For Recruiters: The Anatomy of a Search Agreement

Overview of Article

If you’ve worked in recruiting, you probably have a good understanding of what comprises the standard search agreement. Even so, this article should serve as a good starting point for understanding how to create and negotiate terms pertaining to your own search agreement. Please note that none of the information included in this article is legal advice; please seek legal counsel for professional advice.

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The Anatomy of a Search Agreement

As with most legal contracts, search agreements can be broken down into their component parts. The below list lays out the basics of the typical search agreement. Please note that this list is not exhaustive; additional terms may be included in search agreements you’ve signed. 

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Operational

• Engaged Parties – recruiting agency, including lead recruiter; and employer, including primary point of contact (typically the hiring manager)
• Role(s) – the title(s) and specifications of the role(s) the employer is hiring for (e.g. Senior Software Engineer, Chief Marketing Officer)
• Correspondence – the means by which the recruiter and the employer POC should be communicating (e.g. email, employer’s ATS, etc.)
• Exclusivity – specifies if the search agreement is exclusive to a single recruiter or if it is non-exclusive and may be filled by other recruiters

Financial

• Fee Structure – outlining how payments to the recruiter will be made based on certain criteria being met
• ~Retainer – 1-time or recurring payment for the recruiter’s ongoing work on the search
• ~Performance or Time Trigger
• ~~Performance Trigger – after meeting a performance obligation (e.g. X number of candidate interviews), the recruiter is entitled to some payment
• ~~Time Trigger – after a period of X weeks, the recruiter is entitled to some payment
• ~Placement (Contingent) – final payment contingent on successful placement of a candidate in the role. Can also be subject to candidate’s ongoing employment in the role
• Fee % or $
• ~Fee % – typically calculated as a percentage of the candidate’s first year total cash compensation
• ~Fee $ – flat dollar fee associated with the search
• ~Equity – increasingly, the best recruiters are including equity in the agreement to better align incentives of all parties
• Payment Terms – upon invoicing the employer for portions of the Fee, how long does the employer have to pay? (e.g. Immediate, Net 15)

Engagement

• Guarantee / Replacement Period – the period of time after which the candidate is placed where the recruiter has the obligation to attempt to refill the open role if the candidate does not remain employed by the company
• Terms of Use – legal terms of engagement pertaining to both recruiter and employer
• Confidentiality / NDA – terms by which the recruiter and employer are bound to not sharing information regarding the search
• Termination Terms – under which circumstances the employer or recruiter is eligible to terminate the search agreement
• Choice of Law – should there be a legal dispute between the two parties, this outlines the court of law (e.g. state of New York) where the dispute would be resolved

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Negotiating Your Terms

Negotiating the terms of a search agreement may seem daunting, but ensuring alignment between both recruiter and employer is crucial to a mutually beneficial outcome. Too often recruiters leave too much on the table during negotiations – be it in the form of fee dollars, fee structure, or time spent. We recommend spending time thinking through the puts and takes of exclusivity, fee dollars, fee structure, and the guarantee/replacement period. If you’re interested in learning more about the details of search agreements, and tips on how to negotiate your terms, please reach out to us at grow@headrace.com.

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