A recruitment agency contract reads like boilerplate until the day a placed candidate resigns after ten weeks, and you discover the rebate clause you skimmed only covers voluntary resignation, not the redundancy you actually had to make. Contract terms recruiters treat as standard are often negotiable, and the ones employers treat as harmless are usually where the cost hides.
This is written from the employer's side of the table, not the agency's — what to check before you sign, where fee structures quietly shift risk onto you, and which clauses are worth a five-minute conversation before your first requisition goes out.
The fee percentage is the number everyone negotiates. The rebate trigger is the number that actually determines whether you get your money back.
How Do Recruitment Agency Fee Structures Work?
Most agency fees are a percentage of the placed candidate's first-year base salary, typically 15-25%, charged either on placement or split across an offer stage and a start date. Contingency agencies bill only on a successful hire; retained agencies bill in stages regardless of outcome.
The percentage headline is easy to compare across agencies; the base it applies to is not. Some contracts calculate the fee against base salary only, others fold in guaranteed bonus, car allowance, or even projected commission for sales roles — which can move a 20% fee from a number you expected to one 30-40% higher in practice. Ask for a worked example against your last three hires before you sign, not a percentage in isolation.
Payment timing matters almost as much as the rate. Contracts that require full payment on offer-acceptance rather than start date shift the risk of a candidate falling through entirely onto you, with no automatic refund path unless a rebate clause explicitly covers it.
What Is a Rebate Clause and Why Does It Matter?
A rebate clause refunds a portion of the fee — often on a declining scale like 100% in month one, 50% in month two, 25% in month three — if the placed candidate leaves within a defined window. It matters because the trigger wording decides whether a bad hire actually costs you the full fee or a fraction of it.
The clause employers get burned by most often is scope: "leaves employment" sounds broad but frequently excludes dismissal for cause or redundancy, covering only voluntary resignation. If your risk is a candidate who was misrepresented and underperforms, ask explicitly whether termination-for-performance triggers the rebate — many standard templates do not, and agencies will not volunteer that gap.
Rebate windows also compress fast. Ninety days is common; some contingency shops offer 30. If your onboarding and ramp time genuinely runs four to six months for a role, a 30-day rebate is close to worthless — you will not know if the hire was wrong until after it expires.
| Contract term | Employer-favourable version | Watch-out version |
|---|---|---|
| Fee base | Base salary only, stated example provided | "Total compensation," undefined, no worked example |
| Rebate trigger | Any termination within window, including redundancy | Voluntary resignation only |
| Rebate window | 120-180 days | 30 days with no ramp-time allowance |
| Exclusivity | None, or capped at 2-3 weeks per role | Open-ended exclusivity across all roles |
| Payment trigger | Candidate start date confirmed | Offer acceptance, before start date |
Should You Sign an Exclusivity Clause With a Recruitment Agency?
Exclusivity means you commit a role, or sometimes your whole hiring pipeline, to one agency for a defined period, forfeiting the option to run competing search or post the role yourself. It can be worth it for a genuinely retained search on a hard-to-fill senior role, and rarely worth it for volume or contingency hiring.
The trade you are making is speed and cost against optionality. A retained, exclusive search usually comes with a dedicated timeline and a portion of fee paid upfront, which should buy you priority attention — reasonable if the role is genuinely hard to fill. An exclusivity clause bundled into an ordinary contingency contract, with no retainer and no service-level commitment in return, is a one-sided ask that agencies push because it removes their competition, not because it serves you.
If you do agree to exclusivity, cap it in time — two to three weeks per role is standard practice — and tie it to a measurable output like a shortlist by a specific date, so the clause has an exit if the agency underdelivers.
Exclusivity without a service commitment attached to it is a one-way clause. If they want your pipeline locked, ask what they are locking in return.
What Data and GDPR Clauses Should an Employer Check?
Under GDPR, both you and the agency are responsible for how candidate data was sourced, stored, and shared, so the contract should state consent basis, retention period, and what happens to candidate records once the engagement ends. Vague or absent data terms are a compliance gap you inherit, not just the agency's.
Ask specifically whether the agency retains candidate CVs and contact details for future placements after your role closes, and under what legal basis. Reputable agencies operating in the UK and EU will point you to guidance consistent with the UK's employment agency regulations and general data protection principles; if an agency cannot answer the retention question in writing, treat that as a real flag, not a formality.
This is also where your own candidate sourcing process matters — if you run parallel in-house sourcing alongside an agency, make sure your data handling and theirs do not create duplicate consent gaps for the same candidate.
How Does Contract Recruitment Pricing Differ From Permanent Placement?
Contract and temp placements are usually priced as a margin on the contractor's pay rate rather than a percentage of annual salary, billed weekly or monthly for the duration of the assignment instead of once on placement. That structure changes your negotiating leverage: margin percentage, not a one-off fee, is the number to interrogate.
If your hiring need spans both permanent and contract roles, it is worth reading a dedicated breakdown of how contract recruitment margins and compliance differ from perm desks before comparing quotes from an agency that runs both models — the incentives are not identical.
FAQ
What should be in a recruitment agency contract?
A recruitment agency contract should set out the fee percentage and what it is calculated against, the rebate schedule if a hire leaves early, exclusivity terms, payment timing, and what happens to candidate data after the engagement ends. Missing any one of these is where disputes start.
Is a recruitment agency contract negotiable?
Yes — fee percentage, rebate length, and exclusivity are the three terms agencies expect employers to push back on. A reputable agency will discuss all three; one that refuses any discussion is telling you something about how the rest of the relationship will go.
What is a rebate clause in a recruitment contract?
A rebate clause refunds part of the placement fee, on a sliding scale, if the hire leaves or is dismissed within a set window — typically 90 to 180 days. Read the trigger conditions closely: some rebates only apply to voluntary resignation, not termination for underperformance.
Can I use more than one recruitment agency at once?
You can, unless you have signed an exclusivity or retained clause with one of them. Non-exclusive, contingency-based terms let you run several agencies in parallel and pay only the one who makes the placement — but check the contract wording, because "priority" and "exclusive" are sometimes used loosely.
What happens to candidate data under GDPR when a contract ends?
The agency should confirm in writing what happens to candidate CVs and contact data once your engagement ends — deletion, anonymisation, or continued use under their own privacy notice. Under GDPR you are jointly responsible for how that data was collected and shared, so get this in the contract, not a verbal assurance.
None of this is an argument against using agencies — a good one earns its fee back many times over on a hard role. It is an argument for reading the contract like you read a lease: line by line, before the deadline pressure of an open req makes you skim it. If you are building the internal side of that pipeline too, Yena's recruitment software comparison for 2026 and the ATS ROI calculator are useful reference points before your next renewal conversation.
If you want to see what running sourcing and shortlisting in-house alongside your agency relationships actually looks like, try Yena free and compare the two side by side on your next open role.