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What is a staffing agency contract?
A staffing agency contract is a legal agreement between a recruitment agency and a client company that defines:
- The scope of hiring services
- Payment terms (retained, contingency, hourly, or flat fees)
- Candidate ownership rules (preventing clients from bypassing your agency)
- Confidentiality and compliance with employment laws
- Dispute resolution mechanisms
If you’re an owner of a recruitment agency, here’s why you need a contract:
- Guarantees payment by clearly defining payment terms, deadlines, and penalties for late payments
- Defines service scope to avoid confusion over hiring duration, job roles, and responsibilities
- Protects candidate ownership, ensuring clients cannot hire applicants introduced by the agency without compensation
- Provides legal protection by ensuring compliance with employment laws and shielding the agency from liability risks
6 steps to create a recruitment agency contract
A well-drafted agreement should be clear, enforceable, and adaptable to hiring situations. Here are steps that will define to write an agency contract:
Step 1: Define the scope of services
Here’s an outline of what you’ll include in your scope of services:
- The type of hiring (temporary staffing, contract hiring, or permanent placement)
- The number of hires and any limitations
- The expected timeline for filling positions
- Responsibilities of both the staffing agency and the client
Example clause:
“The Agency agrees to provide qualified candidates for up to five open positions within 60 days. The client agrees to conduct interviews within a reasonable timeframe.”
Step 2: Set payment terms clearly
To prevent payment delays, specify:
- How fees will be structured (flat fee, percentage of salary, hourly rate, or milestone payments)
- When payments are due (upon placement, 30 days post-invoice, etc.)
- Late payment penalties (e.g., 5% per month on overdue invoices)
Example:
“The client agrees to pay a recruitment fee equivalent to 15% of the candidate’s first-year base salary, payable within 30 days of the candidate’s start date. Late payments will incur a 0.5% penalty per month.”
Step 3: Protect your candidate ownership rights
Prevent clients from hiring your applicants directly without paying your agency by:
- Setting a candidate ownership period (e.g., 12 months)
- Stating that if a client hires a candidate introduced by your agency, they owe a recruitment fee
Example clause:
“If the client hires a candidate introduced by the agency within 12 months of the introduction, the client agrees to pay the full recruitment fee, regardless of the hiring method.”
Step 4: Include a replacement guaranteed clause
If a placed candidate resigns within a short period, the agency may offer:
- A free replacement candidate within a set period (e.g., 90 days)
- A partial refund if a replacement isn’t found
Example clause:
“If a candidate placed by the Agency resigns or is terminated within 90 days, the Agency will provide one replacement candidate at no additional cost.”
Step 5: Address legal & compliance responsibilities
To ensure compliance and protect both parties, specify:
- Who is responsible for payroll, benefits, and taxes (especially for temp staffing)
- Compliance with employment laws and anti-discrimination policies
- Limitations of liability in case of wrongful hiring decisions
Example clause:
“The client is solely responsible for compliance with employment laws and workplace regulations. The Agency is not liable for any employment-related disputes arising after placement.”
Step 6: Add confidentiality & non-solicitation terms
- Protects candidate data from unauthorized sharing
- Prevents clients from poaching your agency’s recruiters
Example:
“The client agrees not to disclose candidate information to third parties without written consent. Additionally, the client will not solicit or hire any employees of the Agency for a period of 12 months.”
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Frequently asked questions
1. How to get contracts/clients as an agency?
Winning contracts as a staffing agency requires combining industry expertise, strong networking, and a clear value proposition.
Offering competitive pricing and transparent fee structures also builds trust with clients.
Showcasing testimonials and case studies from satisfied clients can further strengthen your credibility. Some companies only work with pre-approved vendors, so registering on their staffing portals can be another way to land contracts.
2. What happens if a client refuses to pay according to the contract terms?
The first step is to review the agreement to confirm payment deadlines and any late penalties.
If the payment is overdue, a polite reminder via email or phone call can resolve most issues. Some agencies include late payment fees as a deterrent, which can be referenced in follow-ups.
If the client still doesn’t pay, temporarily pausing services, such as withholding new candidate submissions, can apply pressure.
To avoid these situations, always outline clear payment terms in your contract, including upfront deposits, milestone-based payments, or penalties for late payments.
3. Should my contract be different for temporary vs. permanent staffing?
Yes.
Temporary staffing contracts should include payroll, benefits, and worker classification details, while permanent placement agreements focus on one-time fees and replacement guarantees.
