Placement Fee
What a placement fee is, how direct hire placement fees are calculated from salary, contingency vs retained, how guarantees work, and when the fee is due.September 25, 2026
5 min read
Invoicing & Billing
Written by the NextCrew team
Definition
A placement fee is what a client pays a staffing or recruiting agency when it hires, as its own employee, a candidate the agency found. It is usually a percentage of the hire's first-year base salary, paid once, and often comes with a guarantee to replace the hire or refund part of the fee if they leave early.
A placement fee pays for the search, not for hours worked. That is the difference from temporary staffing, where the agency earns a spread on every hour through the bill rate. With a direct hire, the agency earns once, on the day the hire starts, and then carries the guarantee.
How is a placement fee calculated?
Placement fee = first-year base salary × the agreed fee percentage. The contract defines what "salary" means. Some agreements use base pay only; others include guaranteed bonuses or total first-year compensation, which can change the fee a lot.
Illustrative: $70,000 salary, 20% placement fee
$70,000 × 20% = $14,000, invoiced once
What is a typical direct hire placement fee?
There is no official benchmark; the percentage is whatever your contract says. What moves it: how hard the role is to fill, seniority and salary level, how many hires the client commits to, whether the search is exclusive, and how long the guarantee runs. Be wary of "industry average" figures without a named source; most come from agencies marketing their own rates.
What are the main placement fee structures?
| Structure | How it is paid | Common for |
|---|---|---|
| Contingency | Only if the client hires your candidate | Most direct hire roles |
| Retained | Part up front, the rest at milestones or on hire | Senior or hard-to-fill searches |
| Flat fee | A fixed amount per hire | High-volume or repeat roles |
| Conversion fee | When a temporary Crew Member is hired by the client | Temp-to-hire placements |
What is the difference between a placement fee and a conversion fee?
A placement fee is for a direct hire from day one; a conversion fee is for hiring someone who started as a temporary Crew Member. Conversion fees often shrink the longer the person has worked the assignment, because the agency has already earned margin on those hours. See conversion fee.
What is a placement guarantee?
A placement guarantee is the agency's promise to find a replacement, or refund part of the fee, if the hire leaves or is let go within a set period. The contract sets the period and the conditions. Typical conditions are that the fee was paid on time and that the hire did not leave because of a layoff or a change to the role.
When is the placement fee due?
Usually on the hire's start date, invoiced on your normal terms. If the candidate accepts and then never starts, most agreements say no fee is due; if they start and leave inside the guarantee, the guarantee terms apply instead.
Where agencies get placement fees wrong
- Sending resumes before the fee agreement is signed. Without a signed agreement, collecting the fee becomes a negotiation after the fact.
- No proof of who submitted the candidate first. When two agencies send the same person, the dated submission record decides.
- A vague salary basis. Base or total compensation? Say which.
- Forgetting the guarantee window. Nobody notices it ending, or a refund request arrives with no record of the terms.
- Invoicing late. The start date is the trigger; invoice that week.
Bottom line: a placement fee is only as collectible as the paperwork behind it: a signed fee agreement, a dated record of who submitted the candidate, and a clear salary basis.
How NextCrew handles the paperwork around a placement
NextCrew is built for high-volume temporary staffing, and it keeps the records a placement fee depends on:
- Client contract details. Each client record carries billing information, contract details and an assigned account owner.
- A dated submission trail. Notes on candidate and client records are timestamped and attributed automatically, so who presented whom, and when, is on record.
- Guarantee dates that do not get missed. Tasks with due dates send reminders automatically, so a guarantee end date or a follow-up with the new hire gets done.
See the staffing CRM for client records, or staffing invoicing software for billing.
Frequently asked questions
Related terms
- Conversion fee: what a client pays to hire a temporary Crew Member directly.
- Markup: how temporary staffing earns instead: a percentage on every hour.
- Gross margin: the profit left after pay and burden on temporary hours.
- Job order: the client request that starts a search or a shift.
- Co-employment: why long temporary assignments often turn into conversions.
- Recruitment process outsourcing (RPO): outsourced permanent hiring.
- Right to represent: the consent that protects a submission.