Recruitment debt disputes - tips and templates
Home > Debt Dispute Tips & Recruitment Templates
Sterling’s experience to prevent and recover recruitment agencies debts
Recruitment agencies often struggle with clients who may refuse to pay invoices or dispute their obligation to pay for services provided. They can use tactics ranging from exploiting loopholes in your terms of business, to employing through a different business entity owned by the same individual or group. Sterling have experience in collecting recruitment agency debts since 2006, during that time we have grown to understand the regular disputes and tactics that debtors can use in their attempts to avoid payment. We have put together useful advice below to help you protect against bad debts, and to resolve disputes.
Final demand letter for recruitment sector
Illegitimate disputes are common especially for permanent placements, either from disreputable customers, or where there has been a misunderstanding of the client’s liability. In many cases problems with such customers can be solved by presenting them with a properly composed response or final demand letter. Sterling have – for your convenience – written final demand letter templates available specifically for use within the recruitment sector.
You can find and download the templates for such letters >>at the bottom of this page<< including:
- Advising client of a Back Door
- Non-payment of invoice when candidate has left in rebate period
- Temp to perms
- Reminder for payment
- Final Demand
Resolving disputes and protecting against bad debts – Tips for recruitment agencies
There are actions that agencies can take themselves to help avoid bad debts, to ensure they have a watertight case, and to maximise the value that can be claimed from a debtor should debt recovery action be required.
Strengthen your contracts
Review your terms of business with a solicitor* specialising in the recruitment sector. Often recruiters inherit contracts from other firms or contacts, clauses may be out of date or contain weaknesses. But even the current, regularly-used agreements from leading recruitment sector associations have deficiencies that can open up a loophole for the debtor. See here for advice on tightening up your recruitment terms of business.
Clearly define your terms of business
Make sure the terms of business are incorporated correctly. It’s a common misconception with recruiters that by emailing their agreement along with the CV means that a contract is in place. When dealing with a new client and even a new vacancy, you should ALWAYS e-mail the client your terms of business separately with a cover letter or cover message BEFORE sending details of any candidates. This provides a clear separation between formation of the contract (incorporation of terms) and performance of the contract (an introduction). Provided the client does not respond stating they do not agree with your terms, or offering alternative terms, then your terms of business should then apply and you can proceed to performance (introductions). As a belt and braces approach we also recommend an introductory cover letter with the terms and an e-mail footer with a hyperlink to your terms on all out-going e-mail.
Know your clients: Check company status
Make sure you know who you’re dealing with. Often agencies will begin work for a business that is listed as non-trading, insolvent or on the brink of bankruptcy. You can check a company’s status for free at companies house which will show whether the company is live or has a winding up petition against it. For more information including details of CCJ’s you can subscribe to a credit checking service for as little as £300 per year.
Identify the true hiring entity: Ensure contracts cover related entities
Another trick we have seen becoming more regular is for the candidate to be engaged by a company related to your client, for example an individual may own or be the director of two business entities, sign an agreement with the recruiter using one entity, but engage the candidate with the other. This can also happen with different businesses within the same group. Your terms of business should be in place for the business that will ultimately hire the candidate, and they should deal with instances whereby the client passes the candidate on to another business (in which case the client is liable for your fee, not the hiring business).
Uncover backdoor hires: Utilize Sterling’s expert back door fee finder service
Back door hires, where the client hires the candidate without making the agency aware (and temp to perms) are a growing problem for recruiters, and are often a problem without the agency realising. There should be a process in place to search for back door placements on a consistent and regular basis. You should search 12 months of data and for best results this should take place every quarter. Sterling provide a back door fee finder service to find your back door cases on a no find, no fee basis.
Contact Us - Expert debt recovery
A debt recovery agency specialising in recruitment debt will also help you to tighten up your procedures and agreements so that you are best placed to collect, protecting your business from bad debt. You can sign up with Sterling at no cost, with no obligation so you’re ready to refer debts quickly should the need arise. Contact us to find out more.
Download Letter Templates
Please leave your email address to download our resource
* Sterling Debt Recovery uses an independent 3rd party solicitor. You can see more information here legal services.
Need More information
Strengthen your recruitment terms of business. Learn how here.
Back Door Hire: Learn more with our back door fee finder service.
Sign up for our no-cost, no-obligation service today. Contact us to learn more.
