CWS 3.0: January 19, 2011 - Vol. 3.2

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Column Corner: Drafting a Contract

By Bryan T. Peña

As companies move into a new year, they often consider evaluating their current vendor relationships and contracts. We at Staffing Industry Analysts often field questions related to contracts -- what they should cover and what they should say.

I enjoy contract discussions. That being said, I must stress that I am not an attorney and what I reference in this column is for informational purposes and not legal advice. If you need distinct legal advice, you should seek counsel.

Often, beginning contingent workforce managers, or procurement managers in general, use their provider's contract template when crafting an agreement, because they don't have a contingent labor contract readily available. While this is not to say that most providers would not provide a fair contract language in their boilerplate contracts, I don't think I would be wrong in saying that provider contracts may not be the most beneficial contract model for the buying company.

Structure

We recommend that all services contracts be governed under the Master/Exhibit model. What that means is, there are standard terms and conditions which are spelled out in a master services agreement or MSA, which usually contains standard terms and requirements for any business. There you would see such items as payment terms and addresses, nondisclosure requirements, insurance expectations, agreement term and renewal procedures, dispute resolution and whatever terms and conditions are standard for your company.

Within the Exhibits would be those contractual terms that would relate to the services at hand. It is in the Exhibit that you would put most specific language pertaining to temporary labor. This model is helpful as you can easily add new exhibits to be governed by the MSA as your business relationship grows or changes.

Exhibit

While Staffing Industry Analysts makes available to CWS Council members actual contract templates, I will share with you the a high-level list of suggested headings and considerations to include in your temporary labor exhibit. Each would have significant additional detail, but this is a place to start.

Scope. What areas and locations are included in the contract, what services specifically are to be addressed and how they are to be ordered and tracked.

Responsibilities of the parties.

  1. Who is responsible for background checks, what is included in a background check, and do you require drug screening?
  2. Who's responsible for on-boarding and what's included?
  3. How are resume submittals supposed to be handled?
  4. What is the specific issue escalation and resolution process?

Pricing.

  1. What pricing strategies will fall under the services -- mark-up plus pay rate, bill rate or other? How are changes in pricing to be addressed? What about increases due to statutory or governmental expense? What about covering government hiring incentives, such as the HIRE Act in 2010?
  2. What is the expected compliance rate with pricing? Is there a discount on overtime and double-time calculations? How much and how is it calculated?
  3. What discounts are to be included in your contract and under what conditions are they included?
  4. What are the volume expectations and what happens in the event of significant changes in volume?

Service-Level Expectations. Here you'll spell out your performance expectations with your provider with regard to Issues such as time to respond/time to fill, rate compliance, turnover, customer satisfaction/issue resolution, and invoice accuracy. These are just a few considerations and suggestions for how you structure your own contracts. While every contract is different and every deal is different, you can ensure program success by asking the right questions, and remembering to involve the right people before you sign on the dotted line.

Bryan T. Peña is a strategic services executive at Staffing Industry Analysts. He can be reached at bpena@staffingindustry.com.

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