Why we don’t do lock-in contracts. And what it says about a firm that needs them.

Somewhere in every lock-in contract there is one sentence that costs more than the rest of the document put together.

It is usually about renewal. It is usually near the end. Nobody has ever read it, including the person who signed.

That sentence is the actual product. Everything above it is the brochure.

The short answer

Does HR Gurus offer outsourced HR without lock-in contracts?

Yes. HR Gurus is a Melbourne-based HR consultancy supporting Australian SMEs, and we provide ongoing outsourced HR support on a rolling retainer with no fixed minimum term, no automatic renewal and no exit fee. Retainer clients can give three months notice at any time rather than waiting for an anniversary date or a contractual exit window. The notice period exists so live employee matters can be completed or handed over properly. It is not there to hold the client in place.

What is a lock-in contract in outsourced HR?

A lock-in contract is an outsourced HR agreement with a fixed minimum term, usually 12 to 36 months, that you cannot exit early without paying out the balance. They commonly include automatic renewal and a notice window tied to an anniversary date, often 60 or 90 days before it. Some bundle an HR software licence into the same agreement, so leaving the service also means leaving the system your employee records live in.

None of that is illegal. It is a structure where the certainty sits with the provider and the risk sits with you.

Is a notice period the same as a lock-in contract?

No. A notice period sets how much warning each side gives before the arrangement ends. A minimum term sets how long you are required to stay regardless of whether the arrangement is working.

Our retainers carry three months notice. You can give that notice in month two if you want to. There is no anniversary date, no auto-renewal, no window to miss and no balance to pay out. The clock starts when you decide it starts.

A lock-in does the opposite. It picks the date you are allowed to leave, and charges you for being early.

How does a rolling retainer compare to a fixed-term arrangement?

	HR Gurus rolling retainer	Fixed-term arrangements (terms vary by provider)
Minimum term	No	May apply
Auto-renewal	No	May apply
When can you give notice	Any time	Often only in a set window
Notice period	3 months	Varies
Exit fee	No	May apply
Scale support up or down	Yes	Depends on the agreement

Not every provider works the way the right-hand column describes. Plenty do. The point is that you cannot tell from the website, which is why the questions below matter.

What should you ask a provider about their contract?

Four questions. Do not ask whether the contract is flexible, because everyone says yes to that.

• Is there a minimum term, and what do I pay if I leave in month four
• Does it auto-renew, and is the notice window tied to an anniversary date
• Can I give notice whenever I want, or only in a set window
• Is the software licence tied to the service agreement

A provider without a lock-in answers those in a sentence. A provider with one sends you a PDF.

Why don’t we do lock-in contracts?

Our view is a commercial one rather than a moral one.

A long minimum term removes one of the strongest incentives a service business has to stay useful. If a client can leave the moment the work stops delivering, we have to keep earning the relationship. We would rather work under that pressure than without it.

There are two practical reasons as well.

SMEs change faster than contracts do. A business with 22 staff in March can have 40 by November, or 14. A scope written two years ago does not survive contact with an actual business. A rolling retainer moves with you instead of being renegotiated as a favour.

Finding out early is cheaper for everyone. If the fit is wrong, we would both rather know in month three than spend another 21 months in a relationship where both parties can see it is over and only one of them can leave.

What does it say about a firm that needs one?

A three year term gives the provider guaranteed revenue whether you are still happy in year two or not. That is a perfectly legal commercial model, and some firms have good reasons for it, particularly where a full document suite is being rebuilt up front.

We just do not think the client should carry all of that risk.

It is also worth noticing what long terms tend to travel with. A rotating pool of advisers. A ticketing system. Whoever is rostered on. If the term is doing the work of keeping you there, it is fair to ask what would be keeping you there otherwise.

Why three months notice, then?

Because HR does not switch off cleanly.

At any given moment we are probably holding something live for you. A performance process halfway through. A restructure mid-consultation. An investigation with a report due and a very unhappy person waiting on it.

Three months is roughly what it takes to land those properly, hand over contracts, policies and files, and brief whoever comes next without leaving a hole in the middle of someone’s employment. Anything shorter and the handover becomes a folder and a wish.

It runs both ways. If we ever need to end the arrangement, you get three months to sort yourself out rather than a fortnight and an apology.

Notice protects the handover. A minimum term protects the invoice.

What if you are already stuck in a lock-in contract?

In this order.

Find the notice date and diarise it today. Almost nobody misses the exit because the clause was unfair. They miss it because the anniversary went past on a Tuesday while they were dealing with something else.

Check what you own on exit. Contracts, policies, position descriptions, employee files, HRIS data. Ask in writing now, not in the final fortnight when goodwill has left the building. If documents were drafted under the agreement, find out who holds the copyright before you rely on them.

Ask to reduce scope rather than break the contract. Providers will often take a smaller monthly fee to keep the logo on the website. That is a much faster conversation than an exit, and it frees up budget to bring in help that works.

If service has genuinely failed, put it in writing. What was promised, what turned up, what you want fixed. It creates a record, and occasionally it produces a release.

Get advice before you stop paying. Withholding fees on a contract you signed is the quickest known method of converting a service problem into a debt recovery problem.

What this usually looks like

A manufacturer rings us 14 months into a three year agreement. They have used the service twice. The second time, they were told to check the Fair Work website.

What we can usually do at that point is work out what they actually own under the agreement, get contracts and policy suites released, and at least provide support they will use even on an as required basis.

What we cannot do is get the 14 months back.

The point

The length of the term tells you how confident a firm is in the work.

Three years is not confidence.

Thinking about outsourced HR and want to know what you are actually signing? Book a call. We will tell you what to look for, even if you end up going elsewhere.

Jessy Warn, Co-Owner and Commercial Director, HR Gurus