Recruitment agencies get paid by the employer doing the hiring, not by the job seeker, and the fee depends on the model. Contingency placements generally cost 15% to 25% of the new hire’s first-year salary. Retained executive searches run around 33%. Temporary staffing uses an hourly markup of 25% to 40% above the worker’s pay rate. Each arrangement shifts risk differently, and the numbers only make sense once you see what each fee is actually buying.
Who Pays: Employers, Not Candidates
The standard arrangement across the staffing industry puts the financial obligation on the company doing the hiring. Agencies earn their revenue by solving a problem for the employer, which is finding qualified candidates faster than the company’s internal team can. That value proposition only works when the employer is the paying client, which is why the vast majority of legitimate agencies never charge candidates.
No single federal statute bans all candidate-charged fees in private-sector recruitment. The Federal Acquisition Regulation prohibits federal contractors from charging workers recruitment fees, and several states impose restrictions through employment agency licensing laws. The strongest protection for most job seekers, though, is market practice: agencies that charge candidates struggle to attract talent and lose credibility with employers. If a firm asks you for money upfront to see listings or process an application, treat it as a warning sign.
Between the agency and the employer, the contract spells out when payment is triggered, what the fee covers, and what happens if the hire doesn’t work out. Those contracts fall into a handful of distinct models.
Contingency Fees
Contingency recruitment is the most common model and works like it sounds. The agency gets paid only if the employer actually hires one of its candidates. No placement, no fee. That makes it a low-risk option for companies, which is why it dominates mid-level and professional hiring. Employers often engage two or three agencies at once under non-exclusive contingency agreements, creating a race to fill the role.
Fees are calculated as a percentage of the placed candidate’s first-year base salary. That percentage generally falls between 15% and 25%, though highly specialized roles in technology, healthcare, or finance can push higher. On a $100,000 salary, a 20% fee means the employer pays the agency $20,000. The invoice usually goes out once the candidate accepts the offer and starts, with payment on net-30 terms.
Nearly every contingency contract includes a guarantee period, usually around 90 days from the start date. If the hire leaves or is terminated during that window, the agency either provides a replacement at no additional cost or refunds part of the fee. The refund is often prorated: leave in the first month and the employer gets most of the money back; leave in month three and the refund shrinks. This guarantee is one of the few protections employers have against a bad match, so read it carefully before signing.
Retained Search Fees
Retained searches are reserved for senior leadership and hard-to-fill specialist roles where discretion, depth of research, and exclusive focus matter more than speed. A retained firm commits dedicated resources to a single client’s search rather than juggling many searches at once. The tradeoff is that the employer pays whether or not a hire results, because the fee covers the search process itself.
The total fee for a retained search typically equals about 33% of the successful candidate’s first-year total cash compensation, paid in three installments:
- An engagement retainer, one-third due when the contract is signed, launches the search.
- A shortlist milestone payment, another third, is billed when the firm delivers a slate of qualified candidates.
- The completion fee, the final third, is due when the selected candidate accepts an offer.
The first two installments are generally non-refundable. If the employer reviews the slate and decides not to hire anyone, the firm keeps what has already been paid because the work was performed. A final reconciliation invoice may follow if the hired candidate’s actual compensation differs from the initial estimate. Some retained firms also bill reimbursable expenses separately, covering pre-approved costs like candidate travel and background checks.
The math gets significant fast. For a VP-level role paying $250,000, a 33% fee totals $82,500 across those three milestones. Employers accept the premium because retained firms typically reach passive candidates who aren’t responding to job postings and wouldn’t surface through contingency channels.
Temporary Staffing Markups
Temporary staffing works on a different model. Instead of a one-time fee, the staffing agency charges the client an hourly rate for every hour the temp works, and that rate is higher than what the worker earns. The gap is the agency’s markup, and it covers far more than profit.
In a temp arrangement, the staffing agency is the employer of record. The worker is on the agency’s payroll, not the client’s. The agency handles paychecks, tax withholdings, benefits administration, and employment compliance. The markup funds all of it.
Markups for standard temporary roles generally range from 25% to 40% above the worker’s hourly pay, with higher percentages for specialized or physically dangerous work. For a temp earning $30 an hour, a 35% markup means the client pays $40.50 per hour. That $10.50 spread has to cover several statutory and operational costs before the agency earns anything:
- The employer’s share of Social Security (6.2%) and Medicare (1.45%) adds 7.65% to every dollar of wages, up to the Social Security wage base of $184,500 in 2026. Medicare has no wage cap.1Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates2Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security
- Federal and state unemployment taxes add roughly 2% to 6% of wages, depending on the agency’s experience rating and the state.
- Workers’ compensation premiums depend on job risk. An office temp might cost the agency $0.50 per $100 of payroll, while an industrial laborer could cost $10 or more per $100.
- Temporary workers averaging 30 or more hours per week qualify as full-time under the Affordable Care Act, so the agency must offer minimum essential health coverage or face employer mandate penalties. That can add roughly 3% to 5% per worker.
- Whatever remains covers the agency’s overhead and margin. Actual net margins in temp staffing often land in the 3% to 8% range.
Clients sometimes see a 35% markup and assume the agency pockets a third of the bill. In practice, mandatory employment costs eat most of that spread before the agency earns anything.
Temp-to-Hire Conversion Fees
Many temporary placements come with an option to convert the worker to the client’s permanent payroll. When that happens, the staffing agency charges a conversion fee to compensate for lost markup revenue and the recruiting investment. These fees are spelled out in the original staffing contract, and hiring the temp “off the books” after their assignment ends usually triggers a liquidated damages provision that costs even more.
Conversion fees typically range from 10% to 20% of the worker’s anticipated annual salary, often prorated based on how long the temp has worked through the agency. The longer someone has been on assignment, the more markup revenue the agency has already collected, so the buyout should shrink. If a standard fee is 20% but the worker has completed 16 of 26 qualifying weeks, the employer might owe only the remaining fraction.
For a temp earning $60,000 annually who has worked half the qualifying period, a prorated 20% fee might come out around $6,000 instead of $12,000. The formula varies. Some agencies use a declining scale tied to weeks or months worked; others set a flat fee that drops to zero after a waiting period of 90 to 180 days. Read the conversion clause before signing.
Flat Fee, RPO, and Subscription Models
Not every hiring need fits percentage-based pricing. Companies making large numbers of similar hires often negotiate flat-fee arrangements where the cost per placement is a fixed dollar amount regardless of salary. This works well for roles with predictable compensation, like customer service or warehouse positions.
Recruitment Process Outsourcing hands over all or most of a company’s hiring function to an outside provider. Instead of paying per hire, the employer pays a monthly management fee for one or more dedicated recruiters embedded in its hiring workflow. Monthly costs for a dedicated RPO recruiter typically run $8,000 to $15,000, depending on role complexity and hiring volume. Hybrid RPO contracts use a lower monthly base of $4,000 to $8,000 per recruiter plus a reduced per-hire bonus of $1,000 to $3,000 per successful placement.
Subscription-based recruiting has gained traction among smaller companies that need ongoing but lighter support. These arrangements provide access to a recruiter for a fixed monthly rate at a lower price point than full RPO, without the process redesign or technology integration. The appeal of all these alternatives is predictable spending; the company knows its recruiting costs in advance rather than watching them fluctuate with each hire’s salary.
Picking the Right Model
Lining up the percentages side by side doesn’t tell the whole story. A 20% contingency fee on a $90,000 role costs $18,000 with no upfront risk. A retained search at 33% on the same salary runs $29,700, with two-thirds paid before anyone is hired. A temp-to-hire arrangement might cost more in total markup over six months than either direct-hire option, but it lets the employer evaluate the person’s actual work before committing.
Contingency works well for mid-level roles where multiple candidates exist in the market. Retained search makes sense when the talent pool is tiny and confidentiality matters. Temp staffing is the right call when the employer isn’t sure the role will be permanent or wants a trial period. RPO pencils out when hiring volume is high enough to justify a dedicated monthly spend. Whichever route the employer chooses, the fee terms, guarantee period, payment timing, and conversion rules are all negotiable, and agencies expect those conversations.