Placement Fee

How placement fees work

The fee is earned when the candidate the agency introduced accepts an offer and, under most agreements, starts work. It is invoiced on or after the start date with payment terms of 15 to 30 days. Most direct hire agreements include a guarantee period: if the hire leaves or is let go within that window, the agency finds a replacement or refunds part of the fee.

In a contingency search, the agency is paid only if the client hires its candidate, and the client may use several agencies at once. In a retained search, the fee is split into installments paid during the search, with the agency working exclusively.

Typical placement fee percentages

• Contingency search, professional and mid-level roles: commonly 15% to 25% of first-year base salary, with 20% a frequent starting point.
• Hard-to-fill technical or niche roles: 25% to 30% is not unusual.
• Retained executive search: typically around one-third of first-year total cash compensation.
• High-volume or hourly direct hire: often a flat fee per hire or a lower percentage, for example $1,500 to $4,000 per hire for supervisors and skilled hourly roles, sometimes less with volume.

Fees for clients with large, repeat volume are often discounted by tier (for example 20% for the first five hires in a year and 17% thereafter). Remember that fees are paid by the employer. Many states regulate or ban charging job seekers placement fees through employment agency licensing laws.

Contract terms that matter

• Definition of compensation: base only, or base plus bonus, sign-on bonus and relocation.
• Candidate ownership: how long a submitted candidate is 'owned' by the agency, often 6 to 12 months. If the client hires the person within that time, the fee is owed even for a different role.
• Duplicate submissions: who gets credit when two agencies or the client's own sourcing reach the same person. The usual rule is first documented submission wins.
• Guarantee: length, replacement vs refund, and exclusions (layoffs, role changes, poor treatment by the employer).
• Payment timing: on start date, or on completion of a probation period.
• Temp-to-hire overlap: what happens when an agency temp is hired directly, which is usually governed by a separate conversion fee schedule.

Signing the agency's terms by replying to an email with a resume is still agreeing to terms in many cases. Have a signed agreement before reviewing any agency candidate.

Is the fee worth it

Compare the fee to the real cost of the alternative: an internal recruiter's time, advertising, and the cost of the role staying vacant. For a sales role producing $40,000 in gross profit a month, a $20,000 fee that fills it six weeks faster pays for itself. For an entry-level role your team can fill in two weeks from job boards, it rarely does. Agencies earn their fee on roles where the right people are not applying and need to be found and persuaded.