She was excellent in the interviews, excellent in the trial task, and gone by the end of week six for a job closer to home that paid slightly more. No drama, no dispute, a perfectly polite resignation letter. We wished her well and then went looking for the rebate clause, which we were fairly sure said we would get most of our money back.
It did not say that. What it said, once we read it properly rather than skimming it eight months earlier, was something quite different — and the gap between what we assumed and what we had signed cost roughly the price of a small van. The figures below are illustrative, but the clauses are the ordinary ones.
The fee is the easy part to read
The headline was straightforward enough. A permanent placement fee charged as a percentage of the candidate's first-year gross salary, payable within 14 days of the start date, plus VAT. On a £45,000 salary at 20%, that is £9,000 plus VAT.
Two details in that sentence are worth more attention than they usually get. First, what counts as salary. Our terms defined the fee base to include not just basic pay but guaranteed bonuses, a car allowance and any joining payment. That took the base above the number we had in our heads, and nobody had queried it.
Second, the payment date. Fourteen days from the start date means you settle the invoice long before you know whether the hire has worked. That is not unreasonable from the agency's side — they have done the work — but it does mean the rebate clause, not the fee clause, is the one that carries all your risk.
The fee clause tells you what you are paying. The rebate clause tells you what happens when it goes wrong, and it is always the shorter of the two.
The rebate scale is not a refund
Ours ran on a sliding scale: 100% in the first four weeks, 50% in weeks five to eight, 25% in weeks nine to twelve, nothing after that. She left in week six, so we expected £4,500 back.
What we got was a credit note. The clause did not promise a refund at all — it promised a rebate "by way of credit against a future placement fee, valid for twelve months from the date of termination". If we hired through them again inside a year, we would get £4,500 off. If we did not, we would get nothing.
That is a materially different product from the one we thought we had bought. A refund returns your cash. A credit locks you into using the same agency again, after they have just supplied someone who lasted six weeks, and it puts a clock on the decision. It is a retention device dressed as a guarantee.
There is a harsher variant, and it is common: replacement-only. The agency undertakes to find you another candidate rather than to return anything, with no cash alternative at all. If the role has since been filled internally, or the need has passed, or you simply do not want to work with them again, a replacement-only clause is worth precisely nothing.
The conditions that switch the rebate off
Read the sentence after the rebate scale. That is where the conditions live, and any one of them can void the lot.
Notification in writing within a short window — often seven days from the termination date. Miss it while you are busy covering the vacancy and the entitlement lapses. This is the most common way rebates are lost, and it is entirely self-inflicted.
Payment of the original invoice in full and on time. If you disputed anything, paid late or held back part of the fee, the rebate typically falls away. Agencies are within their rights on this one, and it catches out firms who thought a small late payment was a small matter.
The reason for leaving. Many terms exclude redundancy, restructuring, a change to the role, or dismissal for reasons other than gross misconduct — which quietly means the rebate covers only the candidate walking out, not the hire turning out to be wrong. That is a narrower promise than most buyers assume.
Re-engagement. If you later employ that candidate, or engage them as a contractor, within a stated period, the full fee typically becomes payable again.
And introduction fees. Under most terms, an introduction is deemed accepted unless you object within a few days, so a speculative CV sent by email can create a liability if you hire that person months later through another route. If you are running a proper process, how to run a recruitment process that will not land you at a tribunal is the other half of getting this right.
The temp-to-perm bit that actually has law behind it
The second incident was more useful, because on that one the law was on our side and we did not know it.
We had a temp through an employment business, she was good, and after a few months we wanted to take her on permanently. The agency quoted a transfer fee. We assumed that was simply what it cost.
It is not. Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, a transfer fee is unenforceable unless the contract also gives the hirer the option of an extended period of hire instead — that is, continuing to take the worker through the agency for a specified further period, after which they transfer with no fee at all. The choice belongs to the hirer.
There is a time limit on when a transfer fee can be charged at all. The relevant period runs to whichever ends later: eight weeks beginning the day after the worker last worked for you through that employment business, or fourteen weeks beginning on the first day they worked for you through that supply. Outside that window, the charge does not arise.
So the actual decision is a comparison, not a bill. On one side, the transfer fee. On the other, the extra margin you pay the agency across the extended hire period. Work out both and pick the cheaper. In our case the extended hire was slightly better, and knowing the option existed changed the conversation entirely — which is the general point about agency terms. The related trap on longer temp assignments is the twelve-week rule for agency workers, which changes what a temp costs you before any of this arises.
What we changed in the terms
We now negotiate four things before signing with any agency, and none of them has ever been refused outright.
A cash refund alternative to the credit note, even at a slightly lower percentage. Cash you can spend anywhere beats a credit you can spend in one place.
A longer rebate window — six months on a sliding scale rather than twelve weeks. Most genuine mis-hires surface between months three and six, well after a twelve-week scale has expired. That is also the window a probation period is designed to cover, so aligning the two is a reasonable thing to ask for.
A defined fee base: basic salary only, excluding bonuses, allowances and joining payments. Cheap to agree at the outset and awkward to argue afterwards.
And a notification period we can realistically meet, with the trigger diarised the day anyone resigns.
The wider lesson is the same one that applies to every hire, agency or not. The fee is the visible cost and it is rarely the biggest one — the real cost of a bad hire is mostly the months of half-speed, the management time, and the work that did not get done while the seat was empty twice. The agency terms determine only how much of the visible part you get back, and by default the answer is less than you think.
Common questions
Do I get my money back if a recruitment agency's candidate leaves quickly?
Only to the extent your terms say so, and often less than you expect. Most agreements set a sliding rebate scale over eight to twelve weeks, but many provide a credit against a future placement rather than a cash refund, and some offer a replacement candidate only. Conditions attached to the rebate matter as much as the scale: written notification within a short window, the original invoice paid in full and on time, and exclusions for redundancy, a change to the role, or dismissal for anything other than gross misconduct. Read the sentence after the scale, because that is where the entitlement is usually lost.
Can a recruitment agency charge a fee if I hire their temp permanently?
Sometimes, but not on their terms alone. Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, a transfer fee is unenforceable unless the contract also offers the hirer the alternative of an extended period of hire, after which the worker transfers without a fee. The choice is yours, not the agency's. There is also a time limit: a transfer charge can only arise within the relevant period, being whichever ends later of eight weeks from the day after the worker last worked for you through that business, or fourteen weeks from the first day of that supply.
What is a rebate period in a recruitment agreement?
It is the window after a placement starts during which the agency will return some value if the hire ends. Typically it runs as a sliding scale — for example the full fee in the first month, half in weeks five to eight, a quarter in weeks nine to twelve, nothing thereafter. The two things worth negotiating are the length and the form. Twelve weeks is short, because genuine mis-hires often surface between months three and six, so ask for six months. And ask for a cash refund alternative rather than a credit note, even at a lower percentage, because a credit only has value if you use the same agency again.
What should I negotiate in recruitment agency terms before I sign?
Four things, all of which are cheap to agree upfront and impossible to fix later. Define the fee base as basic salary only, excluding bonuses, car allowances and joining payments, because a loose definition quietly raises the fee. Ask for a cash refund option alongside any credit note. Extend the rebate scale beyond twelve weeks, ideally to six months, so it covers the period when mis-hires actually surface. And check the notification requirement, then diarise it the day anyone resigns — missing a seven-day written notice window is the most common way a valid rebate entitlement is lost.
