Reading the Service Agreement
Read it for the list of what the provider will do, because everything absent from that list stayed with you.
The service agreement with the provider
The employment contract with the person
Who the employer is in law
What you are buying with the fee
YoursThe provider'sCrosses the twoNeither contract
Four matters, and no share: what any one agreement covers differs by agreement. One crosses both, and the handoff is where these arrangements fail. The distinction everything else in this collection rests on.
One buyer's reading of its own agreement, clause by clause, with where each matter actually landed
YouThe providerNeither contractRunning payroll, withholding and the local filings
Named as a service, with a stated cycle and a stated funding date
Issuing and amending the employment contract
Drafted by the provider, agreed by the person, requested by you
Across the handoff: A written change request from you, the person's agreement, and a document the provider issues under local law
Recruiting and selecting the person
Excluded in terms, and the exclusion was the shortest clause in the document
Supplying equipment and systems access
Not mentioned anywhere in forty pages, which is how it became a surprise in week one
Whether the person stays past the first year
Named in neither document, raised by nobody at signature, and the reason this arrangement nearly ended
Ending the arrangement at speed
Thirty days to the provider, ninety from the employment contract
Across the handoff: Your notice under the service agreement, the person's statutory and contractual notice, and whatever local process the provider must run
YoursThe provider'sCrosses the twoNeither contract
Six matters drawn · no share
Six matters, and the two the buyer assumed were handled were the two that were not mentioned at all. One buyer's own reading of its own agreement; what any agreement covers differs by agreement and by jurisdiction.
Read the service agreement for its list of what the provider will do. Everything absent from that list stayed with you, whatever the sales conversation suggested, and the absences are the part worth an hour.
The contractual distinction in “Reading the Service Agreement” also matters when buying workforce software. For teams researching employee time tracking, explore the platform capabilities should be evaluated against a named operational decision, clear ownership, export requirements and a tested exit process rather than treated as a substitute for the employment agreement.
What follows is the order to read it in, which is not the order it is written in.
The WHO occupational-health resources provides an external reference for the issue raised in “Reading the Service Agreement”. It is most useful when the team records which principles apply to this arrangement and which require local advice.
Start at the exclusions
Most agreements carry a short clause saying what the service does not include. It is usually three lines long and it is the most informative passage in the document.
Read it first and the rest of the document makes sense. What usually appears there:
- Recruitment and selection.
- Equipment, software and systems.
- Benefits above the statutory floor.
- Immigration and sponsorship, in some agreements.
- Anything described as management or supervision.
Then the schedule of services
The positive list: payroll, withholding, statutory contributions, leave administration, contract issuance, local filings, and a named contact.
Each item deserves a question about frequency and evidence. A service you cannot get evidence of is a service you cannot verify.
Frequency matters as much as presence. "Leave administration" means something quite different where the balance is published monthly and where it is produced on request after a week.
The fee clause, including the pass-through
Two numbers hide here: the provider's margin, and the employer costs passed through to you. The second is usually much larger and much more variable.
Ask what is included at the quoted figure and what will be invoiced separately. Statutory increases are normally yours to absorb, which is reasonable, but better known in advance.
Ask also how the pass-through is evidenced. A provider that will show you the local calculation behind the figure is a different proposition from one that issues a single line and declines to break it down.
The deposit
Many providers hold a month's cost, or more, as security. It appears in the fee schedule rather than anywhere obvious.
It is ordinary and defensible. It is also money you have placed with a counterparty, which belongs in the same conversation as that counterparty's financial strength.
The funding date
Payroll is run by the provider from your money, and your money has to arrive first. The date is typically several days before the person is paid.
Miss it and somebody else's employee is paid late because of your treasury calendar. Put the date in a finance system rather than in a person's memory.
Term and renewal
Initial term, renewal mechanism, notice to prevent renewal. Automatic renewal with a long notice period is common and quietly expensive.
Diarise the notice date at signature. The buyers who discover they are locked in for another year are not the ones who read this clause; they are the ones who meant to.
Termination, in both directions
Your notice to end the service, the provider's notice to end it, and what each triggers for the person.
The asymmetry worth noticing is that the provider ending the service leaves you with a person employed in a country where you have no entity, on a clock you did not set.
Ask what the provider undertakes to do in that case. Some will cooperate with a move to another provider or to your own entity; some will simply terminate. The difference is worth more than a point of margin.
The liability cap
Usually a multiple of fees paid. Sized against the service, not against the exposures.
It has a note of its own in this collection because the arithmetic is worth doing explicitly, once, before signature.
The indemnity
A promise by the provider to cover certain losses, most often misclassification and employment claims. Read what it excludes, what notice it requires, and which legal entity gives it.
An indemnity from a holding company with no assets is a sentence, not a protection.
Data protection terms
Three parties and one set of personal data. The agreement should say who is controller for what, how instructions are given, where data goes and what happens on termination.
Boilerplate here is common and usually inadequate. It is also the clause your own privacy people will ask about first.
Assignment of intellectual property
Ownership must travel from the person to the provider and from the provider to you. Your agreement can only guarantee the second leg.
Check the contract template for the first. A broken first link cannot be repaired by any amount of drafting in your own document.
The clause that is not there
Nothing in a service agreement obliges anybody to care whether this person is still here in two years. No clause can, and none should pretend to.
That absence is not a drafting failure and it will not be fixed by negotiation. It is the part of the arrangement that remains yours to do by hand, and reading the agreement carefully is mostly a way of finding out how much of it there is.