Guarantees

I understand why companies want them. They pay a lot of money for something and they want to know that on some level, you the provider of the product stands behind that product. It’s obvious why the client wants to get back all the money if the candidate does not work out for any reason within a specific period of time. I also know , no recruiter out there wants to give back any of the money they collect should a placement go south. 

There are a ton of different ways to handle guarantees. They come in all shapes and sizes. Some are a full cash back, some have some component of cash and credit, and some cash returns are based on a length of time the candidate worked before hitting the door – all kinds. 

Then there is the time factor. Most of the agency agreements that I have seen were always between 60 and 90 days. Very few companies ever asked for 120 days and I think they figure out quickly, that strategy does not work. Most companies wanted 90 days and I always wanted 60 days. I have heard of 30 day guarantees and I think I remember reading somewhere that some executive search firm was giving a year. 

Some people make it easy and say if the candidate works a month, we keep a third. If the candidate works two months, we keep two thirds. If the candidate works three months, the guarantee is over. Sometimes if the candidate works under thirty days, all the money back and for every day after that you just work the percentages until the total fee is earned. I bet there are some that look like a book. 

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I think that whatever you choose to do, you should never ever agree to give all the money back. Maybe it makes sense to say that you will give back all the money plus 10% but they get it back in 5 installments over the next 5 placements made, and the fee agreement is signed at 40% of the candidates salary. Hmmm, I kind of like that one. 

Jim, I talked to someone a while back who had just made a big placement. I’ll ask him about the guarantee.

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