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5 Ways To Protect Yourself When Invoking A Replacement Guarantee

5 Ways To Protect Yourself When Invoking A Replacement Guarantee


The average recruitment agency charges a hefty fee for its services, and will often try to justify it by offering their clients a guarantee.

However, if you ever need to take up that guarantee, you could be left with a nasty surprise.

A Victorian company recently experienced problems when trying to have their recruitment guarantee honoured by a Melbourne-based recruitment agency.

Shortly after being billed more than $17,000 in recruitment fees by the agency to hire a sales director, the company found that the new hire was unsuitable and requested a replacement candidate from the agency.

There was no reply from the agency for three months (coincidentally, the period of the guarantee), after which time the company requested a refund.

The agency refused to pay, claiming the company was late in paying their initial recruitment fee and therefore, the guarantee was void.*

The question that would have to be asked is, would you, as the client, have been in a hurry to pay the initial fee if the appointed person was proving to be unsuitable and the agency was not even returning your calls?

Here are 5 ways that employers can protect themselves when dealing with recruitment agencies offering a replacement guarantee:

Recruitment agencies today charge clients anywhere from 15% to 30% of a new hire’s total salary package for the first year. For more senior appointments, this fee can equate to the price of a new car.

Many firms are happy to pay this if their newly appointed employee turns out to be everything they’d hoped for.

But if the new hire doesn’t work out, that’s a lot of money down the drain, so recruitment agencies nearly all now offer the reassurance of a guarantee.

A typical guarantee promises that if the new appointment either leaves or is terminated within a certain period of time (usually 3 to 6 months), then the recruitment agency will undertake to find the client a suitable replacement candidate free of charge.

The problems

While that all sounds well and good, the reality can in fact be quite different. For one thing, the client has paid all that money to fill a position and now they are left with a vacancy that needs to be filled even more urgently than before.

The recruiter may have already received their commission, so they may not necessarily feel the same sense of urgency and their attempts to find another suitable candidate can in fact take a lot longer and produce candidates of a much lower calibre. Hence, they’ve ‘stolen your wallet’, because you’ve already paid them the full fee.

There are also a number of conditions that are often attached to such a replacement guarantee. These might include:

  • Further advertising expenses will be billed to the client
  • The replacement is only subject to the availability of suitable candidates
  • Whether the client has paid their invoice in full within the stipulated terms of business
  • If the new hire was dismissed, whether the client has provided satisfactory written evidence of their unsuitability, in light of the agreed-upon job description
  • The guarantee is void if the client employed someone else in the meantime, using another recruitment agency
  • The guarantee is void if the job description changes from that agreed upon in the initial brief
  • The guarantee is void if the new hire is made redundant or is incapacitated in any way and can no longer perform the role.


Obviously, there are good and bad operators in every industry and two sides to every story, but it begs the question of whether the recruitment industry needs more self-regulation. Perhaps there is a need to formalise the terms of such a guarantee and to draw up best-practice guidelines to be observed by all recruitment agencies.

In the meantime, there are a number of ways in which hiring companies can protect themselves when dealing with recruitment agencies offering such a replacement guarantee:

  • Discuss all the possible outcomes with the agency before agreeing to any terms.
  • Shop around for the agency that offers the most comprehensive guarantee in writing.
  • Negotiate to pay only a percentage of the fee upon hiring, with the remainder to be paid when the guarantee period has expired.
  • If you already have an ongoing relationship with an agency, negotiate with them to receive a credit for any unsatisfactory appointments (for whatever reason) in the form of a percentage of the fee for the next assignment.
  • Make sure the agency is a member of the RCSA, which requires all members to observe the highest ethical standards.
  • Look for an agency with a demonstrated record of successful job placements, so that there is less likelihood of you needing such a guarantee in the first place.

*Source Australian Graphic Design Association 

Cofounder at RecruitLoop. I've been a hands on recruiter, manager, trainer, coach, mentor, and regular speaker for the recruitment industry for 20 years. Follow me @paul_slezak.

  • Luke Collard

    Like this article Paul.

     I have always found the gaurnatee period to be a very grey area (when people want it to be). I have always tried to operate in the ‘spirit’ of what the gaurantee is meant for i.e – working together to share risk as opposed to take your money and run. That being said, if a client is 4 weeks late paying the invoice or showing no committment to replacing the person, then I find myself less inclined to help.

    Like with so many things in our industry, the gaurantee period is open to abuse. There will always be those that do the right thing, and those that don’t. And for this reason we need regulation –  not just to protect those compnaies that use recruters, but the recruitment industry itself.

    • Paul Slezak

      Thanks Luke … as you say it’s not just about protecting the agencies or the individual recruiters – but the recruitment industry itself.

  • Nigel Mills

    Firstly, enjoyed the article. Secondly, agree 100% the the Recruitment Industry (and it’s reputation) would benefit from a dose of regulation.
    Lastly, and at the risk of being slammed as one of “those” recruiters – some of the points struck me as common-sense, and I’m mystified as to why they’d be perceived as “dodgy” practices. Let me explain.
    Further advertising expenses will be billed to the client – If the initial attraction strategy was agreed to (& paid for) by the client, & (if) they want a repeat of the same strategy, why would the Agency foot the bill this time?  
    The replacement is only subject to the availability of suitable candidates – in this case, if there are no candidates (what, none?) available, I have no problem with giving a full refund.
    Whether the client has paid their invoice in full within the stipulated terms of business – um, the client didn’t pay the bill? Or they paid it at 80 days, when the agreed term was 30? I agree that there is some necessary lee-way here – but some clients take advantage of an agency’s goodwill here. We aren’t here to fund someone else’s cashflow. If you don’t pay your electricity bill, what happens?  
    If the new hire was dismissed, whether the client has provided satisfactory written evidence of their unsuitability, in light of the agreed-upon job description – again, flexibility required. In 99% of cases, the client is right. Even in the 1%, take their word for it, and wear a replacement or refund.
    The guarantee is void if the client employed someone else in the meantime, using another recruitment agency – I like to think that I’ve earned the opportunity to attempt to replace a candidate who hasn’t worked out. If my car doesn’t start one morning, I don’t go to a dealer, buy another one, and expect to get it for free. I trust that the manufacturer will attempt to repair (or replace) my car. I might even get a loaner in the meantime.
    The guarantee is void if the job description changes from that agreed upon in the initial brief – I’ve hired someone according to your instruction, then a week after they start, you change the job from underneath them? Flexibility & goodwill may be required, but offering someone “the job that wasn’t” isn’t my (or my candidate’s) doing. Perhaps a credit, but not a refund.
    The guarantee is void if the new hire is made redundant or is incapacitated in any way and can no longer perform the role – two very different things. Unfortunately, redundancies & restructures are a common occurence. A recruiter has 0% ability to control a client’s decision, and can’t be held responsible for an unanticipated restructure. Again, a credit may be in order, but not a refund. Incapacitation: tough one, and I’m going to bite the bullet & say refund or replace, whichever the client prefers. Again, something that is out of a recruiter’s control, but goodwill is required to do business. Cheers.

    • Hi Nigel – some helpful clarifications here, thanks.

      My immediate reaction (as a potential ‘client’), would be that there seem to be a lot of conditions / caveats to the guarantee! 

      I suspect in most cases, conditions like these are not communicated to clients in advance? You may be different. But I’d guess a big driver of dissatisfaction on the client side, would be misunderstanding (or miscommunication) of what’s in/out of the guarantee.

      Hence this post, trying to point out the potential issues! (And our approach to pricing at RecruitLoop, which removes the guarantee altogether, in place of an hourly support model).
      Thanks for the comments.

  • Melissa

    In the recruitment company I work for, we take our business relationships with our clients very seriously. Repeat business is the best sort. Our replacement guarantee is within the first three months of the candidate starting. Our consultants stay in touch regularly with the clients and candidates during this three month period to help iron out any wrinkles. If the candidate does not work out, our replacement guarantee can be used for replacing the person that you have lost or any alternative role you wish to use the credit for on your next hire. No tricks no further advertising expenses. Our consultants work on high commission and low base, and a candidate falling out affects their bottom line, so replacing the candidate quickly is in their best interests. We specialise in a sector that has constant skill shortages. You can’t start working with a client again until you have sorted the lost candidate out. And reputation is everything in a small market.
    Some company’s do have morals and ethics and care about long term relationships with candidates and clients.

  • In recruitment, like any other industry, you get what you pay for. If the client was only paying a $7000 fee for a salesperson, then it should have rung massive alarm bells. That equates to only 10% of a $70k package, the very low end of the range of salesperson’s salaries in Melbourne. Much less than the 15-30% mentioned in the article.

    There are shonks in every industry, but the low fee should have been a warning.

    Also membership of the RCSA is ABSOLUTELY NO guarantee of quality or ethical behaviour. Indeed many of the dodgiest operators are members and have been for years, and with total impunity. Membership is seen as a marketing tool, not a QA measure. Conversely, many of the best operators are NOT members, as they don’t need the RCSA crutch to lean on.

  • Advisor Databases

    Well, that’s a cool move made by these
    Recruitment Solutions Agencies. Well, it is obvious that if a
    candidate provided by such an agency is terminated by the client
    company then apparently it is going to run the company into a viscous
    circle of losses. However the decision to provide a replacement
    candidate free of cost is quite mouth watering for every firm. Our
    market pioneer Financial Media Group is way ahead of all these
    tactics as the candidates provided by it highly qualified and have
    meagre chances of failing in a job.

  • Mark

    Tricky one but….I presume that the agency has put forward the candidate in good faith and run the recruitment process according to the employers instructions.
    It looks like a bad decision has been made but by who? The employer has no doubt met the candidate more than once and made decisions based on what they saw of the candidate, the employer then asked the recruiter to organise the next step based on the employers decision.
    Recruiters do in many ways rely on their clients to make good decisions and I know from experience that recruitment processes are run according to the clients wishes not the recruiters, recruiters don’t make the decisions about who gets hired. That is of course how it should be but when a hire doesn’t work at least some of the responsibility goes with the hiring manager who didn’t make a good decision. Its not fair to ask the recruiter to refund what they were paid when they have run the process according to the clients instructions.
    Even when you know a client firm well its impossible to predict how the chemistry will be between candidates that are introduced and existing staff, that why the interview process takes place and why clients make the decisions.

  • richa

    At Placement Mumbai, we always stand by our clients 100%. Many
    companies offer recruitment and placement services but due to our teams’
    efficiency & dedication we are among the top most placement agency
    in Mumbai. We believe that no other placement agency can offers the
    level of service and support that we give to our each and every client.

  • Hi Paul,

    100 % agreed with you.

    Nice article on recruitment agency myths.

    I am working with GlobaHunt – Recruitment Agency. So, guys don’t worry but check properly before work with any agency.

    Best of Luck.

    To know about GlobalHunt visit @

  • Yes you may right, some recruitment companies are like this once they get the commission they will leave you behind. but not all, in our company we guaranteed that our customer will be guided step by step and give an updated as soon as possible.

    We deployed thousands of workers over 200 companies in Australia,
    you can check our recruitment site for more INFO..

  • Allea Marie Santiago

    I enjoy reading your article. Well it is really hard to find these days trusted naperville staffing agencies. Most of the recruitment agency say too much promise which are really good to hear but when you see the other side it was unrealistic. Most of them also, does not give proper training to the candidate they present to your company. and other agency was up to the salary of the recruited agent.

  • Idea Ventures

    Throughout most of your article, you talk of mistakes made by the client. If a candidate is terminated by the employer, why should the recruiter replace? It was the employer’s mistake in hiring a wrong person or not being able to manage him. Secondly if the client does not pay in time that would obviously make all the future terms void. If the client is breaking the terms & conditions, they should face the consequences. Providing good service to a client does not mean becoming his slave. The client needs to understand that just like his business the recruiter’s is also running a business which carries a cost & needs a profit to survive.

  • im very impressed read your articles nowadays its very hard to find right placement consultancy.we have to first check all track records of the company

  • This is one of the most critical issue that companies and organization have to facenow-a-day. These kind of issue can be minimized in many different ways and changing organization policies with Recruitment services But in many countries all the Seth organization can’t overcome this issue as the authority is centralized and one body rule in the organization.

  • Graham Gourley

    This has always been and always will be a contentious issue for all the obvious reasons and it’s always amazed me that guarantee clauses have become the norm in the industry. How do you guarantee a human being? The ultimate decision to hire is always with the client, not the recruitment firm, so where does ownership of a poor hiring decision lie? The guarantee clause could be palatable for very junior, temporary and commoditised roles, but could be pretty much impossible to honour for senior and specialised (rare) roles. So – why have it at all? In my 10 years of senior level recruitment in the UK I never came across a guarantee clause. Is it uniquely Australian? If so, could it be an indication of our low level of maturity in the recruitment industry here? The ‘labour hire, agency’ approach. In my experience, if a client insists on having a guarantee clause in the contract then you’ve chosen the wrong client to work with. I’ve always been very cautious of who I work with and focussed on developing genuine long-term relationships with my clients. They’ve often gone past the client category and moved into the friend category. If I recruited a senior or key person for them and it didn’t work out, of course I’d want to help a friend in trouble!

  • Carla Houston

    Your article tells many truth about bed recruitment agencies which the employer is facing. The problem faced with recruitment agencies is also with the candidates. These kind of issue can be minimized with ( A review platform to maintain transparency between job seeker and recruitment agencies).

  • David Shanks

    On the other hand I am a recruiter working with a client who has extensively interviewed and hired then less than 30 days later fired very qualified candidates (5 since Jan) and I get the same feedback from the candidate every time. They tell me that the company is thoroughly un-organised, the management does not communicate with them when they need help and basically offers no training or help of any kind. These candidates have excelled in their previous jobs. There are even some he said she said reasons why they fired a couple of them. This company is ruining our reputation in the area by making all these candidates (who know a lot of others in the field) not trust us now. And now that we don’t want to work with them anymore they want us to pay for the last couple of replacements! Now how is that right? It’s not! Recruiters and clients alike, both need to hold themselves to ethical standards. Neither should be bullied into paying money they don’t owe.