Contingency vs retained: how to price a search

Pricing a search is two decisions: how you get paid (contingency, retained or something in between) and how much. Most small agencies copy whatever their first client accepted and never revisit it. That's how you end up working three months on a search that pays nothing, or discounting a fee you didn't need to discount.

This guide walks through the models, a simple way to calculate your floor, and the terms that matter as much as the percentage. We use example numbers throughout; replace them with your own.

The three models

Contingency

You get paid only if the client hires a candidate you presented. The fee is usually a percentage of the candidate's first-year base salary, or sometimes a flat amount agreed upfront.

For the client: no risk. They often brief several agencies on the same role.
For you: all the risk. If the client fills the role internally, hires through another agency or cancels the search, your hours are lost.

Retained

The client pays you to run the search, typically in installments: for example, one part at the start, one when you present the shortlist and one on placement. In exchange, you usually get exclusivity and a commitment to a process and timeline.

For the client: a dedicated search with a defined process, for roles where getting it right matters more than getting it free.
For you: guaranteed income for the work and a client who is committed to the search.

Engaged (or "container") searches

A hybrid: the client pays a smaller amount upfront that is credited against the final fee on placement. It filters out clients who aren't serious without asking for a full retainer, and it's a natural step for a client who has only ever worked on contingency.

Which model fits which search

Ask these questions about each search, not about the client in general:

Question	Points to contingency	Points to retained or engaged
Is the role easy to describe and common in your niche?	Yes	No, it's senior, rare or confidential
How many agencies are working on it?	Several	Only you
How urgent is it for the client?	Nice to fill	Business-critical
How often do you fill this kind of role?	Often	Rarely or never
Does the client need a defined process and reporting?	No	Yes

If most of your answers land on the right, propose a retainer or an engagement fee. The worst a client can say is no, and the conversation itself tells you how committed they are.

How to calculate your floor

Before you negotiate a percentage, know what a search costs you. Three numbers are enough:

Hours per search. Intake, sourcing, screening, presenting, interviews, offer. Look at your last few searches. Example: 60 hours.
Your fully loaded hourly cost. Salaries (including yours), tools, office and overhead, divided by productive hours. Example: $50 per hour.
Your fill rate on this kind of search. Of the contingency searches like this one that you took on, how many did you fill? Example: 1 in 3.

With those example numbers:

Cost of the work on one search: 60 hours × $50 = $3,000.
On contingency you only get paid on 1 in 3 searches, so each placement has to pay for three searches' worth of work: $3,000 × 3 = $9,000. That's your break-even fee per placement.
On a role paying $100,000 a year, that's 9% just to break even, before any profit.

If you want each placement to return twice what the work costs, the fee needs to be $18,000, or 18% on that salary. Change the inputs and the answer changes a lot: a search that takes 120 hours, or a fill rate of 1 in 5, moves the floor well above what many contingency fees pay.

On a retained search the arithmetic is different, because you get paid whether or not the client hires: your floor is closer to the cost of the work itself plus your margin. That's the real reason retained fees can be lower as a percentage and still be better business.

Then check the market

Your floor tells you what you can't go below. It doesn't tell you what the client will pay. To check the market:

Ask the client what they've paid other agencies for similar roles. Many will tell you.
Ask peers in your niche what they charge and how they structure it.
Look at what you've actually been paid on your last placements, not what you quoted.

If your floor is above what the market pays for a kind of search, that's useful information: either change the model (propose an engagement fee), reduce the hours (narrow the brief), or stop taking that kind of search on contingency.

Terms that matter as much as the percentage

A good fee with weak terms can still lose you money. Agree on these in writing before you start:

The fee base. Is the percentage on base salary only, or on total first-year compensation including bonus? In countries where salaries are paid in more than twelve installments a year, say whether those extra payments count.
Payment terms. How many days after the start date (or the offer acceptance) the client has to pay.
Guarantee. How long it lasts and what happens if the candidate leaves: a free replacement search, a partial refund, or a pro-rata credit. Replacement is usually better for you than a refund.
Ownership of candidates. For how long a candidate you presented counts as yours if the client hires them later, directly or for a different role.
Exclusivity. On retained and engaged searches, for how long you're the only agency.
Cancellation. What the client owes if they cancel a retained search halfway.
Expenses. Who pays for job ads, assessments or travel, if any.
Currency. For cross-border searches, which currency the fee is in and who carries the exchange risk.

Keep these in a one-page terms sheet you send with every proposal. It saves arguments later, and it makes you look like the professional you are.

Track what you charge

Once you've priced searches deliberately, keep the data. For every placement, record the fee type, the percentage or flat amount, the salary it was based on, the payment due date and when the guarantee ends. After a dozen placements you'll know your real average fee, which clients pay late and which searches you should stop taking on contingency.

You can do this in a spreadsheet. Or you can keep it next to the search itself: in Recruiting ATS, each job carries its fee (percentage or flat), currency, payment terms and guarantee, and each placement shows when payment is due and when the guarantee expires, with alerts for overdue payments and guarantees ending soon. It's $20 per seat per month; see pricing.