Making the most of hiring from competitors



Getting the contract right will benefit both the business and the recruit

Employees or partners who are hired from another organisation (often a competitor) to fill a role at a similar level, possibly on a similar remuneration package, are known as ‘lateral hires’. Many start their new roles in or around September as it coincides with the end of the school summer holiday period, and also means the recruit has at least six months to make an impact before the end of the financial year in many organisations. It is also common for senior employees to re-evaluate their career options during the summer holidays and to start looking for new opportunities in the autumn.

There are signs that employers are increasingly looking to lateral hires, sometimes accompanied by their teams, to fill senior positions in certain sectors, including law and IT. In a recent survey carried out by law firm Fox Williams and Byfield Consultancy, 71 per cent of the top 200 UK law firms cited recruiting a team as the best way to increase profits.

Filling senior roles in this way has a number of advantages for organisations including enabling them to:

  • grow strategically
  • fill immediate talent gaps, without re-training existing employees
  • increase revenue and take advantage of the recuit’s knowledge, skills and contacts.

Often, there is also prestige associated with attracting a key player to join an organisation from a competitor. However, recruiting and retaining staff in these circumstances is not without its difficulties. Getting the recruitment stage right is key to maximising the chances of success.

An organisation will usually have undertaken some preliminary research by the time it approaches, or responds to, someone it is interested in hiring, including looking at the person’s online profile and speaking to others in the industry to find out their views of him or her. This should be handled sensitively to prevent the current employer finding out the person is considering leaving. Certainly formal references should not be taken up or the existing employer approached until the candidate has agreed to this, which will usually be after the job offer has been accepted and the current employer informed.

Negotiations to get to this stage can be time consuming, but it is important to strike a balance between amicable discussions and ensuring the employment contract is robust and protects the business. Early on organisations should check the candidate’s existing:

  • notice period
  • the length of any garden leave provisions
  • post-termination restrictions, which may prevent him or her from joining a competitor for six to 12 months.

One of the key attractions to lateral hires is the hope they will bring a portfolio of existing clients with them. However, if there are restrictions preventing the candidate from soliciting or dealing with such clients for a certain period, this needs to be factored in, as it is likely to affect the potential profitability of the new hire during that time. In some sectors it is common for candidates to negotiate with their existing employer to bring certain clients with them, as it is acknowledged the new employer and employee will then adhere to the remainder of the restrictions.

Even if the candidate is not subject to restrictions, he or she will be bound by confidentiality obligations, so hiring from a competitor should never be viewed as a way to obtain confidential information.

When negotiating the employment contract, remuneration is usually agreed first, especially issues such as signing-on bonuses, annual bonuses and long term incentive plans, and there may also be discussions about benefits such as sick pay, holiday and pensions. Employers should ensure the contract’s wording is tailored to suit the particular deal, and includes adequate protection for the business should the relationship end, such as restrictive covenants. Such restrictions need to be well-drafted, as they could constitute a restraint of trade and are only enforceable when they protect a company’s legitimate business interests.

Naturally employers do not want to focus too much at the outset of an employment relationship on the possibility of it ending, but clear provisions in the contract should set out clearly the circumstances in which the employee may be dismissed without notice, paid in lieu of notice, or put on garden leave. Failing to address these points can prove costly.


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