The three models
A contingency recruiter is paid nothing until somebody starts, so their working day goes to the roles most likely to close. If your brief is hard, it is not the one they are working on this afternoon.
That is not cynicism about recruiters. It is what the payment model rewards, and any honest recruiter will say the same.
| You pay | When | The firm's incentive | |
|---|---|---|---|
| Contingency | 15 to 25 per cent of salary | Only on a placement | Speed and volume |
| Exclusive contingency | Slightly less, often 15 to 20 per cent | Only on a placement | Speed, with less competition |
| Retained | 25 to 33 per cent of first-year earnings | In thirds, through the search | Completing the mandate |
VAT and the other line items
In the UK, agency fees carry VAT at the standard rate. On a £45,000 fee that is £9,000 you need in the budget, recoverable if you are VAT registered but real cashflow either way.
Advertising, assessment and psychometrics are often billed separately. Ask whether they are inside the fee or on top, and ask for a cap.
What a rebate actually protects
Most agreements offer a sliding rebate if the hire leaves early: often 100 per cent inside a month, falling to nothing by three. Some firms offer a free replacement instead, which is worth more.
Neither covers the real loss. If a senior hire leaves at four months you have lost two quarters of the function, not a percentage of a fee.
What is worth negotiating
- The base the percentage is charged on, and whether bonus counts.
- An expense cap, or expenses inside the fee.
- The guarantee period, and exactly what voids it.
- Payment terms: thirty days from invoice rather than on offer acceptance is normal and rarely refused.
Questions
- Do recruitment fees have VAT?
- In the UK, yes, at the standard rate on the whole fee. Budget for it as cash even if you can recover it.
- What is a normal recruitment fee percentage?
- Contingency is typically 15 to 25 per cent of salary in the UK and 20 to 25 per cent in the US. Retained executive search sits higher, at 25 to 33 per cent and 30 to 35 per cent respectively.