The ‘Terms of Business’ in both the UK and the US serve as legally binding agreements outlining the terms under which businesses operate, but there are notable differences due to variations in legal systems, contract law, consumer protection, and regulatory frameworks. 

A checklist for UK recruitment firms venturing into the US market 

Expanding into the US offers lucrative opportunities, such as higher markups and a less crowded market. While candidate sourcing, client calls, and business development function similarly in both countries, one thing that can significantly hinder your growth is not knowing your terms of business.  

For example, the US and UK do not recognize each other’s legal systems. Even if a US client agrees to your UK terms, you may be able to sue, but UK courts cannot enforce payment for unpaid fees from a US-based client.  

US businesses are particular about contract terms 

In the UK, it’s common to have your terms of business signed with few or no questions, but US clients often scrutinize every legal detail. As a recruiter, you’ll need to be clued in on your terms of business and understand their implications. 

You may even need to explain the concept of a recruitment agency, as outsourcing recruitment is still relatively new in the US. 

Here’s a breakdown of the key components in your terms of business that you should be familiar with when discussing them with clients: 

Payment terms 

In the UK, payment terms for recruitment services are typically 30 days from the date of the invoice. This is considered the standard across many industries, including recruitment. The law provides UK agencies with a certain level of protection and encourages clients to pay on time. 

While 30 days is still common, it is not unusual for US companies to negotiate terms of 45, 60, or even 90 days. In some sectors, especially with larger corporations, Net 60 or Net 90 payment terms are often requested as a standard. For smaller recruitment agencies working with big clients, accepting longer payment terms can be necessary to win business.  

Unlike the UK, there are fewer legal protections that mandate interest on late payments, although some contracts include provisions for late fees or penalties for delayed payments.   

Payment structures for contract staffing 

UK agencies providing temporary, or contract staff typically bill clients weekly or monthly, based on the contract. Payments align with the timesheet approval process, with clients usually paying within 7-14 days to ensure payroll continuity. Faster payment cycles help agencies manage contractor payments and cash flow. 

In the US, payment cycles are often longer, especially with large corporations. Some clients negotiate Net 60 terms, which can strain smaller agencies paying contractors weekly or bi-weekly. This leads to more frequent use of factoring (selling receivables for immediate cash) to manage cash flow. 

Dispute resolution 

The UK has a more centralized legal system, where contract law is governed by common law principles across the whole country. This makes it easier to predict how disputes will be resolved, and the court system is generally perceived as reliable, efficient, and impartial. 

In the US, the legal system is more fragmented, with both federal and state-level laws playing a role. Contract law, including dispute resolution, is largely governed at the state level, meaning each state may have different rules or procedures. The fragmented legal system makes it critical for recruitment firms to specify which state’s laws will govern their contract, as it can significantly impact the outcome of a dispute.  

Mediation vs. Arbitration  

UK courts strongly favor mediation as the first step in dispute resolution, expecting parties to explore it before going to court. An independent mediator helps both sides reach a settlement without imposing a decision. 

Arbitration is common in larger disputes, offering faster resolution and confidentiality. Arbitration awards in the UK are usually final and binding, enforceable by the courts if needed. 

In the US, arbitration is often preferred, especially in commercial contracts, with many agreements including mandatory arbitration clauses. This is popular as arbitration is usually quicker and cheaper than litigation. 

UK business culture favors compromise and ADR, while the US is more open to litigation. 

Indemnity 

Indemnity clauses in recruitment contracts are crucial for managing risk and liability between agencies and clients. These clauses outline the responsibility of one party to compensate the other for specific losses or liabilities arising from the contract. 

In the UK, indemnity clauses are typically more specific and often include clear limitations and caps on liability. In contrast, US clauses tend to be broader, covering a wider range of both third-party and first-party claims, sometimes without liability caps depending on negotiations. 

UK contracts usually have more balanced mutual indemnities, while US contracts often favor the party with greater bargaining power. 

Penalties for Late Payments 

In the UK, businesses can charge extra interest on overdue payments and claim a set amount (between £40 and £100) to cover debt recovery costs. Most UK companies also include clauses in contracts that specify the interest and fees for late payments. 

In the US, late payment penalties aren’t as standardized and usually depend on what both parties agree to in the contract. There’s no federal law for interest rates on late payments, so recruitment agencies need to outline these details in their agreements. Larger corporations in the US may resist including late payment penalties in contracts, especially if they hold more bargaining power. 

If you need further support with your US expansion – contact our team today.