Legal Team’s Checklist for Workday SaaS Contracts

Negotiating a Workday SaaS contract is a high-stakes endeavor. Workday’s cloud-based HR and Finance platform will hold critical employee and financial data, so getting the contract right from the start is essential. This checklist is designed for procurement and CIO professionals (and their legal teams) to identify and address key legal issues when finalizing an initial global Workday subscription agreement. The tone here is practical and advisory – we focus on clear guidance, real-world examples, and actionable tips to protect your organization’s interests.

Core SaaS Legal Risks (Workday Focus)

Every SaaS deal carries certain legal risks – understanding them in a Workday context helps you negotiate proper safeguards. Key risk areas include:

• Data Control & Ownership: In SaaS, your data resides on the vendor’s systems. There’s a risk of losing access if the contract ends or if the vendor withholds data. With Workday, ensure the agreement explicitly states that you own and control your data, with the right to access it at any time. Without clarity, you risk being locked out of your own HR and finance records.
• Downtime & Service Continuity: SaaS downtime can cripple operations. Workday is mission-critical, so outages or slow performance pose serious risks. Contracts must include solid Service Level Agreements (SLAs) (uptime guarantees, support response times, etc.) to mitigate business interruption risk. For example, Workday’s standard SLA commits to ~99.7% uptime (≈<2.2 hours downtime per month); you should evaluate if this meets your needs or if stronger terms are required.
• Security Breaches & Data Privacy: A breach in Workday’s cloud could expose sensitive employee data, triggering regulatory and liability issues. Ensure Workday provides robust security commitments and rapid breach notification (their security exhibit typically promises notice within 24 hours of discovery). If Workday fails to protect data, your company may face lawsuits or fines – your contract should allocate responsibility and remedies for such events. (More on this under Security Provisions below.)
• Vendor Lock-In & Exit: Without careful planning, a Workday contract can create lock-in – e.g., multi-year commitments, proprietary data formats, or costly exit procedures. The risk is that you can’t leave Workday without significant pain. Mitigate this by negotiating exit rights, ensuring data export, and post-termination access to data, as well as avoiding hefty termination penalties. In essence, plan the divorce before the marriage – even if you never leave Workday, having a clean exit strategy gives you leverage and peace of mind.
• Compliance & Legal Liability: As a global SaaS, Workday must comply with various laws (GDPR in Europe, the US, and others). If Workday’s service or contract isn’t aligned with these laws, your company could be exposed. For instance, improper cross-border data transfers could violate GDPR. The contract should require Workday to adhere to all applicable data protection laws and assist you in compliance (e.g., providing tools for data access requests, audit logs, etc.). Indemnification is another facet – who bears responsibility if a third party claims harm (e.g, an IP infringement claim or a data privacy lawsuit)? We cover indemnities later, but this is a core risk that needs to be allocated.
• Contract that needs to be allocated: Watch out for hidden legal pitfalls common in SaaS deals: auto-renewal clauses that automatically extend your contract if you don’t give notice, one-sided termination rights (vendor-friendly), or broad usage restrictions. For example, Workday might include a clause allowing them to audit your employee counts – a necessary right, but if left unchecked, it could be overly invasive or frequent. Identify these in advance to negotiate terms that are balanced.

By recognizing these risks upfront, your legal team can map each risk to specific clauses that are balanced and tailored to tighten or add, ensuring Workday’s contract works for you, not just for them.

Key Clauses to Scrutinize in Workday’s Agreement

When Workday provides its Universal Main Subscription Agreement (UMSA) and Order Form, certain clauses deserve extra scrutiny. Focus on negotiating the following critical provisions:

• Data Ownership & Access Rights: Verify the contract explicitly states your organization retains ownership of all data you input into Workday. Workday’s standard terms usually affirm this, but double-check. Just as important is ongoing access: you want the right to access and export your data at any time in a usable format. Reject any language that limits data access to the subscription period without a post-termination grace period. If Workday’s template is silent on post-termination data retrieval, insist on adding it. (Example: “Upon termination or expiration, Workday will provide Customer Data in a commonly readable format (CSV/XML) and allow read-only access to the tenant for 60 days for data retrieval.”)
• Service Level Agreements (SLAs): The SLA defines Workday’s performance obligations. Key points include uptime percentage, scheduled maintenance windows, disaster recovery commitments, and possibly the inclusion percentage of training performance. Workday’s standard SLA: 99.7% uptime per calendar month, weekend maintenance hours on Saturdays, and disaster recovery (RTO ~12 hours, RPO ~1 hour). Scrutinize these against your requirements. If Workday’s uptime or RTO isn’t sufficient, negotiate if possible (they may resist altering the 99.7% figure, but might offer other assurances or credits). Also, look for response time guarantees for support tickets – Workday may define priority levels but not commit to specific resolution times in the base contract. If high uptime or faster support is mission-critical, consider negotiating a Premium Support addendum or, at the very least, document the promised response times in an exhibit.
• Service Credits & Remedies: An SLA is only as good as its remedies. Check how Workday handles SLA breaches. Typically, Workday offers service credits if they fail to meet SLA targets over a rolling period – e.g., after one major incident, you receive a meeting. Still, the second incident in six months yields a 10% credit, the third a 20% credit, and the fourth a 30% credit of that month’s fees. These credits are capped and only apply to the affected service, so evaluate if they provide meaningful compensation. Negotiate stronger remedies if needed: for example, credits kicking in on the first serious outage, or higher percentages. Also, secure the right to terminate the contract for chronic SLA failures (e.g, if uptime falls below 98% for several consecutive months). Having a termination-for-cause trigger in the SLA protects you – it’s a last resort if Workday’s service quality truly deteriorates.
• Indemnification Clauses: Indemnities allocate risk for third-party claims. Workday’s indemnity will typically cover you for intellectual property (IP) infringement claims – i.e., if a third party alleges that Workday’s software infringes their patent or copyright, Workday should defend and cover the costs. Ensure this IP indemnity is solid and cannot be negated by other limits (the contract should state that indemnity obligations are outside or in addition to liability caps). Also consider data breach indemnity: If a breach of Workday’s system causes third-party claims (say, employees or regulators taking action due to a data leak), who pays? Workday may not volunteer to indemnify for this, but large customers can attempt to negotiate it. At a minimum, push for language that any breach of confidentiality or data protection by Workday is considered a material breach, triggering your remedies. In some cases, clients negotiate vendor indemnification for data privacy claims – e.g., “Workday will indemnify the customer harmless from any third-party claims arising from Workday’s breach of its confidentiality or data security obligations.” While Workday might resist broadening indemnities, raising the ask can lead to at least some concessions or stronger liability terms (discussed next).
• Liability Limits (Caps and Exclusions): SaaS vendors heavily limit their liability. Workday’s contract will cap its liability (often at a sum equivalent to 12 months of fees) and exclude indirect damages, such as lost profits. As the customer, you need to ensure this is fair and doesn’t leave you holding the bag. Negotiate for a higher cap or such ase-outs for critical situations. A common approach is to accept a general cap (e.g., liability limited to fees paid in the last 12 or 24 months) but carve out certain liabilities from that cap. For instance, propose that the cap does not apply to Workday’s obligations around IP indemnification, confidentiality, data privacy, or gross negligence. This means, for instance, that if Workday experiences a massive data breach due to gross negligence, its financial responsibility wouldn’t be artificially capped at a limit. For instance, experience liability is mutual – Workday shouldn’t have unlimited rights to sue you while you’re capped. Striking the right balance here is crucial: you acknowledge Workday cannot accept unlimited risk for all issues (that’s what insurance is for), but you also shouldn’t accept anemic remedies if Workday truly fails in its duties. Aim for a cap that scales with the risk (some customers succeed in getting 2x or 3x annual fees for certain high-impact breaches, or even uncapped liability for IP infringement and willful misconduct).
• Audit and License Usage Rights: Cloud contracts often allow the vendor to audit your usage (e.g., employee headcount, modules used) to ensure you haven’t exceeded licensed quantities. Workday is not known for aggressive “Oracle-style” audits, but review any audit clause carefully. Negotiate to include reasonable audit parameters: e.g., “any audit shall be upon reasonable notice (30 days), no more than once per year, and conducted in a manner that minimizes disruption”. Also, ensure you won’t be charged for an audit unless a material overuse is found. Define the resolution process if you are out of compliance: typically, you would simply purchase additional licenses at the contract rate to bring you back into compliance. Avoid any punitive “penalty fees” or retroactive charges beyond the pro-rata license fees. Additionally, make sure confidentiality covers any data you provide during an audit. The goal is to allow Workday to verify usage if needed, but prevent unnecessary fishing expeditions or surprise bills.
• Termination and Renewal Terms: Review the terms under which the contract can be terminated. Termination for cause (e.g., material breach) will be standard – ensure it gives you a reasonable cure period if Workday alleges you breached (and vice versa). Early termination without cause. It is rare in SaaS, but if the reviews are dire, it can be terminated to negotiate it (perhaps with an early termination fee). More practically, focus on renewal terms: Workday’s contracts usually auto-renew for a fixed term unless you give notice 60-90 days prior. Negotiate a longer notice period if possible (e.g., 90 days instead of 60, or even 120 days for complex deals) and calendar that deadline internally the moment the contract is signed. Also, cap any renewal price increases – do not accept an open-ended clause allowing Workday to raise fees by an arbitrary percentage or “CPI + X%” each year. Many enterprises succeed in setting a cap of 3-5% on annual increases (and some negotiate no increase for the first renewal). For example, one company pushed back on a “CPI +4%” escalation (which could have been nearly 10% in high-inflation years) and secured a fixed 3% cap, saving approximately $ 800,000 over five years. The contract should ideally state the exact cap or fixed renewal pricing to avoid surprises. Finally, ensure post-termination rights are addressed (tying back to data retrieval and transition assistance as noted above).

Other clauses to review include warranties (Workday will warrant the service performs as described in documentation, and that it won’t contain malware, etc. – ensure these are included and any disclaimer of warranties is not overbroad) and confidentiality (make sure it’s mutual and adequate – see the IP/Confidentiality section below). By zeroing in on these key terms, you can redline the contract to close gaps and protect your organization’s interests. Always cross-reference the contract draft against this checklist of clauses to ensure nothing is overlooked.

IP Protections, Confidentiality, and Security Provisions

A Workday contract should delineate intellectual property rights, enforce confidentiality, and mandate strong security practices:

• Intellectual Property (IP) Rights: Typically, Workday retains all IP rights to its software and platform, while you retain IP rights to your data and any materials you provide. Confirm that the contract reflects this: you receive a subscription license to use Workday’s IP, but all configurations and data you input remain yours. If your team builds anything using Workday (for example, custom reports, configurations, or Workday Extend apps), clarify ownership and usage rights to ensure consistency and transparency. Often, the customer owns any specific configurations or outputs, but Workday may claim rights to general improvements or anonymized learnings. Ensure that any IP transfer is intentional – e.g., if Workday’s consulting team develops a custom integration for you, ensure you have a license to use it beyond the subscription term. Also important: IP Indemnification, as mentioned earlier – Workday should indemnify you against any third-party intellectual property claims. Verify that if Workday’s software or any provided deliverable infringes someone’s patent/copyright, Workday will defend and cover costs (and possibly provide a fix or workaround). This is a standard protection in software deals.
• Confidentiality: Workday’s agreement will have a confidentiality clause – ensure it is mutual (both parties protect each other’s non-public information) and covers your data. Your employee and financial data on Workday is highly sensitive; even if it’s not marked “Confidential” formally, the contract should treat all Customer Data as confidential by default. Key points to nail down:
  • Duration: Confidentiality obligations should survive termination. It’s common to specify a period (e.g., 3 years post-termination) or indefinite protection for trade secrets. Don’t let obligations drop immediately when the contract ends – your data and designs should remain protected as long as they reside with Workday.
  • Scope of Use: Workday should only use your confidential information (including data) to perform the services or fulfill its obligations. Watch for any clauses that allow Workday to use your data for purposes beyond its intended use. Many SaaS vendors include language that allows the use of aggregated, anonymized data across customers for analytics or improvements – if Workday has this, scrutinize it. Ensure any such use irreversibly anonymizes personal data and complies with privacy laws. If you’re uncomfortable with your data being used even in anonymized form, negotiate to remove or restrict that clause.
  • Breach Handling: Tie confidentiality to security – the contract should require Workday to notify you promptly of any unauthorized access or disclosure of your data (this may be specified in a separate security or data protection exhibit). You want to know immediately if a breach occurs so you can fulfill any legal duties (like notifying regulators within 72 hours under GDPR). As mentioned, Workday usually commits to very fast notification (often within 24 hours of a confirmed breach). Confirm this in the contract or data processing agreement.
• Security & Privacy Exhibits: Workday, like most cloud providers, will attach a Security Exhibit (sometimes referred to as a Data Security or Privacy Exhibit) that outlines how it protects your data. Review this exhibit in detail. It should cover:
  • Standards and Certifications: Workday should be contractually committed to maintaining key security certifications (e.g., ISO 27001 for information security, SOC 2 Type II audits, ISO 27701 for privacy, etc.). These demonstrate a baseline of security controls and external audits. Verify if the contract permits thesubmission oof request athe submission of 2 reports, penetration tests, orperiodic audits)– this ior periodiccfor you r wn compliance or audit requirements.
  • Data Encryption: Ensure the contract specifies that Workday will encrypt your data both in transit and at rest. Industry-standard encryption (e.g., TLS 1.2 or later for data in transit, AES-256 for data at rest) should be specified. If not explicitly stated, ask for it – encryption is a basic expectation to prevent unauthorized access to data.
  • Security Safeguards: Look for commitments regarding network security, access controls, employee background checks, and the physical security of data centers, among other key areas. Workday’s security documentation should cover these, but having contractual language helps enforce it. Additionally, ensure that Workday’s personnel and subprocessors only access your data on a need-to-know basis and are bound by confidentiality agreements.
  • Breach Notification & Incident Response: As noted, there should be clear obligations on Workday to notify you promptly of data breaches or security incidents (e.g., within 24-48 hours) and to provide reasonable assistance in remediation. Given global laws, you may also negotiate a clause that allows you to terminate the contract without penalty in the event of serious or repeated security breaches. Some customers include this as a remedy in ultimate remedy agreements (e.g., if Workday commits multiple material breaches of data, you can walk away).
  • Audit Rights for Security: If you are in a heavily regulated industry, you may need the ability to audit Workday’s security practices. Typically, instead of on-site audits (which are not feasible in multi-tenant clouds), vendors offer audits by providing their SOC 2 report or conducting a merger audit. Ensure the contract allows you to request these artifacts or, if necessary, visit for a security review. Workday might not allow individual audits (for security reasons), but confirming your right to their regular compliance reports is important.

In summary, insist on concrete security commitments rather than vague assurances. Workday prides itself on security, which it holds to a high standard by having specific standards and obligations in its contract. For privacy, ensure that a proper Data Processing Agreement (DPA) is in place (see the next section) and, if necessary, that confidentiality and security obligations interlock to safeguard your data throughout the relationship.

Compliance with Global Data Protection and Cross-Border Laws

Global data privacy regulations (like GDPR) impose common requirements – from data subject rights and breach notifications to data transfer restrictions. Your Workday contract must address these areas to ensure compliance.

When deploying globally, data from different countries (employee records, final, once) will be stored in the cloud. Legal due diligence ensures the contract and service adhere to international data protection laws. Key considerations:

• GDPR and International Data Transfers: If you operate in the EU (or handle EU personal data), GDPR is paramount. Workday will act as a data processor on your behalf. You must have a Data Processing Agreement (DPA) (often called the Data Processing Exhibit in Workday’s contract) that meets GDPR requirements. Verify that Workday’s DPA includes all required clauses from the GDPR, specifically clauses 28 – e.g., processing only within instructions, confidentiality of processing, use of sub-processors with consent, assistance with data subjects’ rights, and breach notification. Workday’s standard DPA should cover these, but verify each point. Also, ensure that the EU Model Clauses (Standard Contractual Clauses) or other transfer mechanisms are in place if personal data is transferred outside the European Union. Workday has addressed cross-border transfers by implementing Binding Corporate Rules (BCRs) for data processors, a robust mechanism recognized under the GDPR. Confirm whether Workday’s BCRs are approved and referenced; if not, SCCs should be included in the DPA. The contract should explicitly permit lawful international data flows, and ideally commit Workday to notify you of any new transfer challenges (e.g., changes in law, such as the Schrems II decision). Summary: To ensure compliance, obtain it via the DPA and related exhibits that Workday will handle EU (and UK, etc.) data in compliance with the DGDPR
• Local Data Residency Requirements: Consider whether any country where you operate has data residency or ABCRs laws (for which certain HR data may be required to stay in-country). Workday’s cloud has a limited number of data center regions. Discuss and record where your tenant will be hosted, such as the. “EU data center” or “OTA center”) and if any mirror or backup is obtained from that region. If you have workforce data that confirms jurisdictions like Russia or China have strict data localization requirements, consult legal counsel – Workday may not be able to host in those countries, meaning you’ll need to assess compliance or make special arrangements. The contract should allow you to restrict where data is stored or processed to the extent Workday’s architecture allows (usually by picking the hosting region). Additionally, ensure that Workday commits to obtaining any necessary local certifications (for example, if dealing with government data, certain security clearances may be required, although this is a more specialized requirement).
• Privacy & Regulatory Compliance Support: Beyond GDPR, ensure Workday will assist you in complying with other privacy laws (CCPA/CPRA in California, HIPAA if applicable for health info, etc.). For instance, Data Subject Rights – the contract or DPA should state that Workday’s system enables you to fulfill rights such as access, correction, and deletion of personal data. Workday provides tools for tasks such as data purging and representation. However, it’s beneficial to have a clause that ensures they will assist the controller in responding to data subject requests and provide the necessary information for regulatory inquiries. Suppose you need Workday to sign a Business Associate Agreement (BAA) for HIPAA-covered data in the US, ensure that’s addressed. Essentially, any regulatory requirement that impacts the SaaS provider should be acknowledged in the contract. For example, Workday agrees to comply with applicable data protection tasks and maintain industry certifications (such as ISO and SOC), as this ensures assurance of compliance.
• Cross-Border Data Transfer: The necessary steps are to document Workday’s approach to cross-border transfers (BCRs or SCCs). If using Workday in multiple regions, clarify how support access works – support personnel may access your data from other countries (e.g., a US-based support engineer assisting an EU customer). The DPA should cover this (including a sub-processor list and global support offices). Verify if the contract includes a list of Workday sub-processors and grants you the right to be notified of any changes to that list. For compliance purposes, you may not receive approval rights for sub-processors (except possibly for material changes), but you should at least be informed and have the ability to object if a new sub-processor is deemed problematic. Workday likely has a published list of sub-processors (e.g., for data center providers or support partners), including a rate by reference. It must ensure that it maintains equivalent agreements with any sub-processor to uphold the same data protection standards.

In essence, thank you for the contract’s privacy and data protection purposes. May you make Workday a true partner in compliance. Possibly accept vague assurances like “Workday complies with all applicable laws” without the specific mechanics (DPA, SCCs, deemed security measures) to back it up. Regulators expect that companies (controllers have these terms in place with their SaaS vendors. A well-documented Worensure that security maintains ensures that if a privacy audit or issue arises, you can demonstrate that you exercised due diligence and contractually required strong protections.

Negotiation Strategies: Pushing Back on Unfavorable Terms

Workday is a leading SaaS vendor with standard contracts, but “standard” doesn’t mean unchangeable. Here are strategies for CIOs and procurement leaders to negotiate better terms:

1. Do Your Homework – Benchmark and Leverage Industry Standards: Arm yourself with knowledge of what is normal in SaaS contracts. If Workday offers a term that seems one-sided, enterprise vendors or other Workday customers have likely negotiated it to their advantage. For example, if Workday’s liability cap feels low, note that many SaaS deals cap at 12 months’ fees – use that as a baseline and cite it. If their renewal cap is high, bring data: “Our other major SaaS providers agreed to 3% annual caps; this should be aligned.” Leverage independent advisors or benchmark data for support. Showing that you know the market weakens the “this is our policy” argument.
2. Prioritize Your Must-Haves: Identify which terms are critical to your risk management and which are nice-to-have. It’s rare to get every change you want, so be clear about your red lines. For instance, data ownership, basic indemnification, and a reasonable liability cap might be non-negotiable musts. In contrast, you might be willing to live with Workday’s standard SLA if service credits are slightly improved. Communicate internally and with Workday on which issues affect your ability to sign. Vendors are more likely to concede on well-justified, high-impact points – especially those tied to legal compliance (e.g., data privacy requirements or specific regulatory needs you have).
3. Use Regulatory Requirements as Justification: If Workday resists a change, tie your request to compliance obligations. For example: “We are subject to GDPR and by law must have XYZ in our contract – we need this clause adjusted to comply.” Or “Our auditors/board require that any critical supplier provide a SO with two reports on any need, a contractual commitment on that.” Framing changes as mandatory for you to meet laws or internal governance makes it harder for Workday to say no. It shifts the conversation from “we want this because we’re difficult” to “we both have to do this to stay compliant.”
4. Ask for Clarifications in Writing: If Workday says, “We never misuse customer data” or “We’d of course help you in a transition,” then respond with, “Great, let’s put that language in the contract to memorialize it.” Don’t rely on verbal assurances. Even something as simple as an email from Workday’s representative confirming an interpretation can be turned into a contract clause, or at the very least, added as an exhibit or attachment. For instance, if the salesperson promises 6 months of free premium support, ensure it is documented in writing in the order form or an addendum. This strategy closes the gap between sales promises and contract reality.
5. Leverage Timing and Deal Size: Choose your negotiation moments wisely. Workday, like many vendors, may be more flexible at quarter-end or fiscal year-end when they need to close deals. If you are as simple as a sal is substantive, Workday’s representative has more leverage – don’t be afraid to escalate issues to Workday’s senior team, or even legal counsel. Sometimes a sales rep’s authority is limited; by having our documented executives speak to their “immovable” terms, they can suddenly be moved. Use the fact that this is an initial contract – Workday wants your business, and you haven’t invested yet, so this is when you have maximum leverage. Once you’re locked in, leverage drops considerably at renewal time.
6. Trade Concessions Strategically: Vendors often have playbooks of what they can give. If Workday resists lowering the liability cap, perhaps they can expand the scope of indemnity or give a bit more SLA credit as a compromise. Be prepared to compromise on something less critical to get what you need. Customers might become more flexible if they agree to higher service credits or a longer renewal notice period. Show willingness to find a win-win – “If you can’t do X, perhaps you could meet us halfway by doing Y.” Negotiation is an iterative process; maintain a collaborative tone.
7. Document Every Change and Understand Its Impact: During redlining, keep track of what you’ve requested and what has been agreed upon. When Workday sends back an edited draft, read it carefully – sometimes language changes can be subtle. Ensure no new risks slip in. It’s wise to have a checklist (like this one) and tick off each item once you have it resolved in writing. Also, consider the future impact: for instance, if you agree to a high renewal cap now in exchange for a bigger discount, you might win in the short termrt termrt term ba a ut y fee to the fee to the late prin the process Try to structure terms such that future negotiations aren’t handicapped. (One tactic: include a most-favored customer clause, marking it as such, so you can revisit pricing or terms if you can show they’re out of line. )While rare in SaaS, even mentioning it might get Workday to moderate extreme positions.)
8. Involve Legal Early and Align with Procurement: Ensure your legal team, procurement, and IT security are on the same page. A united front with clear goals is more effective. If procurement is focusing on the short term, ensure they understand that some aspects (e.g., liability for data breaches) could indirectly be worth millions in risk avoidance – it’s not just “legal nitpicking.” Conversely, legal should understand the pricing structure to avoid clauses that accidentally trigger fees (like audit true-ups). By collaborating, you can approach Workday with a cohesive list of requests rather than piecemeal requests.

Finally, remember that everything is negotiable to some extent. Workday might have standard contracts, but if the deal is important, they will ensure a middle ground. Use a certain, but reasonable approach, such as this: you’re not trying to win a breach settlement, you’re trying to establish a mutually beneficial partnership with fair risk allocation. Document all negotiated changes clearly (ensure the final contract version reflects them – no “handshake deals” left out). With these strategies, you can push back on unfavorable language and craft a contract that stands on solid ground.

Common Pitfalls in Workday Contracts (and How to Avoid Them)

Even seasoned negotiators can miss nuances specific to Workday deals. Watch out for these common pitfalls:

• No Cap on Renewals = Soaring Costs: Many have learned the hard way that if you don’t lock in renewal pricing, Workday can significantly increase fees. Standard contracts may allow annual hikes tied to an index or a set percentage (e.g., CPI + 3-5%). If you “leave it for later,” you could face sticker shock at renewal – one company saw nearly 10% yearly increases due to a CPI+4% clause. Avoidance: Always negotiate a renewal cap or fixed pricing window upfront. It’s easier to get started now than when you’re already fully invested in the platform.
• Auto-Renewal Ambush: Workday’s auto-renewal terms can trap unwary customers. If you miss the 60- to 90-day notice window, the contract may automatically renew for another term. Companies may be liable for failure to send a non-renewal notice or negotiate in good faith. Notice Docket the non-renewal deadline from day one. Send a preliminary notice (even if just to say “we intend to discuss renewal terms”) well in advance. This keeps your options open and forces a negotiator to start rather than automatically lock in.
• Oversold Buying / Shelfware Modules: Workday sales pitches often bundle extra modules at a “discount,” which can lead to purchasing items you don’t use (e.g., additional HR modules or analytics tools). Legally, you’re committed to multi-year fees for these. To avoid this, include a usage/value review clause or ensure the contract allows you to drop or swap modules at renewal if they’re not utilized. At minimum, be very critical during negotiation about what you truly need. It’s easier to add later than to remove unused components mid-term. Tie payment to deployment milestones if possible (so you’re not paying full freight on a module that’s not implemented yet).
• Undefined Data Exit Plan: As noted earlier, a significant pitfall is not clearly outlining how you will retrieve purchased items and in what format they will be returned upon termination. If the contract is silent, you may face issues with data export. Avoidance: Negotiate. To avoid this, include valuation clauses (including formats, timelines, and any assistance from Workday) now. Also, plan for data retention – Workday’s default is to delete data shortly after the contract ends. If you require longer retention (for regulatory or transition purposes), address this accordingly. One UK company, for example, required keeping employee records for 6 years for legal reasons; that had to be built into the agreement.
• Hidden Fees for Integrations or APIs: Workday generally includes API access as part of the subscription; however, if you require specific integration services or third-party connectors, additional costs may apply. Additionally, if you require a sandbox environment or additional test tenants, please inquire whether these are included or incur any extra costs. Avoidance: Clarify all ancillary fees in the is. If you see references to third-party products or require the Cloud Platform, ensure you understand what is used. Negotiate any needed integration support or tools upfront, or at least obtain a commitment that APIs won’t be arbitrarily limited. Surprises in integration capabilities can be costly, so be sure to pin down in writing that the system will integrate with your key systems without additional license fees.
• Lack of Custom SLA Terms: Smaller custom operations sometimes require custom SLA terms; however, please inquire whether these issues incur additional costs. If your operations demand it, customize the SLA. For instance, if you run a global payroll on Workday, an outage at the wrong time could be disastrous – you might need a stronger uptime guarantee during payroll week or quicker support response. Don’t overlook SLA details; negotiate those response times and credits as needed. Also, confirm whether downtime includes all outages or only unplanned ones, etc. Nail down definitions so you know when you can claim a breach.
• Assuming “It’s Cloud, So No Negotiation”: A common pitfall is thinking that because Workday is a multi-tenant cloud service, you have to accept boilerplate terms. In reality, Workday will negotiate on many points (especially for larger or global customers). If you don’t push back, you’re effectively accepting a contract that might be suboptimal in terms of risk allocation. Avoidance: Challenge assumptions – ask where Workday has made exceptions in the past. For example, while they rarely alter core platform functionality, they might add a special clause just for your needs (like a unique data segregation requirement or a clause addressing a country-specific law). You won’t get it if you don’t ask.

Being aware of these pitfalls means you can proactively address them. The overarching theme is due diligence – read every clause, ask “what if” scenarios (what if we want to leave? what if the service fails? what if our company doubles in size?), and ensure the contract has answers to those questions. Many pitfalls can be avoided with careful initial negotiation and thorough documentation.

Sample Clause Language and Redline Recommendations

To help translate these concepts into contract terms, the following are some example clauses and fallback positions that you can use in your negotiations. (Always tailor language to your situation and have a legal review, but these illustrate how to protect your interests.)

• Data Ownership & Use Clause: Ensure it’s crystal clear. For example: “Customer retains all right, title, and interest in and to all Customer Data. Workday is granted a non-exclusive license to process customer data only to provide the services. All customers can be considered for establishing limits on the use of your data, strictly for the delivery of the following (preventing unrelated use). If Workday’s draft already states that you own your data, focus on tightening any vague wording about how they can use it. Redline Tip: Strike broad phrases like “including for improving the services” or add “with Customer’s prior written consent” to any extra use.
• Post-Termination Data Retrieval Clause: If not present, propose a clause such as: “Data Export and Transition – Upon termination or expiration of the Agreement, Workday will provide Customer, upon request, with an export of Customer Data in a [specified format]. In addition, for 60 days after termination, Workday shall maintain the Customer’s tenant in a secure read-only state to allow the Customer to retrieve the remaining data and not charge any fees regarding access beyond any reasonable cost of media or delivery.” This example (including the 60-day read-only access) comes from real negotiations – it ensures you’re not left in the dark the day after your contract ends. If Workday balks at 60 days, negotiate the duration or possibly a one-time data dump. The key is to have something in writing so you’re not scrambling post-termination.
• Service Level Failure Remedy Clause: Augment the SLA section with stronger remedies. For instance: “If Service Availability falls below 99.0% in any month, Customer shall receive a service credit of 20% of that month’s fee for the affected Workday products. Credits are applied automatically and can be set off against any invoice. In addition, if uptime falls below 98% for three consecutive months, Customer may terminate the Agreement for material breach with no early termination fee.” This is a more aggressive stance than Workday’s default (which required multiple failures to even start credits). You may not fully understand this, but negotiating for automatic credits and explicit termination rights for chronic failure puts pressure on Workday to maintain its performance. Redline Tip: Add a table or list in the SLA exhibit with uptime tiers and credit are applied natures (as shown above) if not already detailed.
• Indemnity and Liability Carve-Outs: Modify the standard clauses to protect you. Example addition: “Notwithstanding any cap or limitation in this Agreement, Workday’s liability for breaches of confidentiality, violations of its data protection obligations, or third-party claims covered by Workday’s indemnification obligations shall be uncapped [or “subject to a separate cap equal to 2x the fees paid”].” Similarly, you can insert: “Under no circumstances shall Customer be required to indemnify Workday for intellectual property infringement claims related to Workday’s products.” Many vendor contracts sneak in a reverse, they are an indemnity (you indemnify them if you misuse the software) – limit that to only your intentional misconduct. Redline Tip: Carve-outs are often added as a sentence in the liability section, starting with “However, nothing in this section shall limit liability in the event of…” etc. Use Contractnerds’ guidance: carve out gross negligence, willful misconduct, intellectual property, data breaches, and other similar exclusions from any cap. This ensures that a random, arbitrary dollar limit doesn’t constrain serious issues.
• Audit Rights Clause (Customer-Friendly): If Workday’s template has an audit clause, tweak it to ensure fairness: “Workday may audit Cusincludeusage of the subscribclause ed Workday products no more than once per calendar year, upon at leasdays’ prior written notice, and in a manner that does not unreasonably interfere with Customer’s business. Workday shall conduct any audit at its own expense, and any information gathered shall be used exclusively to verify compliance with the license metrics. If an audit discovers material overuse, Customer will pay the applicable fees foran arbitrary dollar limit doesn’t constrain serious issues any audit cost reimbursement unless overuse exceeds 5% of contracted volumes.” This aligns with best practices. Redline Tip: Add the frequency (“no more than annually”) and notice period, and specify that purchasing additional licenses is the sole remedy for overuse – preventing punitive fees.
• Termination for Convenience (Customer Option): While rare, if it’s important for your business, propose something like: “Customer may terminate this Agreement for convenience after the first 12 months of the term by providing 60 days’ written notice to Workday. In such event, Workday shall refund any prepaid fees on a pro-rata basis for the unused remainder of the term.” Workday might reject this outright, but in some cases, especially with government or public sector clients, termination for convenience is non-negotiable. If you can’t get a full termination right, consider a mid-term flexibility clause (e.g., the ability to reduce module quantities or scope at renewal, or an earlier renewal opt-out). Redline Tip: If Workday won’t allow it, you could negotiate an extended termination right for breach – for example, “if any breach by Workday recurs more than twice, it shall be deemed a chronic failure allowing Customer an immediate termination right.” This indirectly gives you an out if things go south.
• Sample Fallback on Price Escalation: For pricing, ensure the order form or pricing exhibit includes your negotiated cap. E.g.: “Fees for any renewal term shall not increase by more than 3% over the prior term’s fees (exclusive of any added users or modules).” If Workday’s draft said “fees may increase by CPI,” you’d redline that to this fixed percentage cap. Real-world example: One customer changed “CPI+4%” to “3% max.” Redline Tip: Put the cap in a clear sentence; avoid ambiguity, such as“may be subject to increase” – nail down the number.
• GDPR Data Processing Addendum Clause: If Workday’s DPA is separate, ensure the main agreement references it and that it’s signed. You might add: “Workday shall process personal data only by the Data Processing Exhibit, which incorporates the Standard Contractual Clauses (SCCs) to facilitate lawful international data transfers. In case of conflict between the DPA and this Agreement, the DPA shall control concerning personal data processing.” This makes sure the GDPR terms have teeth. If there’s any specific GDPR concern (e.g., you need Workday to assist with Data Protection Impact Assessments), include that too. Workday, likely, has such as these covered, but it’s always a good idea to double-check and explicitly reference compliance obligations.

These sample clauses illustrate how you can make the contract more favorable to your interests. When redlining, be specific and use language from your company’s playbook or reputable sources. If Workday’s legal pushes back, ask them to suggest alternative wording that meets the same goal. Often, they might agree to the concept but reword it to fit their style – that’s fine as long as the protection remains. Always read the final redlines to ensure the “spirit” of your ask survived any rephrasing.

Recommendations: Best Practices for Legal Due Diligence

In closing, here is a concise checklist of best practices to guide your legal team through a successful Workday SaaS negotiation:

1. Start with the Standard Contract Early: Obtain Workday’s UMSA and exhibits as soon as possible. Review them in detail, flagging any clauses that are high-risk or unclear to your interests. Early review helps avoid last-minute surprises and allows you time to strategize and implement changes.
2. Use a Checklist (and This Article) to Cover All Bases: Cross-check every critical area – including data rights, SLAs, liability, indemnity, security, compliance, and more – and ensure nothing is left unaddressed. If a topic isn’t in the contract (e.g., data export), proactively add it. A checklist approach ensures that you don’t overlook something like audit rights or auto-renewal notices while focusing on bigger-ticket items.
3. Engage Stakeholders and Experts: Involve IT security, compliance officers, and the business owners (HR/Finance) in reviewing relevant parts. For example, have your CISO or data privacy officer review the security and DPA exhibits. Lehelps avoid outside counsel or consults familiar with Workday if and when implementing, as their insights on “what’s normal” can strengthen your negotiation position and clause, including rafting.
4. Document Negotiations and Maintain Version Control: Traditionally, moreall requested changes and Workday’s responses. Use redlines in Word or a contract management tool to avoid confusion. When an issue is resolved, mark it as such. Before signing, conduct a review comparison of the contract, focusing on the larger negotiated points to ensure that all agreed-upon terms are accurately reflected and included in the text. It’s not unheard of for a term to slip through the cracks – a disciplined approach prevents that.
5. Beware of Side Letters or Emails: Occasionally, a sales team might suggest, “We can’t change the contract, but we’ll send you an email confirming X.” This is a risky approach – those communications are often not binding. Push to get all commitments into the contract or an official addendum. If something truly must be outside the main contract, have your legal team draft a short side letter that both parties sign, and reference it in the main agreement.
6. Plan for Ongoing Compliance: Laws and business needs are constantly evolving. Include provisions that conduct a comparison of legal requirements (for instance, if new privacy regulations are included, they should agree to meet those at no extra cost). Additionally, establish a process to review the contract periodically. A best practice is to schedule an annual meeting with Workday to discuss any compliance updates, new services, or changes in your usage, and amend the contract if needed (or at least document any necessary adjustments).
7. Keep an Eye on Renewal Milestones: The legal team’s job isn’t done once the ink is dry. Changing the renewal notice date and any other key dates (like side letter dates or data deletion dates) is part of contract due diligence. Ensure your team or the responsible department is alerted well in advance of renewal so you can prepare for re-negotiation or termination if needed. Treat each renewal as an opportunity to improve terms or reassess needs, rather than simply rubber-stamping.
8. Foster an additional, established Vendor Relationship: A good contract sets the foundation for a positive partnership with Workday. During negotiation, you can be firm but fair – emphasize that you’re seeking a balanced agreement for long-term success. After signing, maintain communication with Workday about performance and compliance. If issues arise, use the governance mechanisms in the contract (like executive escalation clauses or periodic service reviews) to address them. A strong contract should include governance structures, such as quarterly service reviews or named executive sponsors, which help ensure issues don’t escalate to disputes. Use those proactively.

By following these recommendations, your legal and procurement teams will be well-prepared to secure a Workday SaaS contract that meets your business objectives while mitigating risks. In summary, diligence and detail are your allies – sweat the details now so you won’t have to sweat issues later. Workday is a powerful platform; with a well-negotiated contract in hand, you can deploy it with confidence knowing your organization is legally protected. Here’s to a smooth contract process and a successful Workday partnership!