Whether you’re new to splits or have many years of experience, a good recruiter split fee agreement can help you avoid disputes with your trading partner. What are some of the elements to incorporate in your agreement?
First, make sure you HAVE a signed, written agreement.
It seems obvious, but do not skip this step. Think of this like a contract – it makes clear the division of work (who is doing what), what the payment terms are, and spreads the risk among both partners. Since it can take a long time to complete a deal, and many things can change or interrupt the process, it’s just not good practice to rely on your memory or a voice conversation. And, if you wind up having to take legal action, the absence of a signed, written agreement can really work against you.
Next, a good recruiter split fee agreement makes the payment terms clear. Who is collecting payment from the client? How is the fee being shared, and when? Are there business expenses that might be deducted from the gross fee? What about any shared or unique tax considerations? If multiple currencies are involved, how does that impact payment? What if the client never pays? How does a refund/guarantee policy impact payment? You don’t need to resort to formal “legalese” but you should make sure to cover this topic clearly and thoroughly.
Another point of consideration revolves around candidate ownership. Is the candidate only being submitted for a particular job? What if the job, job title, or term changes? Does your client agreement limit the payment period? For example, if they don’t hire the candidate within 180 days, they don’t have to pay? If you have agreed to those terms with your client, you really MUST inform your partner of that before submitting their candidate. What if the candidate gets hired for a different job?
What happens if the ownership of your firm (or your partner’s firm) changes? Many contracts are automatically passed on to a successor organization, but this is not always true. You might want to incorporate some wording into your contract to cover this circumstance.
If there are significant changes to the search, you may need to amend the contract. It’s worth defining how amendments would work to ensure both parties are protected. In the event of a legal dispute, do you want to sue or use arbitration? What is the appropriate venue?
We recommend consulting with an attorney to make sure your contract is legal and that the most important issues are spelled out. Contract law is a specialty and with the potential financial risk, this is an area that you want to get right. Your partner may want to have their own counsel review the document to make sure their interests are covered as well.
If you belong to a professional association or a formal split placement network, there may be legal resources available to assist. In NPAworldwide, all members execute a signed membership agreement and agree to abide by our operations manual and bylaws. Members who split with each other do not need a separate recruiter split fee agreement because they have already agreed to operate by the network’s policies and procedures governing splits.