Placement guarantee period: replacement vs. refund, and how to word the clause

A placement guarantee period is the time after a placed candidate starts during which the agency will do something if the hire does not last: search for a replacement at no extra fee, refund part of the fee, or credit it against a future placement. It is a commercial promise, not a legal requirement, so everything about it, including length, remedy and conditions, is whatever your client agreement says. The difference between a guarantee that protects the relationship and one that quietly refunds your margin is in the conditions.

This page compares the remedies, gives copy-ready wording for each, and works through the refund arithmetic. For the full agreement the clause sits in, see the placement fee agreement template.

The three remedies compared

Replacement keeps the money in your business and gives the client what they wanted, someone in the seat. Some clients will insist on a refund. One compromise is replacement first, with a credit if you cannot present a suitable replacement within a set time.

Choosing the length

There is no statutory period for a guarantee between an agency and an employer. Pick a length by asking three questions:

• How long until a bad hire becomes visible in this role? A role with a long ramp may need a longer window before either side knows it is not working.
• What can you afford? Every day of guarantee is risk priced into the fee. A longer guarantee is a reasonable trade for a higher fee, exclusivity or faster payment; see how to negotiate recruitment fees.
• Does it line up with the client's probation period? If the client reviews new hires at 90 days, a guarantee that ends at 60 invites argument.

Whatever you choose, state when it starts. "From the start date" is clear. "From placement" is not, because it can be read as the offer date.

The conditions that keep it fair

Without conditions, a guarantee becomes insurance against the client's own decisions. Include these:

1. Paid on time. The guarantee applies only if the fee was paid within terms.
2. Prompt notice. The client tells you in writing within a short, stated period after the hire leaves.
3. Covered reasons only. Resignation, or dismissal for performance or conduct. Not redundancy, restructuring, or a change the client made to the role, pay, hours, manager or location.
4. No re-hire. If the client re-hires the same person within a set period, any refund or credit is reversed.
5. One remedy per placement. A replacement is not itself guaranteed again unless you choose to extend it.

Copy-ready clauses

Replacement guarantee

GUARANTEE - REPLACEMENT
If a Candidate's employment ends within [__] days of the start date
because the Candidate resigns or is dismissed for performance or
conduct, the Agency will search for a replacement for the same role at
no further fee. The Agency will work on the replacement for [__] days
from the Client's notice. This guarantee applies once per placement,
and only if:
(a) the fee was paid in full within the payment terms;
(b) the Client notifies the Agency in writing within [7] days of the
    employment ending, stating the reason; and
(c) the employment did not end because of redundancy, restructuring,
    or a material change to the role, pay, hours, reporting line or
    location made after the start date.

Sliding-scale refund or credit

GUARANTEE - REFUND OR CREDIT
If a Candidate's employment ends within [90] days of the start date
for a covered reason, the Agency will [refund] [credit against the
next fee] the following percentage of the fee paid:
  Days 1-30:  [__]%
  Days 31-60: [__]%
  Days 61-90: [__]%
Conditions (a) to (c) of the replacement guarantee apply. A credit
must be used within [12] months of the Candidate's last day and
applies to [any role] [a role at the same or lower fee].
If the Client re-engages the Candidate within [12] months, any refund
or credit is repayable.

Replacement first, then credit

GUARANTEE - REPLACEMENT THEN CREDIT
The Agency will first search for a replacement under the replacement
guarantee. If the Agency has not presented [__] suitable candidates
within [__] days of the Client's notice, the Client may instead take a
credit of [__]% of the fee against its next placement, to be used
within [12] months.

Worked examples

Invented numbers, to show what each wording produces on the same placement.

Pro-rata feels fairer to finance teams; bands are easier to explain and avoid arguments about exact dates. Run your own fee through both before choosing.

Handling a guarantee claim, step by step

1. Get the facts in writing. Ask the client for the last day worked and the reason the employment ended, and check the date against the notice condition.
2. Check the conditions. Was the fee paid within terms? Is the reason a covered one? Did the client change the role, pay or manager after the start date?
3. Talk to the candidate. Their account often differs from the client's, and it tells you whether a replacement would run into the same problem.
4. Confirm the remedy by email. State which remedy applies, the replacement deadline or the credit amount and expiry, so there is one record both sides can point to.
5. Log the cause. Keep a short note of why each guaranteed placement failed. After a few, you will see whether the problem is a client, a role type or a gap in your screening.

Refunds and recruiter commission

If you pay recruiters commission on a placement and later refund part of the fee, decide in advance whether the commission is clawed back. Put it in the commission plan in writing, and check with an employment lawyer: rules on deductions from pay and on recovering commission already earned vary by state and depend on the plan's terms. The simplest approach is to treat commission as not earned until the guarantee period ends, if your plan and state law allow it.

Making fewer guarantee claims

The best guarantee is one you rarely use. Look for the mismatches a screening process can catch before the offer: pay expectations, commute, the manager, or a skill that was assumed rather than tested.

• Confirm pay, schedule and location in writing before the offer; see how to pre-close candidates.
• Check what the candidate is really leaving for and whether a counteroffer is coming.
• Test the skills the role depends on, not only the ones on the resume; how to avoid a bad hire has a checklist.
• Call the hire and the manager at the end of the first and fourth weeks, and log what they say.

A guarantee checklist

• Length stated, starting from the start date.
• Remedy chosen, and who chooses between options.
• Covered reasons listed; exclusions listed.
• On-time payment and prompt written notice as conditions.
• Credit expiry and scope; re-hire clawback.
• Commission plan aligned with the guarantee.