Retained search agreement template: scope, installments, off-limits and cancellation

A retained search agreement is the contract under which a client pays a search firm in installments to run an exclusive search, whether or not the first shortlist produces a hire. Because money changes hands before anyone is hired, the agreement has to be much clearer than a contingency one about four things: what the firm will deliver, when each installment is earned, what happens if the search is cancelled or put on hold, and who the firm may not recruit.

Below is a template, a worked installment schedule, and notes on the clauses that decide who keeps the money when a search goes wrong. For whether a search should be retained at all, see retained vs. contingency recruiting.

What the agreement must answer

The Association of Executive Search and Leadership Consultants' Client Bill of Rights says the written engagement should set out the assignment from start to finish, the lead consultant, the scope and timing, the fees and payment schedule, deliverables, and specific terms such as off-limits. That is a sensible checklist whether or not you are an AESC member. In practice, answer these:

1. What is the role, who leads the search, and what will the client receive and when?
2. How is the fee calculated, how is it split, and what triggers each invoice?
3. Are expenses included, capped or billed at cost?
4. Who does the fee cover: only candidates the firm finds, or anyone hired into the role?
5. What happens if the client cancels, pauses or changes the role?
6. Whom will the firm not recruit, and for how long?
7. What happens if the hire leaves early?

The retained search agreement template

RETAINED SEARCH AGREEMENT

Between: [Firm legal name] ("the Firm") and [Client legal name]
("the Client"). Effective date: [date].

1. THE ASSIGNMENT
1.1 Role: [title], reporting to [title], location [__].
1.2 Lead consultant: [name]. The Firm will tell the Client before
    changing the lead consultant.
1.3 The Firm is engaged exclusively for this role from the effective
    date until the role is filled or this agreement ends.

2. DELIVERABLES AND TIMING
2.1 Within [__] weeks: a position specification agreed with the
    Client.
2.2 Within [__] weeks of the specification: a market map or target
    list and a progress report.
2.3 Within [__] weeks of the specification: a shortlist of [__]
    assessed candidates, each with a written assessment.
2.4 The Firm will report progress to the Client at least every [__]
    weeks, including market response and obstacles.
2.5 The Client will give interview feedback within [__] business days
    and make its decision makers available. Delays caused by the
    Client extend the Firm's dates by the same period.

3. FEE
3.1 The fee is [__]% of the hired candidate's first-year
    [base salary] [total guaranteed cash compensation: base plus
    guaranteed and target bonus], with a minimum fee of [$____].
3.2 Until the hire is known, installments are calculated on an
    estimated compensation of [$____] (the "Estimated Fee").
3.3 The fee is payable in installments:
    (a) [one third] of the Estimated Fee on signing;
    (b) [one third] of the Estimated Fee on [presentation of the
        shortlist] [the date [__] days after signing, whichever is
        earlier];
    (c) the balance, adjusted to the actual compensation, on the
        candidate's acceptance of an offer.
3.4 If the adjusted fee is lower than the installments paid, [no
    refund is due] [the difference is credited against a future
    search].
3.5 Invoices are payable within [__] days.

4. WHO THE FEE COVERS
4.1 The fee is due if the Client hires anyone into the role during
    the engagement, [including internal candidates and candidates who
    approach the Client directly] [except internal candidates named
    in Schedule A].
4.2 If the Client hires a second candidate from the Firm's shortlist
    into any role within [12] months, a fee of [__]% of that
    person's first-year compensation is due.

5. EXPENSES
5.1 [Administrative expenses are billed at [__]% of the fee.]
    [Reasonable out-of-pocket expenses are billed at cost, capped at
    $____ without the Client's written approval.]
5.2 Candidate travel for interviews is paid by the Client [directly]
    [through the Firm at cost].

6. CANCELLATION, HOLD AND CHANGES
6.1 The Client may cancel by written notice. Installments invoiced or
    due before the notice date remain payable. [No further
    installments are due.]
6.2 If the Client puts the search on hold for more than [__] days,
    either party may treat it as cancelled under 6.1.
6.3 If the Client materially changes the role (level, location,
    reporting line or compensation range) after the specification is
    agreed, the Firm may treat it as a new search, with a new fee
    agreed in writing.
6.4 If the Client hires a candidate introduced by the Firm within
    [12] months after cancellation, the full fee is due, less
    installments already paid.

7. OFF-LIMITS
7.1 During the search and for [12] months after it ends, the Firm
    will not approach [employees of the Client] [employees of the
    Client's [division] at [title] level and above] about other
    roles.
7.2 This does not stop the Firm speaking to an employee who
    approaches it independently, or responding to a public job
    advertisement.

8. GUARANTEE
8.1 If the hired candidate leaves, or is dismissed for performance or
    conduct, within [__] months of starting, the Firm will run one
    replacement search for the same role, charging only expenses.
8.2 The guarantee applies only if all fees were paid on time and does
    not apply after a restructuring, a change of the candidate's
    manager or role, or the Client's breach.

9. CONFIDENTIALITY AND CANDIDATE DATA
9.1 Each party will keep the other's confidential information, and
    candidate information, confidential and use it only for this
    search.
9.2 Both parties will handle candidate data in line with applicable
    privacy law and comply with equal employment opportunity law.

10. REFERENCES AND CHECKS
10.1 The Firm will take [__] references for the preferred candidate
     with the candidate's consent. The Client is responsible for any
     background, credit or right-to-work checks and for the hiring
     decision.

11. GENERAL
11.1 This agreement is the whole agreement for this search and
     prevails over any purchase order. Governing law: [__].

Signed for the Firm: ________ Name/title: ________ Date: ____
Signed for the Client: ______ Name/title: ________ Date: ____

A worked installment schedule

An invented search, to show how the adjustment in clause 3 works.

The split in thirds is only an example; halves, or fixed monthly installments over the expected search length, are also used. Whatever you choose, tie the second installment to a date as well as a milestone, so a client who delays interviews cannot delay your invoice indefinitely.

Clause notes

Deliverables (clause 2)

This is what the client is buying. Vague deliverables lead to arguments about whether the second installment is due. Name the documents, the number of shortlisted candidates, and the reporting rhythm. Clause 2.5 protects your dates when the client is the one who stalls.

Who the fee covers (clause 4)

The template makes the fee payable on any hire into the role during the search, on the reasoning that the client is paying for the search rather than an introduction. Clients with a strong internal candidate will object. Rather than dropping the clause, list named internal candidates in a schedule and exclude only them.

Cancellation (clause 6)

Say which installments survive cancellation, and cover the quieter ways a search ends: an indefinite hold and a role that changes into a different job. Without 6.3, a director search that becomes a VP search halfway through is still billed at the director estimate.

Off-limits (clause 7)

Clients expect you not to recruit their people. Each off-limits promise also closes part of the market to you for other clients, so define it narrowly: which part of the business, which levels, and for how long. Keep a register of active off-limits commitments so every consultant in the firm can check it before an approach.

Guarantee (clause 8)

The template offers a replacement search rather than a refund, because the installments paid for work already done. Placement guarantee period covers conditions and wording in more detail.

Common retained-search mistakes

Running the search to the agreement

Send each progress report on the date in clause 2.4, even when there is little to report, and send the shortlist with written assessments that match the specification. When the second installment is questioned, those reports are your evidence that the work was done. For assessing senior candidates consistently, see executive search screening questions, and for the contingency alternative, the contingency recruiting agreement template.