Temp to Third Party Transfer Fees: When and who can you charge?

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This article focuses on the rights of employment businesses where a temporary worker is engaged by a third party having been introduced or supplied to a client. This is perhaps the least common but certainly the most controversial form of recruitment transfer fee as the client does not normally benefit from the engagement. Nevertheless the engagement results in the employment business losing a valuable temporary worker and the ability to charge an introduction fee.

This article is the third in a series of articles concerning transfer fees by Luke Tucker Harrison, Partner in the Recruitment Sector Team. For a general background on transfer fees please see the first article and the second article in the series.

Temp to third party Transfer Fees typically arise in two circumstances following the introduction of a temporary worker to a client:-

1. Where the client is providing an outsourced service for a third party. For example the client may be a facilities management company contracted to provide a back office function and the temporary worker may be placed as part of that back office function with the end user client. The engagement of the temporary worker by the end user client triggers a transfer fee.

2. Where the client recommends or otherwise puts the temporary worker in touch with a third party. For example a client who operates out of a serviced office provides a recommendation of the temporary worker to another business within the same office and this results in the temporary worker being engaged by the other business.

The client may not have any control over the engagement but the client will have a control over the introduction that results in the engagement. In the first example the client will have placed the temporary worker in a position where they are essentially working for the third party through the client. Prior to the engagement the client should have negotiated an indemnity from it’s end user client for circumstances where a transfer fee arises following engagement by the third party. In the second example the client’s actions in providing the recommendation could have been avoided.

When determining whether or not a third party Transfer Fee has been triggered the employment business should first determine whether or not there has been an introduction within the meaning of the employment business’s standard terms of business. The Recruitment Employment Confederation (“REC”) standard terms, upon which most employment business terms of business are based, define introduction as follows:-

“Introduction means (i) the passing to the Client of a curriculum vitae or information which identifies the Temporary Worker; […] and “Introduces” and “Introduced” shall be construed accordingly”

In the ordinary course of business a temp to third party Transfer Fee is unlikely to arise out of “the passing […] of a curriculum vitae” to the third party by a client but rather “information which identifies the Temporary Worker”. This could be a name, email address or a telephone number.

Once an employment business is satisfied that there has been an introduction the REC standard terms provide “the Client shall be liable to pay a Transfer Fee if the Client Engages the Temporary Worker either directly or through another employment business, or Introduces the Temporary Worker to a third party that subsequently Engages the Temporary Worker .” Whilst there may be evidential issues in proving the engagement so long as the engagement can be proven the employment business is entitled to a temp to third party Transfer Fee.

Case Study (1)

We acted for an employment business who had supplied a temporary worker to a facilities management company (“the Client”). The Client supplied back office and reception staff to it’s own client (“the End User”). The temporary worker was placed on the reception desk at the End User. The End User, having been impressed by the temporary worker, engaged them in a permanent role.

The facilities management company defended the claim on the basis that they had to have done something positive to cause the introduction. The matter settled at Court just prior to the hearing. If the matter had proceeded to a final hearing the facilities management company accepted that the Court was likely to find that placing of the temporary worker to work within a third party End User amounted to an introduction within the meaning of the employment business’s standard terms of business.

Case Study (2)

We acted for an employment business who had supplied a temporary worker to a small office based business (“the Client”). The temporary worker was subsequently engaged by a separate company working within the same office (“the End User”). The Client contested the claim on the basis, amongst other things, that it had not introduced the temporary worker to the End User.

The Court was provided with evidence from Companies House that showed that the Client and the End user had a common director. In the circumstances the Court was prepared to infer that there had been an introduction within the meaning of the employment business’s standard terms. The Court accordingly gave Judgment for the employment business holding that the Client owed the Transfer Fee.

For further advise about your business processes, terms and conditions or the recovery of fees please contact Luke Tucker Harrison, Partner in the Recruitment Sector Team or Penny Daisley, Debt Recovery Manager
Email: lth@debenhamsottaway.co.uk or ped@debenhamsottaway.co.uk
Tel: 0333 2200244