How recruitment agencies typically bill
Contingency and retained search work bill differently, and an invoice should make clear which model applies.
- Contingency: a placement fee (typically 15-25% of first-year salary) due only when a candidate is hired
- Retained search: a deposit (often 1/3 of the estimated fee) up front, with the balance due on placement
- Replacement guarantee: a stated period (commonly 90 days) during which a failed placement is replaced at no additional fee, or partially refunded
Common invoice line items
A placement invoice should state the fee basis explicitly, since "recruitment fee" alone doesn't tell the client how the number was calculated.
- Placement Fee (20% of $120,000 base salary) — $24,000
- Retained Search Deposit (1/3 of estimated fee) — $8,000
- Balance Due on Placement — $16,000
- Replacement Guarantee: 90 days from start date
The most common billing dispute: guarantee periods
Disputes in recruitment billing are almost always about the replacement guarantee — did the candidate leave voluntarily or was it a poor fit, and does that trigger a replacement or a refund. State the guarantee terms explicitly in the signed agreement and reference the start date on the invoice, so the guarantee window is never ambiguous.
Calculating the fee base correctly
Fee percentage is usually calculated against base salary, but some agencies include guaranteed bonuses or total comp. State which basis applies in the agreement and restate it on the invoice line item itself, since this is the other frequent point of disagreement after a placement is made.
Frequently asked questions
How is a recruitment placement fee typically calculated?
Most commonly as a percentage (often 15-25%) of the candidate's first-year base salary, though some agreements include guaranteed bonuses or total compensation. State the basis explicitly in the agreement and on the invoice.
What's the difference between contingency and retained search billing?
Contingency fees are due only when a candidate is placed. Retained search typically requires a deposit up front (often a third of the estimated fee), with the balance due on placement, regardless of how the search concludes.
How should a replacement guarantee be tracked?
State the guarantee period (commonly 90 days) explicitly in the signed agreement, and reference the candidate's start date on the invoice so the guarantee window is never in dispute later.