3rd Party Splits - The Pro-Rata Guarantee

I have found that the simplest way to conduct split fee agreements is to operate on a Pro-Rata Guarantee. Essentially what this means is, the client holding agency disburses fees as warranty milestones pass, therefore alleviating any need to worry about chasing down other 3rd parties should the client require refund, or worse nagging 3rd parties to fulfill a replacement guarantee.

The way I have seen this work most effectively is in thirds. Supposing the average warranty time frame is 90 days. After 30 days 1/3 of the fee becomes non-refundable and is therefore issued as payment, this same process will take on the following 2 30 day marks.

Supposing the candidate falls-off on day 45 of the 90 day warranty. The difference owing would be 1/6, and would be due immediately.

Unfortunately in the world of fee splitting amongst third party recruiters, there is no absolutely perfect method to ensuring everyone gets everything they ever wanted. But at least this way you're always assured you'll get paid as a service not as a refundable product, and its hassle free after.

If anyone has any contributing thoughts or ways in which this approach can be strengthened, I for one, am all ears!

Views: 136

Comment by pam claughton on March 1, 2008 at 9:58am
George,

This is how I and my split partners do it as well. Although I'd love to receive the $$$ sooner, I really do prefer it this way because once I do receive it I don't have to worry about the (admittedly rare) possibility of returning it. This way everyone involved has peace of mind.

Seems the fairest solution all around.

Pam

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