whatever reason. If this isn’t complied with, the guarantee period will be void.
Depending on the circumstance you may be able to negotiate with your recruiter a credit or refund. A refund option may be considered by your recruiter if the process is too time consuming or expensive.
Most recruitment organisations state in their terms that if the invoice is not paid within the agreed time the guarantee will be void. Be careful to ensure that you check with your finance department that they can fulfill any payment terms.
Can the fee be reduced if the guarantee period is excluded from the contract?
Just something to think about.