Conversion Fee
A conversion fee is what a client pays a staffing agency to hire a temp directly. The common fee structures, how to set yours, and where agencies lose it.September 24, 2026
5 min read
Invoicing & Billing
Written by the NextCrew team
Definition
A conversion fee is what a client pays a staffing agency to hire a Crew Member directly, as its own employee, before an agreed period is up. It covers the recruiting the agency already did and the billing it gives up, and it is set in the staffing agreement before the placement starts.
What happens when a client wants to hire your Crew Member
How does a temp-to-hire conversion fee work?
Most agreements set a conversion period, and the fee shrinks as the Crew Member works more hours through the agency. Once the period is over, the client can usually hire with no fee, because the agency has earned its margin through the hours it billed. Temp-to-perm conversion fees usually take one of four shapes:
| Structure | How it works | Often used for |
|---|---|---|
| Flat fee | One fixed amount, whenever the client converts | Simple roles and lower pay rates |
| Percentage of salary | A share of the Crew Member's starting annual pay, often reduced as hours build up | Skilled and professional roles |
| Sliding schedule | The fee steps down as billed hours pass set thresholds, then reaches zero | High-volume temp-to-hire |
| Free after a minimum period | No fee once the Crew Member has worked a set number of hours | Clients planning to convert from day one |
The numbers in your schedule are a pricing decision. Build them from what you give up, not from another agency's contract.
How do you set a conversion fee?
Price the fee to recover what the conversion costs you: the recruiting you already paid for, and the margin on hours you will no longer bill. A worked example, using made-up numbers:
| Illustrative example | Value |
|---|---|
| Gross margin per hour | $5.00 |
| Hours expected on the assignment (26 weeks at 40 hours) | 1,040 |
| Hours billed before the client converts (8 weeks) | 320 |
| Hours given up | 720 |
| Gross margin given up | $3,600 |
A sliding schedule that starts near that figure and falls to zero at 1,040 hours keeps the agency whole whenever the client converts. The inputs come from your gross margin per hour and the bill rate you agreed.
Where agencies get conversion fees wrong
Conversion fees are lost at the paperwork stage, long before the client asks to hire.
- No conversion clause, or no signed agreement. If the client never signed terms that include a fee, there is nothing to enforce when they hire your Crew Member.
- Terms the client never noticed. A fee buried in the agreement becomes a dispute at the moment of conversion. Point it out when the account opens, not when the hire happens.
- No record of hours worked at that client. Without hours per Crew Member per client, you cannot show where on the schedule the conversion falls.
- Missing indirect conversions. The Crew Member leaves your agency and the client hires them a few weeks later. Many agreements cover direct hires made within a set period after the assignment ends; without that wording, the fee is easy to avoid.
Bottom line: put the fee schedule in the signed agreement, track hours per Crew Member per client, and invoice the fee the week the conversion happens.
How NextCrew handles conversions
NextCrew keeps the record a conversion fee depends on: who worked, where, and for how long.
- Full job history for every Crew Member, exportable from the Job History tab, so you can show exactly what was worked at a client.
- Timesheets filtered by client, Crew Member and date range, to find where a conversion lands on your fee schedule.
- Records kept after a Crew Member leaves. Job history, timesheets and documents stay in the system when someone is terminated.
- Charges added to an invoice as expenses or surcharges, so a conversion fee can be billed with the client's regular invoicing.
See how billing works in invoicing software for staffing agencies.
Frequently asked questions
Related terms
- Bill rate: what the client pays per hour while the Crew Member works through the agency.
- Gross margin: the margin a conversion takes away from future hours.
- Job order: the client request the placement started from.
- Temp-to-hire: an assignment planned from the start to end in a direct hire.
- Placement fee: the fee for a direct hire from day one.
This page explains common practice. It is not legal advice; have your staffing agreement reviewed by counsel.