A replacement guarantee is a clause in an agency agreement promising a free replacement search, or a partial refund, if a placed candidate leaves within a defined early period. Length, whether it pays cash or a rebate, and the exclusions vary by agency and market, so read the trigger conditions before signing rather than at the point of failure.
If the person you hired leaves or is dismissed within the agreed window, the agency runs the search again at no additional fee. The window is typically measured in weeks or a few months and is defined in the agreement rather than by any industry standard. Some agreements offer a sliding refund instead, returning a proportion of the fee that decreases as time passes. A minority offer nothing at all, particularly at the lower end of contingent recruitment. The guarantee exists because it aligns interests: an agency that carries replacement risk has a reason to care whether the person actually stays, not merely whether they signed. Ask for the exact wording rather than the summary in a proposal, since the two frequently differ.
More than most buyers expect, which is why the exclusions matter more than the headline period. Common voiding conditions include late payment of the original invoice, redundancy or a business change rather than a candidate departure, a material change to the role after the person started, and dismissal for reasons unrelated to capability. Some agreements require you to notify within a short window after the departure. Others exclude cases where the candidate was subsequently promoted or moved internally. Read these clauses before signing, alongside the credit and introduction terms, since a guarantee with broad exclusions is close to decorative and you will only discover that at the worst moment. Ask the agency to walk you through a real case where the guarantee was invoked and what happened next.
It depends on why the hire failed. A replacement is worth more when the role still exists and the agency understands it well by now, since a second search should be faster than the first. A refund, where offered, is worth more when the requirement has changed, the team has restructured, or you no longer want to work with that agency. Cash terms are less commonly offered and usually cost more in the fee, so decide which you would actually want before negotiating. Also consider a staged fee, where part of the payment falls due after the person has been in the role for a period, since that structure achieves a similar alignment more simply. Whichever you prefer, keep the candidates from the first search in your [applicant tracking system](/ats), because a shortlist you already vetted is the quickest route to a replacement.
The real cost of a failed hire. The fee is usually the smallest part: the larger costs are months of unproductive work, the manager's time, the disruption to a team and the second search. A free replacement returns none of that. Guarantees also do not fix the causes. Early departures frequently come from an unclear role, weak onboarding or an inaccurate description of the job during the process, and none of those are the agency's to solve. Treat the guarantee as sensible risk-sharing rather than as insurance, and put the effort into the parts you control: a clear brief, honest selling and proper onboarding once the person arrives. Record each placement and its outcome so patterns across agencies show up in your [recruitment analytics](/recruitment-analytics-software) rather than in anecdote.
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