Critical Components of a Staffing Supplier Contract Part I: Scope, Terminations, and More

Good fences, it is said, make good neighbors. The corollary for workforce management organizations might be best stated as “good contracts make good partners.” No one would dispute, producing a strong and detailed contract between your organization and the staffing suppliers you rely upon for talent is a critical success factor. A good contract protects both parties’ best interests and helps to prevent time consuming and unproductive disputes. This two-part series covers, in depth, the key elements contained in a model contracts between a staffing supplier and a hiring organization.

1. Fifty-Thousand Foot View

A good contract properly articulates a detailed scope of services. The scope of services section of a contract outlines the purpose of the contract along with the specific parameters within which the supplier will provide services (e.g., direct hire vs. contracted services).  This section should itemize all the services the agency is committing to perform under the agreement. Be sure to include as much detail as you can when defining what metrics are to be used to quantify success and failure. This way there is no room for debate about whether the services provided meet with contractual obligations later. For more tips on specific methods of measuring workforce supplier performance, read this previously posted blog.

2. Define the Term and Termination Clauses 

This section of the contract establishes expectations regarding the term and length of the agreement, what is to occur at the conclusion of the contract term, and how to address any breaches of contract terms by either party. Term of agreement is typically set for one year at the time of contract creation (however any term may be specified according to business requirements). The contract should stipulate in specific terms, how far in advance a written notice of early termination must be presented by either party should either group wish to dissolve the agreement ahead of the one year term.

In addition, this section ought to include notes on how to address supplier employees still on assignment during termination. Will they continue the assignment, or will their assignment be terminated immediately?

3. Stipulations Governing Breach of Contract 

Not every supplier relationship will be a happy one. Protect your organization against partnerships gone bad. Language should be included ensuring, in the event either party breaches the agreement terms there is a specified number of days within which the breach must be cured. There should also be specific remedies in the event that a breach is not cured within the curing period and instructions on how to proceed in such a scenario.  For example, language could hold that the non-breaching party may choose to end the contract after the set amount of days in the cure period if no attempt at correction is made. It is also wise to include instructions on how the status of supplier-employees performing contracted services at the date of termination will be affected, along with payment terms should the contractor be terminated for a breach.

4. Include a section clarifying ownership of items delivered under a supplier staffing agreement

Requirements for the return of client property at the end of a contractor engagement should be well-defined. Property can be physical and/or intellectual including items such as source code, laptops, documentation, reports, drawings, photos, blueprints, etc. Included in this would also be any reproductions made. Should a supplier or supplier employees be terminated, a strong contract specifically defines that these items shall remain property of the client at all times, and must be returned to the client upon termination of the agreement, or upon demand.

5. Payment Terms 

This section of the supplier contract is vital to identifying the amount of time between client payment and supplier payment as well as the transaction fee or percentage the contract owner will be retaining. Details regarding dates of payment, method of payment, effect of late payments, and withholding of taxes should all be included in this important section of the contract. Guidelines important to address within this section may include fees being paid to the contract holder (agency), modes of pricing, discounts, conversion fees, and responses to changes in statutory expenses.

Check back soon to read Part II of the Critical Components of the Staffing Supplier Contract wherein we’ll examine the array of insurance requirements commonly associated with the staffing supplier/client relationship. In the meantime, you can refresh on these 3 steps to maximize your workforce supplier network.