CPC Contract Negotiation & Placement Agreements 1 — Questions and Answers
Question 1: In a retained search agreement, the client typically pays the search firm:
- Only upon successful placement of a candidate
- A portion of the fee upfront before the search begins (Correct answer)
- A flat hourly rate for recruiter time
- Nothing until the candidate completes 90 days of employment
Correct answer: A portion of the fee upfront before the search begins
Retained searches require the client to pay a portion of the fee upfront (often one-third), giving the firm dedicated resources to conduct the search.
Question 2: What is the primary distinction between a contingency fee arrangement and a retained search?
- Contingency fees are always higher than retained fees
- The recruiter is paid only upon successful placement in a contingency arrangement (Correct answer)
- Retained searches are used only for entry-level positions
- Contingency arrangements require an exclusivity clause
Correct answer: The recruiter is paid only upon successful placement in a contingency arrangement
In contingency recruiting, the fee is contingent on a successful hire, meaning the recruiter earns nothing if the client hires through another source or internally.
Question 3: An 'exclusivity clause' in a placement agreement means that the client agrees to:
- Interview only candidates referred by the recruiting firm
- Work with only one recruiting firm for a defined period or position (Correct answer)
- Hire the first qualified candidate presented by the recruiter
- Pay a premium fee in exchange for faster turnaround
Correct answer: Work with only one recruiting firm for a defined period or position
An exclusivity clause restricts the client from engaging competing firms or sourcing candidates independently for the covered position or time period.
Question 4: A standard guarantee period in a placement agreement protects the client by:
- Locking in the placement fee for a set number of months
- Requiring the recruiter to provide a free replacement if the placed candidate leaves within the period (Correct answer)
- Guaranteeing a minimum number of qualified candidates will be presented
- Preventing the recruiter from placing the same candidate with competitors
Correct answer: Requiring the recruiter to provide a free replacement if the placed candidate leaves within the period
A guarantee period (commonly 30–90 days) obligates the recruiting firm to provide a free replacement or refund a prorated fee if the placed candidate leaves or is terminated without cause.
Question 5: An off-limits clause in a staffing agreement typically prohibits the recruiting firm from:
- Presenting candidates who are currently unemployed
- Soliciting employees from the client company for a specified period (Correct answer)
- Contacting references without written permission
- Sharing salary information with competing firms
Correct answer: Soliciting employees from the client company for a specified period
Off-limits (or non-solicitation) clauses prevent the recruiter from raiding the client's own workforce by recruiting their employees for other clients during and after the engagement.
Question 6: When a placement fee is expressed as a percentage of first-year compensation, the base for calculation typically includes:
- Base salary plus all anticipated bonuses and equity grants
- Base salary only, excluding variable compensation
- Base salary plus guaranteed bonuses and any sign-on bonuses (Correct answer)
- Total compensation as reported on the W-2 form from the prior year
Correct answer: Base salary plus guaranteed bonuses and any sign-on bonuses
The fee base commonly includes base salary plus any guaranteed bonuses or sign-on payments, though exact terms should be defined in the agreement to avoid disputes.
Question 7: If a client hires a candidate presented by a recruiter without paying the agreed placement fee, the recruiter's primary legal remedy is typically:
- Filing a complaint with the Department of Labor
- Pursuing breach of contract action in civil court (Correct answer)
- Revoking the candidate's employment offer directly
- Reporting the client to the state licensing board
Correct answer: Pursuing breach of contract action in civil court
Placement agreements are enforceable contracts, and failure to pay the agreed fee constitutes breach of contract, giving the recruiter standing to sue for damages in civil court.
CPC Contract Negotiation & Placement Agreements 1
In a retained search agreement, the client typically pays the search firm: