Global organizations are increasing their presence, making it more accessible to secure a global contract. The benefits of a global contract compared to a standard Local Master Service Agreement (MSA) are vast and continue to grow. Utilizing the broader footprint of a global contract and its services are some of the greatest door-openers for potential new clients.
Read on to learn more about the differences between global and local agreements to help you decide which would be best for your clients.
KEY DIFFERENTIATORS BETWEEN LOCAL & Global CONTRACTS
When a service provider prepares to supply their services to a large company with affiliates and subsidiaries, they will turn to one or multiple global contracts. By doing so, they can serve every aspect of the company according to the terms of the singular contract. This efficient approach only needs to be negotiated once for the entire company, ensuring uniformity within the internal business and legal mandates. If any amendments need to occur, that can all be accomplished in one document.
Do note that with global contracts, there are some instances in which such broad terms and agreements may not address specific situations. In terms of accountability, this type of contract may not specifically address which affiliate or subsidiary is responsible if anything were to go wrong. If an organization already has local contracts in place, it must be noted if the conditions of the global contract supersede the local contracts when deciding how to resolve conflicts.
Local contracts are specific to a site or facility and separately negotiated at every business level and its affiliates. Although each branch might work under the same company, they must negotiate each contract based on the particulars of that branch. In some instances, a more local business team understands the businesses nearby that can provide services as needed.
Be aware that local contracts are at a higher risk of being more limiting than global contracts. The terms in a local agreement may not align with the parent company’s legal mandates for commercial agreements, increasing the possible liability that could fall on the company. These agreements need to clearly state where terms apply for any global contracts involved to ensure responsibility is in the right hands if things were to go awry.
top benefits of a global contract
1. standard KPI's and Measurable service levels
A global contract provides clients with standard KPIs and measurable service levels across multiple countries controlled by the singular head office. Clients can implement an overarching agreement with all the KPIs and standards they expect across every country and region in which they operate. There are additional local terms included covering any local employment laws. In my experience, I have seen Germany and the UK added to a US agreement simply by adding a clause for each.
I have also seen clients spend a huge amount of time and money expanding contracts to include other regions. However, the legal team here at Yoh recently worked with a US client to develop simple, targeted clauses to create a working global contract. In this case, we added Germany, UK, Switzerland, Singapore, Hong Kong, and India while satisfying the labor laws of each additional country.
Many clients are really interested in benchmarking their global contracts, typically on an annual basis. My team works with clients to provide accurate rate information on their key skill sets. Clients have the opportunity to address any issues that may have occurred in the previous year and create extremely transparent contracts. By building relationships with our clients, we can learn where certain labor costs are higher than others and where the workforce is more transient to provide fair rates and open doors to new business.
Discounts are a massive benefit in securing a global contract. The margins to receive a discount vary based on who you work with, but the terms are worth negotiating. The two main areas you might be eligible to receive a discount are volume discount and early payments. You are more likely to find these discounts with a global contract since they cover such a vast number of subsidiaries and affiliates.
With this information, you are equipped to help your client choose if they will benefit more from a local or global contract. When your client is choosing suppliers, top talent is necessary to achieve success for everyone involved. Be prepared to help your clients identify the key skills needed to attract high caliber talent within their recruitment strategies.