Direct-Hire Placement Fees: What Staffing Agencies Charge (and How to Set Yours)
Ed Burtle ·
Direct-hire fees run 15-25% of first-year salary. Here's how they're calculated, how guarantee periods work, how to set your percentage, and a free calculator.
A direct-hire (permanent placement) fee is the one-time charge a client pays when your agency finds and places a full-time hire for them. Unlike a temp placement, there's no ongoing bill, you're paid once, as a percentage of the role's salary. Getting that percentage right is the whole game.
Here's how placement fees are calculated, how guarantees work, how to set your own rate, and a free placement fee calculator to run the numbers.
How the Fee Is Calculated
The standard structure is a percentage of the candidate's first-year base salary:
Placement Fee = First-Year Salary × Fee %
Fees typically run 15–25%, with 20% a common midpoint. So an $85,000 role at 20% is a $17,000 fee. Base salary is the usual basis, bonuses, commissions, and other compensation are normally excluded unless your agreement says otherwise.
Contingency vs. Retained
- Contingency. You're paid only if your candidate is hired. Most agency direct-hire work is contingency, higher risk for you, so often priced at the upper end of the range.
- Retained. The client pays a portion upfront to engage you exclusively, common for executive and hard-to-fill searches. Lower risk, and the fee is often structured in installments.
Guarantee Periods
Almost every direct-hire agreement includes a guarantee period, commonly 30–90 days. If the hire leaves (or is let go) within it, you provide a replacement search or a prorated refund. The guarantee doesn't change the fee math, but a longer guarantee is worth a higher percentage, you're taking on more risk.
How to Set Your Percentage
A few factors move the number:
- Difficulty and specialization. Niche, senior, or credential-heavy roles justify 20–25%+. High-volume, easier-to-fill roles trend lower.
- Guarantee length. More risk to you = a higher fee.
- Relationship and volume. A client sending you steady direct-hire work may negotiate toward the lower end; that can still be worth it on volume.
A Worked Example
An agency placing three professionals in a quarter at an average $90,000 salary and a 20% fee:
- Per placement: $90,000 × 20% = $18,000
- Three placements: $54,000 in fees
Run direct hire alongside your temp desk and those one-time fees can meaningfully smooth revenue between billing cycles.
Run the Numbers
- Placement Fee Calculator — first-year salary and fee % in, with 15/20/25% tier comparison.
- Conversion Fee Calculator — the temp-to-hire buyout equivalent.
- Direct Hire & Executive Search — how FreshStaff manages placements, fees, and guarantees.
The Bottom Line
Direct-hire fees are simple arithmetic, first-year salary times your percentage, but the percentage should reflect the search's difficulty and the guarantee you're offering, not a reflex 20%. Price the risk, put the guarantee terms in writing, and track placements and fees in one system so nothing falls through the cracks. Our post on temp-to-hire vs. direct placement covers when to steer a client toward each model.
For broader benchmarking on placement fees and recruiting economics, see the American Staffing Association's research and resources.
About the Author
Ed Burtle
Ed Burtle is the founder of FreshStaff. He's spent 20+ years in enterprise IT, network administration, and cybersecurity across government, military, and private-sector roles, including building multiple employee onboarding systems and consulting on IT infrastructure for staffing agencies like 1st Choice Personnel and East Texas Staffing. He holds a CISSP (Certified Information Systems Security Professional) certification and is a U.S. Air Force veteran. That background, building and securing large-scale systems where reliability and compliance aren't optional for both government systems and the staffing agencies that actually run on this kind of software, shapes how FreshStaff is built: real encryption, real audit logging, and a payroll and compliance engine held to the same standard as the systems he's spent his career on, not bolted on as an afterthought.
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