What is a rebate period in recruitment?
A rebate period is the window after a placement starts during which the agency refunds part of its fee if the candidate leaves. In UK permanent recruitment it is typically 8 to 12 weeks, on a sliding scale: a full refund in the first weeks, falling to a partial refund, then nothing once the period ends.
The rebate exists because a permanent fee is invoiced on a start date, not on the placement working out. It gives the client protection against paying a full fee for someone who lasts a fortnight, and it is one of the terms most negotiated in a set of terms of business.
A sliding scale is the common shape. Something like a hundred per cent refund if the candidate leaves inside two weeks, fifty per cent to week four, twenty-five per cent to week eight, nothing after that. The exact ladder varies by agency and by client, and it is worth knowing that some clients will push for a replacement guarantee instead, where you fill the role again rather than return cash.
The operational problem is that rebate liability is invisible until it bites. A fee invoiced in March can be clawed back in May, against a month you have already reported and possibly already paid commission on. Agencies that track rebates in a spreadsheet find out about exposure when the client rings.
The thing worth building into a system is the date, not the paperwork. If every placement carries its rebate window, the finance view can show what is still at risk rather than treating an invoiced fee as money in the bank.
What shapes can a rebate take?
There are four common structures. The figures below use an illustrative £12,000 fee and a twelve-week window; they show the mechanics, not a recommended rate.
| Structure | How it works | If the hire leaves in week 6 | Tends to suit |
|---|---|---|---|
| Stepped ladder | Refund falls in bands, for example 100%, then 50%, then 25%, then nil | Refund set by whichever band week 6 falls in | Most contingent perm desks |
| Straight line | Refund falls by an equal amount for every week worked | Six of twelve weeks remain, so £6,000 | Clients who want the arithmetic to be obvious |
| Flat partial refund | One fixed percentage refunded at any point in the window | The same refund in week 1 or week 11 | Agencies wanting a simple, capped exposure |
| Free replacement | No cash back; the agency refills the role at no extra fee | Search restarts; the fee stays banked | Retained and senior searches |
Rebate or free replacement: which should you offer?
A cash rebate is cleaner for the client and costlier for the agency. It turns an early leaver into a refund, often after the fee has been counted, reported and paid out in commission.
A replacement guarantee keeps the cash but spends consultant time. It works well where the agency is confident of refilling the role, and badly in a thin market where a second search could take longer than the first. It also needs limits written down: how long the agency has to find a replacement, whether the client must use it, and what happens if the client decides not to rehire.
Many agencies offer a replacement first and a partial refund only if no suitable candidate is found in an agreed time. Whatever you choose, pick it deliberately per client rather than inheriting whatever the client's procurement template says.
When does the rebate clock start, and what conditions apply?
The window almost always runs from the candidate's first day, not the offer or acceptance date. A late start therefore pushes the whole exposure later, which matters when a start slips into the next quarter.
Rebates are a contract term, so the conditions are whatever your terms of business say. Conditions agencies commonly include:
- The fee must have been paid within the agreed payment terms, or no rebate is due.
- The client must tell the agency in writing within a set number of days of the candidate leaving.
- No rebate where the role is made redundant, restructured away, or the candidate is dismissed for reasons unrelated to their performance or conduct.
- No rebate if the candidate is later rehired by the client or an associated company.
- Any refund is made by credit note against the original invoice, not as a cash payment on request.
Is a rebate period a legal requirement?
No. UK law does not require an agency to offer a rebate or set how long one should last. GOV.UK's guidance on the Conduct of Employment Agencies and Employment Businesses Regulations 2003 notes that the legislation does not regulate the fees agencies charge hirers, and a rebate is part of that fee arrangement.
That makes the written terms the whole story. A rebate promised on a call but missing from the signed terms, or a client's own purchasing terms that override yours because they were signed later, is how disputes start. Check which set of terms governs each client before the first placement, not after the first early leaver.
How should an agency account for fees still inside the window?
An invoiced fee inside its rebate window is income that can still partly reverse. Treat it that way in reporting: show fees billed, fees past their window, and fees still exposed, and know the exposure total at any point in the month.
When a rebate is triggered, raise a credit note against the original invoice for the refunded amount, with the VAT on that amount reversed too. Decide in advance how consultant commission is handled. Paying commission only once a fee clears its window avoids clawing money back from someone's salary, at the cost of a longer wait for the consultant.
Where Vayora fits
Vayora holds a rebate schedule as bands, either agency-wide from your terms of business, which it can read out of a pasted terms document, or on an individual placement, and shows the rebate terms alongside the placement fee. Refunds are raised by hand as credit notes. It does not yet work out when each window ends, flag fees still at risk, or hold commission back automatically.
Common questions
- Do you refund the VAT as well when a rebate is due?
- Yes, if VAT was charged on the fee. The refund is made by credit note against the original invoice, and the credit note reduces both the net fee and the VAT on it in proportion. The client then reclaims less input VAT and you declare less output VAT. Refunding only the net figure leaves the two sets of VAT records disagreeing.
- Can a client refuse to pay the fee until the rebate period ends?
- They can ask, and some procurement teams try. Your terms of business decide it: most agencies make the fee payable on the start date within normal payment terms and make on-time payment a condition of the rebate. Agreeing to defer payment turns the rebate window into an unpaid credit period, so it is worth pricing that in if you accept it.
- How long are rebate periods for senior or executive roles?
- Senior and retained searches often use a longer window, sometimes up to six months, and more often favour a replacement guarantee over cash. The reasoning is that senior hires take longer to prove themselves, and the retained fee has partly been earned by the search work already done. Whatever length you agree, write the replacement conditions down precisely.
- Does the rebate still apply if the client made the role redundant?
- Only if your terms say it does. Many agencies exclude redundancy, restructuring and dismissals that have nothing to do with the candidate's performance or conduct, because the placement did not fail. Without that exclusion, a client who cuts a team in week five can reclaim most of the fee for a hire that was working, so the wording deserves attention.