3 Things to Watch Out for in Contract Staffing Agreements

It’s no mystery why recruiters and businesses use contract staffing firms to find and manage contract or temporary workers. There are many benefits to using these firms, especially if businesses don’t have an HR or legal team. But as in any field, recruiters and firms must pay close attention to the fine print in contract staffing agreements. Here are the top three things to look out for and why they can mean bad news.

What are Contract Staffing Agreements?

Let’s first start with what contract staffing agreements are and why you need them. Whether you’re a recruiter or a firm, you’ll work with many clients who use your services to find and manage temporary workers. To legally establish a business relationship, you’ll need an agreement or contract. These can be reasonably straight forward, but it’s essential to look out for conditions that put a higher financial risk on you.

Contractor Guarantees

“Contract guarantee” is a term within a contract staffing agreement where the recruiter or staffing firm guarantees that a temporary worker will finish an assignment. That seems like a fair condition — of course, clients want candidates that can bring high-quality work and skills that benefit their business, right? The client would expect the candidate to, in turn, finish the job. But nothing can be guaranteed in a contract unless you can confidently control the situation. 

As a recruiter or staffing firm, you cannot control your hired workers’ actions or lives. Maybe they fall ill or have a family emergency. Perhaps they don’t have the skill level the client needs or isn’t the perfect candidate you thought. If you guarantee that your worker will finish a contract, then the agreement may include hefty penalty fees that fall on your shoulders. Or, you may then owe the client reimbursement or have to find a replacement for free. 

No-Show Penalties

This concept is quite similar to a contract guarantee, but it’s specific to temporary or contract workers who become “no-shows.” As a recruiter, you work hard to find reliable, exemplary candidates that fit your clients’ needs. Most likely, you’ll offer high-quality workers that both you and the client can trust. But there are many examples of temporary workers simply not showing up to an assignment.

If a no-show penalty is a part of your contract agreement, you risk having to pay a penalty fee to your client. Usually, this appears as a certain amount of hours that the client can bill you, using the established rate of the contract itself. Again, that puts a much higher financial risk on you, and nothing on the client. Additionally you will have to figure out how to react if they show back up.

Satisfactory Work Guarantees

This stipulation is tricky because it’s almost always qualitative and based on the opinion of your client. If the client isn’t completely satisfied with the work of the temporary employee you provided or feels that the contractor hasn’t performed their role to the client’s desire, they can avoid paying their bill altogether. Too often, this condition includes very vague language that the parties interpret in different ways.

It’s best to avoid all three of these conditions in your contract staffing agreements. If a client is insistent, offer to discuss the stipulations and come to a mutually beneficial agreement instead.