Staff Augmentation Agreement: What to Expect
The COVID-19 pandemic forced companies to accelerate their digital presence. Businesses had to quickly adapt to serve customers digitally, while also transitioning their internal communications to virtual environments. With these changes, companies increasingly needed to hire talent who could develop and maintain all these new digital parts of the business. In times like these, staff augmentation agencies provide a vital resource for companies to rapidly fill their IT talent gaps.
According to Statistica, pre-pandemic, the international outsourcing market represented $92.5 billion. During the pandemic, the IT staff augmentation industry ballooned to $132.9 billion. While international spending on outsourcing recruitment also increased–from $15 billion in 2019 to $18 billion in 2020–these numbers pale in comparison to staff augmentation.
If you decide, or have decided, to partner with Stateside (or another agency) for your staffing needs, it’s crucial to consider the legal agreements between your company and the staffing agency. You need to ensure your data and company are protected in case of a dispute.
Key Components of a Staff Augmentation Agreement:
Non-Disclosure Agreement (NDA): An NDA creates a confidential relationship between two parties and prevents them from sharing information with outsiders.
Non-Compete Clause: This clause states that an employee or client must not enter into competition–generally meaning not doing business with, or becoming employed by a company in direct competition with the contracting business–after the employment period is over. Staff augmentation contracts usually specify a time period in which the contracted party, whether employee or company, is barred from working with a competitor.
Scope of Work: The scope clause is among the most important contract terms. It should clearly explain the obligations and duties each party is contractually bound to fulfill. Writing it requires attention to every detail about the services your developer and the vendor will provide. Even if you and the vendor had prior conversations about what services will be performed, it is essential to spell out the responsibilities in the legal agreement. Should the need arise, these details help a judge, arbitrator, mediator, or other person resolving a dispute discern whether a given party fulfilled their obligations.
Compensation Agreement and Payment Terms: The staff augmentation contract lists how much payment the vendor will receive and when. As with all contract terms, the more detailed it is, the clearer it will be for the parties and anyone interpreting the contract in case of a dispute.
Modifications or Change Orders: Often, the need arises to modify, or amend, the terms of the contract. A clause that states how modifications may occur will help avoid, and if need be, resolve any disputes about whether subsequent discussions between parties changed the contract terms. The best practice is requiring that any modifications be made by written agreement between the parties. Usually, a change of order is no more than a 1- or 2-page document and gives the flexibility to address changes to the original agreement, helping minimize paperwork.
Termination Clause: It’s important to include a termination clause because, as we know, sometimes relationships don’t go as planned. This is a standard clause that sets the duration for a commercial agreement and the rights of one or more parties to terminate the agreement early. This can also include standardized language addressing contract renewal, and post-termination obligations.
Ownership of Work Product: This is a provision stating clearly who owns the intellectual property rights in the work product. Keep in mind that in many circumstances the intellectual property rights at issue are so complex they require an entirely separate agreement or addendum to the agreement.
Vendor contracts may not be top of mind when you are creating, growing your business, or researching a solution, yet these contracts ensure uninterrupted workflow in your operation. Being conscious of these essential elements in vendor contracts builds a strong foundation for your business to operate smoothly.
And whether you are hiring one developer or a full team under the staff augmentation model, it’s important to find a trusted legal counsel who understands your company’s values and brand. Your legal council will be your ally, communicating your terms and conditions in third-party business relationships.
Lastly, sending a contract shows an organization cares about having a detailed record of a relationship and is a sign of their commitment to that relationship. Everything from wording to negotiations gives each party an idea of how the other functions. Demonstrating the solidity of a company’s brand and values starts with a carefully laid out contract.
Last updated: Aug 1, 2022, 1 pm EDT