How Recruitment Agencies Get Paid: Contingent, Retained, Exclusive and Temp Fees Explained

If you have ever received a recruitment invoice and thought "how on earth did they get to that number?", this one is for you. Recruitment fees are not complicated once you see how they are built, but the models vary, the jargon is thick, and the differences between them matter far more than the headline percentage.

The good news: once you understand how recruiters get paid, you can pick the right model for each role, negotiate sensibly, and get a much better service. Here is a plain-English tour of how it works across the UK, Australia and the US.

Why the fee model matters more than the percentage

It is tempting to compare agencies purely on their percentage. 18% beats 22%, job done. But the fee model shapes the recruiter's behaviour. It decides how much time they can afford to spend on your role, whether they are competing with other agencies, and what happens if your hire leaves after a month.

A cheap fee on a model that encourages a rushed search can cost you far more than a slightly higher fee on a model that buys real commitment. So let's look at the models first, then the numbers.

1. Contingent (or contingency) recruitment

How it works: the agency is paid only if you hire a candidate they introduced. No hire, no fee. It is by far the most common model for permanent roles below executive level.

What it typically costs:

• UK: commonly 15% to 25% of the candidate's first-year salary, usually basic salary, invoiced after the candidate starts. Prices are normally quoted before VAT, so remember to add 20% if you are budgeting.
• US: SHRM has cited contingency fees of about 20% to 25% of first-year cash compensation. A Staffing Industry Analysts survey reported by Second Talent found 20% to be the most common direct hire fee, charged by 42% of the staffing firms surveyed.
• Australia: published agency rate cards often sit between roughly 12% and 20%, frequently calculated on salary plus superannuation and quoted plus GST. For example, one Australian agency charges 12% for roles under $50k, 15% for $50k to $90k, 18% above $90k and 20% for executive roles.

The upside: zero upfront risk. You only pay for results.

The catch: because the agency only gets paid if it wins, and you may have briefed several agencies, contingent recruitment can become a race to send CVs. The recruiter has to spread their time across lots of roles, and yours may not get top priority.

Best for: mid-level roles in an active candidate market, where speed matters and the profile is reasonably clear.

2. Exclusive (or sole agency) recruitment

How it works: still paid on success, but you agree to work with only one agency on the role, usually for a set number of weeks.

What it typically costs: often a little less than multi-agency contingent work, because the agency knows its effort will not be wasted. One UK agency's published packages show the trade clearly: 20% with an 8-week rebate period when you use multiple agencies, 18% with a 10-week rebate when you partner exclusively, and 16% with a 12-week rebate when you partner exclusively and pay a £2,000 deposit. Another UK executive search firm lists 25% for multi-agency contingent work, 22% for exclusive contingent and 20% for retained exclusive.

The upside: more focus, a more considered shortlist, and often a better price and longer guarantee.

The catch: you are putting your eggs in one basket for a few weeks, so choose your agency carefully and agree what happens if they do not deliver a shortlist in time.

Best for: roles that matter, where you have found a specialist you trust. If you have not found that specialist yet, RecruiterLink lets you search agencies by sector and location so you can pick one with genuine depth in your market.

3. Retained search

How it works: you pay part of the fee up front to secure a dedicated, exclusive search, with the rest paid at agreed milestones. The classic structure is thirds: one third on engagement, one third when the shortlist is presented, and the final third on appointment.

What it typically costs:

• UK: often around 25% to 35% of first-year salary, paid in stages.
• US: SHRM has described the industry standard as about one third of first-year cash compensation, sometimes including bonus and signing bonus. Public sector contracts reviewed by CS Recruiters also showed minimum fees and expenses on top.
• Australia: interestingly, some Australian agencies price retained work below contingent, because the commitment is mutual. One published fee scale runs from 12% to 16% for retained, 14% to 18% for exclusive and 16% to 20% for contingent, depending on salary band.

The upside: dedicated resource, a structured search, market mapping and a shortlist you can compare properly. It is the right tool for senior, confidential or genuinely hard-to-fill roles, including executive search.

The catch: you pay the early instalments whether or not you hire, so you need full sign-off and a clear brief before you start.

A middle path: some agencies offer an "engaged" or "container" model, with a smaller upfront payment credited against the final fee. It buys commitment without a full retainer.

4. Temporary and contract staffing

Temps and contractors are priced completely differently. Rather than a one-off placement fee, you pay a rate for every hour or day worked. That rate covers the worker's pay plus the agency's margin, which in turn covers the agency's own costs and profit.

What is in the margin depends on the country and the arrangement. Where the agency is the employer of record, the charge typically has to cover employment costs such as payroll taxes, insurance and holiday pay, as well as the agency's own profit. In the UK, ON3 Works quotes contract margins of around 12% to 18% in the tech market. In the US, the same idea appears as a "bill rate", which is the worker's pay rate plus a markup.

Two tips that save employers money:

• Always ask whether a quote is a margin or a markup, and what it includes. Two quotes that look similar can be very different once employment costs are added.
• Know the temp-to-perm rules. In the UK, an agency can only charge a transfer fee if you take a temp on permanently within the later of 8 weeks after their last assignment or 14 weeks from the start of their first, and the agency must offer you an extended hire period as an alternative. Other countries handle this through the contract, so read the clause.

5. Fixed fee and other models

Some agencies charge a flat fee per hire, which can make sense for lower-salaried roles or high-volume hiring. Others offer project pricing for multiple hires, or a recruitment process outsourcing (RPO) arrangement where they effectively run your hiring for a monthly fee. These can be excellent value for the right situation, but compare the total cost and the guarantee, not just the headline.

What "salary" actually means on your invoice

This catches people out more than anything. Fees are a percentage of salary, but the definition of salary varies:

• Many UK terms use basic salary only.
• Some include guaranteed bonuses, allowances, sign-on payments and a notional value for a company car. One UK firm's published terms include guaranteed bonuses, inducement payments, allowances and a £7,500 value for a car.
• Australian terms often include superannuation, and some use total fixed remuneration.
• US references often talk about first-year cash compensation, which can include bonus.

On a six-figure role, the difference between base and package can change the invoice by thousands. Agree the definition in writing before the search starts.

How to get the most from your fee

Pick the model to match the role. Contingent for straightforward, active markets. Exclusive for important roles with a trusted specialist. Retained for senior or confidential searches. Temp or contract for flexibility.

Negotiate on value, not just price. A slightly lower fee can be fine, but squeezing too hard can reduce the attention your role gets. It is often smarter to negotiate a longer guarantee, exclusivity in exchange for a better rate, or a volume discount for several roles.

Check the guarantee. A typical UK contingency rebate period is often somewhere between 8 and 12 weeks on a sliding scale. In Australia, a 12-week or 3-month replacement guarantee is common, with some agencies offering 6 or 12 months. Know what you get and what conditions apply.

Pay on time. Many guarantees only apply if your invoice was paid on time. It is an easy protection to lose.

When you are ready to agree terms, it also helps to know what industry-standard recruitment terms look like before you sign.

The takeaway

Recruitment fees are not a mystery. They are a choice between models, each with a different balance of risk, commitment and cost. Once you match the model to the role, the fee starts to look less like a cost and more like an investment in getting the hire right.

The other half of the equation is choosing the right agency. A specialist who knows your market will earn their fee many times over. On RecruiterLink you can find agencies by sector and location, including in the United Kingdom, Australia and the United States, see what they specialise in, and start conversations with the ones that fit your hiring plans.

Sources

• KFFA Recruitment, "Recruitment Agency Fees Explained: UK Employer Guide"
• Talentstem, "How Much Does a Recruitment Agency Cost in the UK?"
• CS Recruiters, "Recruiter Fees: How Much Recruiting Agencies Charge" (citing SHRM)
• FirstHR, "Contingency vs Retained Search: How Recruiter Fees Work"
• Second Talent, "Direct Hire Placement Fees: What US Recruiters Charge in 2026"
• CrossNation, "Recruitment Agency Fees in Australia"
• Talentify Partners, Terms of Business
• Dot Recruit, Terms of Business
• Blair West, Terms of Business
• ON3 Works, "How much do recruitment agencies charge in the UK?"
• GOV.UK, "Using a recruitment agency to find staff"
• BSK Advisory, Terms of Business
• AussieTechTalent, "Our Replacement Guarantee"