Recruiters are missing out on tens of thousands of pounds by not checking that clients stick to the terms of their contracts.

John Miller, operations director of Nforce, told Recruiter that recruiters are losing between 20% and 30% of annual charge rates when clients re-engage contractors using another agency, or directly at the end of their contract but fail to pay the fee due to the original agency.

The purpose of the fee is to stop clients from re-engaging contractors either directly or through another agency by forcing them to compensate the original agency for what is a breach of restrictive covenants within the contract.

According to Miller, within the finance and IT contracting sector it is common for the restrictive covenant to apply for between six and 12 months after the original engagement ends. “However, I have seen some instances of 18 months,” added Miller.

Miller, whose company identifies such breaches of terms and conditions, and seeks payment of any fees due on behalf of recruiters, said the average fee collected by Nforce for these breaches is £17,000.

However, according to Miller, this is only 60% of the actual amount owed, because recruiters do not wish to jeopardise their relationship with clients by insisting on the full amount.

Miller estimates that clients breach contracts in this way in between 3% and 4% of cases of where contractors are re-engaged within 12 months of the original contract ending by means other than by the original recruiter.

Miller said that clients usually tell him they made an inadvertent mistake.

Miller said this is the tip of the iceberg, as it doesn’t include where recruiters miss out on temp to perm fees, and normal permanent introduction fees.

Colin Lapthorn, managing director of IT and engineering project recruiter, Osirian Consulting, told Recruiter that breaches of agreements by clients are a growing problem and had recently happened to his own company on two occasions.

But he advised recruiters not to take it lying down. “It’s a bit of a hassle, but if you take a tough stance they [clients] will come to the table because they have breached an agreement that they have signed. If you roll over and take it, in the long term you won’t have a business.”

However, Alwyn Welch, chief executive of IT recruiter Parity, said breaches of the company’s terms and conditions by clients weren’t a major problem, and had occurred only “maybe once or twice”. Welch told Recruiter that the best way for recruiters to ensure it didn’t happen to them was “primarily by having a good relationship with their clients”.

“If the clients see you are adding value they will respect any contractual terms rather than try to find a way out of them. If they see you as just passing money through your books and doing nothing for it, sooner or later this will happen to you,” said Welch.