Recruitment Commission Clawback & Rebate Periods (UK)

Recruitment commission clawback is the recovery of commission already paid to a consultant when the placement fee that earned it is refunded — almost always because a placed candidate leaves within the rebate period. Nearly every UK placement carries a rebate clause: leave inside a set window (commonly 8–12 weeks) and the client gets some or all of the fee back on a sliding scale. When that fee reverses, the consultant's commission has to reverse too. This is the mechanic that makes recruitment commission genuinely harder than ordinary sales commission, and the one most likely to cause a dispute if it isn't written down clearly in advance.

It's the staffing-specific case of a general commission clawback policy, and part of the recruitment commission plans overview.

TL;DR

Recruitment commission clawback is the recovery of commission already paid when the placement fee behind it is refunded — almost always because a candidate left within the rebate period. UK terms typically refund the client on a sliding scale (say 100% in the first weeks, falling to nil after 8–12 weeks), and the consultant's commission is recovered in the same proportion. Agencies either hold back part of the commission until the rebate window closes, or recover it from the next commission run. It must be agreed in writing in advance — a deduction from earnings under the Employment Rights Act 1996 — or it becomes the most common trigger for a commission dispute.

How do rebate periods drive clawback?

A rebate clause in your terms of business sets out what the client gets back if a placement doesn't stick. A typical sliding scale looks like this:

Candidate leaves within	Fee refunded to client
0 – 4 weeks	100%
5 – 8 weeks	50%
9 – 12 weeks	25%
After 12 weeks	0%

The exact percentages and windows are yours to set (and are governed by your terms under the Conduct of Employment Agencies and Employment Businesses Regulations 2003), but the principle is universal: an early leaver means the agency hands money back. Whatever the client gets refunded, the commission the consultant earned on that fee has to be recovered to match.

Worked example: a consultant earned £1,800 commission on a £9,000 fee. The candidate resigns in week six, triggering a 50% rebate — the agency refunds £4,500 to the client. Half the fee is gone, so half the commission (£900) is clawed back from the consultant.

How does recruitment commission clawback work?

There are two clean ways to handle it, and most agencies use a blend:

Hold-back. Pay only part of the commission on the candidate's start date and release the balance once the rebate window has closed. This is the simplest defence — money you haven't paid can't be clawed back, and the consultant still sees the bulk of their earnings promptly.

Recover from future commission. Pay in full, but if a rebate triggers, deduct the clawed-back amount from the consultant's next commission run. This keeps cash flowing to the consultant but means you're recovering money that's already been taxed through PAYE.

What happens to tax when commission is clawed back?

Because commission is employment income run through PAYE, when a clawback happens matters as much as how much. If the original commission was paid and the clawback occurs in the same tax year, recovering the overpaid Income Tax and National Insurance is straightforward — payroll adjusts the consultant's cumulative figures. If the clawback lands in a later tax year, untangling the overpaid tax is far messier and can leave the consultant chasing HMRC for a refund. The same cross-year problem affects every commission clawback, but rebate periods that straddle April make it routine in recruitment. Where the rebate window allows, structure hold-backs so any reversal completes inside the same April–April window.

How do you write a clawback clause?

A workable clause spells out, in plain terms:

• The trigger — what events cause clawback (candidate leaves within the rebate period, client withholds payment, fee disputed and reduced).
• The amount — how the clawed-back commission maps to the refunded fee (usually pro-rata to the rebate percentage).
• The mechanism — hold-back, deduction from future commission, or both, and over what timescale.
• The edge cases — what happens if the consultant has since left the agency, or if the candidate is re-placed.

Ambiguity in any of these is what turns a routine recovery into an argument. The clearer the clause, the less often you'll need it to settle anything. The REC provides model terms and guidance to members that are a useful reference point when drafting.

Re-placements and goodwill

Many agencies offer a free replacement rather than a cash refund — find the client a new candidate instead of returning the fee. That protects the agency's revenue, but it complicates commission: does the original consultant keep their commission, does the replacement count as a new billing, or is it split? Decide this in the plan up front, because a re-placement that's silent on commission is a guaranteed source of friction between consultants.

Automate the reversal, not just the payout

Tracking which fees are still inside their rebate window, calculating the pro-rata clawback when a candidate leaves, and reversing the right amount — in the right tax period, against the right consultant — is fiddly and error-prone in a spreadsheet, and a frequent driver of the reconciliation pain finance teams dread. A commission platform tracks each fee's rebate status, applies the clawback automatically when a placement is reversed, and keeps the audit trail clean so the consultant can see exactly why an adjustment happened — which is what stops a clawback becoming a trust problem.

Frequently Asked Questions

What is recruitment commission clawback?

It's the recovery of commission a consultant has already been paid when the placement fee behind it is refunded — usually because the candidate left within the rebate period. Since the agency hands money back to the client, the commission earned on that fee has to be recovered too, normally in proportion to how much of the fee was refunded.

How long is a typical rebate period?

Commonly 8–12 weeks, often on a sliding scale — for example a full refund if the candidate leaves in the first few weeks, falling to a partial refund later in the window and nothing after it closes. The exact length and scale are set in your terms of business with the client; the commission clawback should mirror whatever the client is refunded.

Can an agency claw back commission already paid?

Yes, but only if it's been agreed in writing in advance — in the consultant's commission agreement or contract. Clawback is a deduction from earnings and is constrained by employment law, so it can't be applied retrospectively or informally. Documenting the trigger, the amount and the mechanism before any placement is made is essential.

How do you avoid clawback disputes?

Hold back part of the commission until the rebate period closes, write the clawback clause in plain language covering triggers, amounts and edge cases, and give consultants visibility of which of their fees are still inside a rebate window. Most disputes come from clawback terms that were never clearly agreed or from consultants being surprised by a reversal they didn't see coming.

What happens to the tax when commission is clawed back?

If the clawback happens in the same tax year as the original payment, payroll can adjust the consultant's cumulative pay and recover the overpaid Income Tax and National Insurance cleanly. If it crosses into a later tax year, reclaiming the tax is more complicated and may require the consultant to recover it from HMRC directly — so agencies try to keep reversals within the same April–April window.

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Written by the Commit Team — Commit tracks rebate windows, calculates pro-rata clawbacks automatically and keeps a clean audit trail, with payroll-ready figures exported to Xero.