The importance of terms of business for recruitment businesses

It is imperative for recruitment businesses to ensure that their Terms of Business are up-to-date, legally compliant and enforceable. Terms of Business are a legal document commonly used in the recruitment industry to form an agreement between a recruitment business/agency and their client. This agreement sets out the legal relationship between these two parties. Generally, this agreement outlines the terms for both permanent recruitment and fixed term/contract recruitment.

Without Terms of Business, you may end up arguing with your client which is not only problematic but may mean you do a lot of hard work without getting paid. For example, you may have a client that engages your recruitment services to present candidates. However, every time a candidate is presented the client says “we have them on our database”. When you speak to the candidate, they applied for a role 4 months ago and have never heard a peep. Who owns the candidate if you as the recruiter don’t have a term in the Terms of Business addressing this? Or, even worse, no Terms of Business at all?

So, why are they important?

Term of Business are important for a few reasons. They do the following:

  1. ensure that fees and payment terms are clearly communicated as to avoid confusion and potential future disputes;
  2. assist in managing the relationship between the recruitment business and the client;
  3. clarify the candidate engagement process and outlines ownership of the candidate;
  4. outline the specific obligations of the client;
  5. outline specific terms for both permanent and fixed term/contract recruitment;
  6. include a liability and indemnities clause to better protect the legal position of your organisation. This ensures legal surety moving forward with every client;
  7. detail important areas of law such as privacy and termination of contracts;
  8. are imperative to avoid costly, time consuming and burdensome disputes raised by clients; and
  9. put in place a legally enforceable contract between the two parties to ensure greater legal protection of your organisation.

What does this mean for your recruitment business?

It is important that your Terms of Business are updated and reviewed regularly to ensure consistent compliance with the relevant law and to adequately reflect any changes in the industry or your organisation specifically. This reduces risk exposure to your organisation and ensures that you are entering into legally compliant agreements that will protect your organisation now and into the future. Some organisations may find that their Terms of Business do not cover all the necessary areas of compliance or are not communicated clearly and could potentially find themselves in a dispute down the track with a client. It is important to carefully draft your Terms of Business to ensure that all necessary information is captured.

How we can help

Sinclair + May have extensive experience in assisting organisations with the preparation of their legal agreements and documents. If you feel that your Terms of Business need updating or if you require new Terms of Business to be drafted and created or if you feel that your current agreement does not cover any of the points above, please feel free to phone us on 03 9111 5660 or book a free chat via our website.

This is general advice only. Liability limited by a scheme approved under Professional Standards Legislation. 

Published Oct 24, 2018

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