Placement fee agreement template: contingency terms for recruiting agencies

A placement fee agreement is the contract between a recruiting agency and a client that says when a fee is earned, how it is calculated, when it must be paid, and what happens if the hire leaves early. For contingency recruiting, it needs six things settled in writing before you submit anyone: the fee trigger, the fee basis, payment terms, the guarantee, how long an introduction counts, and what happens with offers that fall through.

Below is a master agreement template, a one-page schedule for each role, a worked example of the fee and refund arithmetic, and notes on the clauses that cause most disputes. This page is the document itself. For how to hold your rate on the call, see how to negotiate recruitment fees; for the candidate's side of the same deal, see the right to represent template.

What the agreement has to settle

Most fee disputes are not about the percentage. They are about a question the agreement did not answer. Before you draft, make sure yours answers each of these in one sentence:

1. When is the fee earned? On offer acceptance, on start, or after a period of employment.
2. On what is it calculated? Base salary only, base plus guaranteed bonus, or first-year total compensation.
3. When is it paid? How many days after invoice, and what triggers the invoice.
4. What if the hire leaves? The guarantee period, whether it is a replacement, refund or credit, and the conditions.
5. How long does an introduction count? If the client hires your candidate six months later for a different role, is a fee due?
6. What if the offer falls through? Client withdraws after acceptance, candidate declines after accepting, or the client hires the candidate as a contractor instead.

The placement fee agreement template

Copy this, replace the brackets, and delete anything that does not apply. Clause numbers let the per-role schedule refer back to the master without repeating it.

CONTINGENCY RECRUITMENT AGREEMENT

Between: [Agency legal name], [address] ("the Agency")
And:     [Client legal name], [address] ("the Client")
Effective date: [date]

1. DEFINITIONS
1.1 "Candidate" means any person the Agency introduces to the Client,
    by name or by a resume, profile or other information that
    identifies them.
1.2 "Introduction" means the Agency sending a Candidate's details to
    the Client, or arranging for the Client to meet or speak with a
    Candidate. The date of Introduction is the date the details are
    first sent.
1.3 "Engagement" means the Client, or any related company, employing
    or engaging a Candidate in any role, whether as an employee,
    contractor, consultant or through another agency.
1.4 "First-Year Compensation" means [annual base salary] [plus
    guaranteed bonus] [plus sign-on bonus], as stated in the offer.

2. SCOPE
2.1 These terms apply to every role the Client asks the Agency to work
    on, unless a signed schedule for that role says otherwise.
2.2 The Agency works on a contingency basis: no fee is due unless an
    Engagement results from an Introduction.

3. FEE
3.1 The fee is [__]% of the Candidate's First-Year Compensation,
    subject to a minimum fee of [$____].
3.2 Where compensation is hourly, the fee is calculated on [hourly
    rate x 2,080 hours] [the offered annual equivalent].
3.3 Fees exclude [sales tax / VAT], which is added where applicable.

4. WHEN THE FEE IS EARNED
4.1 The fee is earned when the Candidate accepts an offer of
    Engagement, verbally or in writing.
4.2 The Agency will invoice on [the Candidate's start date] [the date
    of acceptance].

5. PAYMENT
5.1 Invoices are payable within [__] days of the invoice date.
5.2 The Client will tell the Agency the Candidate's start date and
    First-Year Compensation within [5] business days of acceptance.
5.3 Late payment: [interest at __% per month, or the maximum allowed
    by law if lower] [no guarantee applies while an invoice is
    overdue].

6. GUARANTEE
6.1 If the Candidate's Engagement ends within [__] days of the start
    date, the Agency will, at the [Client's / Agency's] choice:
    (a) search for a replacement at no additional fee, for [__] days;
        or
    (b) issue a [credit / refund] on the following scale:
        [0-30 days: __%] [31-60 days: __%] [61-90 days: __%].
6.2 The guarantee applies only if:
    (a) the fee was paid within the terms in clause 5;
    (b) the Client tells the Agency in writing within [7] days of the
        Engagement ending; and
    (c) the Engagement did not end because of redundancy,
        restructuring, a material change to the role, pay or location
        after the start date, or the Client's breach.
6.3 A replacement is offered once per placement.

7. INTRODUCTIONS AND OWNERSHIP
7.1 A fee is due under clause 3 if the Client Engages a Candidate
    within [12] months of the date of Introduction, for any role.
7.2 If the Client already knew a Candidate for the same role, the
    Client must tell the Agency in writing within [2] business days
    of the Introduction, with evidence. Otherwise the Introduction is
    treated as the Agency's.
7.3 The Client will not pass a Candidate's details to any third party,
    including another agency. If a third party Engages the Candidate
    because of information the Client passed on, the Client pays the
    fee.

8. OFFERS THAT FALL THROUGH
8.1 If the Client withdraws an accepted offer for reasons other than
    the Candidate's failure of a lawful pre-employment check stated in
    the offer, [__]% of the fee is payable.
8.2 Despite clause 4.1, if the Candidate withdraws after accepting and
    before starting, no fee is payable and the Agency will continue
    the search [at no additional fee].
8.3 If a Candidate declines an offer and is Engaged by the Client
    within [12] months of the Introduction, the full fee is due.

9. CONTRACTORS AND CONVERSIONS
9.1 If the Client Engages a Candidate as a contractor, the fee is
    [a one-off fee of __% of the annualized contract rate] [agreed in
    a separate contract agreement].
9.2 If a contractor supplied by the Agency converts to permanent
    employment, the conversion fee is [set out in the contract
    agreement / __% reducing by __% for each full month worked].

10. CLIENT RESPONSIBILITIES
10.1 The Client decides whom to hire and is responsible for its own
     interview decisions, offers, employment terms, right-to-work
     checks, background checks and references, unless agreed otherwise
     in writing.
10.2 The Client will give interview feedback within [__] business days.

11. CANDIDATE INFORMATION
11.1 The Client will use Candidate information only to assess the
     Candidate for employment, keep it confidential, and handle it in
     line with applicable privacy and data protection law.
11.2 Both parties will comply with applicable equal employment
     opportunity laws. The Agency will not act on a request to screen
     Candidates on a protected characteristic.

12. LIABILITY
12.1 [Limitation of liability wording, to be drafted by your lawyer.]

13. TERM AND TERMINATION
13.1 These terms continue until either party gives [30] days' written
     notice. Fees for Introductions made before termination remain
     payable under clauses 3, 7 and 8.

14. GENERAL
14.1 These terms and any signed role schedule are the whole agreement
     on this subject. If the Client's purchase order or other terms
     conflict with these, these terms apply unless both parties sign a
     change.
14.2 Governing law: [state/country].

Signed for the Agency: ____________  Name/title: ________  Date: ____
Signed for the Client: ____________  Name/title: ________  Date: ____

The per-role schedule

Send this for every new role, even under a signed master. It takes two minutes and removes the most common argument: "that was not what we agreed for this one".

ROLE SCHEDULE [number] under the Contingency Recruitment Agreement
dated [date]

Role:                 [title], [location], hiring manager [name]
Fee:                  [__]% of First-Year Compensation (clause 3.1)
                      [or: fixed fee of $____]
Fee basis for role:   [base only / base + target bonus / as clause 1.4]
Guarantee:            [__] days, [replacement / credit / refund]
Exclusivity:          [none / exclusive until date]
Feedback commitment:  [__] business days after each interview
Other terms:          [anything that differs from the master]

This schedule overrides the master agreement only where stated.

Confirmed by: [client name], [date]   [agency name], [date]

An email reply saying "Confirmed" to this schedule is far better than nothing. A signature is better still. Store the confirmed version with the job order so anyone on your desk can find it.

A worked example: fee, refund and credit

An invented placement, to show the arithmetic each clause produces.

Run your own numbers through each option before you choose one. The sliding scale is simpler to explain; the pro-rata version feels fairer to finance teams and avoids a cliff at the end of each band.

Clause-by-clause notes

The fee trigger (clause 4)

"Earned on acceptance, invoiced on start" protects you if the client changes its mind after the candidate has resigned elsewhere. If a client insists on "earned on start", pair it with clause 8.1, a partial fee when the client withdraws an accepted offer, so the risk is shared.

The fee basis (clauses 1.4 and 3)

Write down exactly which parts of compensation count. "Salary" alone invites a later argument about a guaranteed bonus or a sign-on payment. Clause 5.2 matters here too: you cannot check an invoice if the client never tells you the final package.

The introduction period (clause 7)

This is the clause that pays for the candidates a client meets through you and hires later, for another role, or after "going quiet". Whatever period you choose, it must run from a date you can prove, which is why the definition ties it to when details were first sent. Keep the submittal emails. The process in how to avoid double submissions is what makes clause 7.2 hold up when a client says "we already had this person".

The guarantee (clause 6)

The conditions in 6.2 are what make a guarantee fair to you. Without them, you can end up refunding a fee because the client restructured the team or cut the role's pay. Linking the guarantee to prompt payment gives clients a reason to pay on time.

Offers that fall through (clause 8)

Decide in advance what happens in the three common cases: the client withdraws, the candidate withdraws, and the candidate declines now and joins later. The last is the one agencies most often forget to cover.

Candidate information (clause 11)

Clients forward resumes to other agencies more often than they admit, usually by accident. Clause 7.3 makes the client responsible for a fee if it happens. Clause 11 also commits both sides to handle candidate data lawfully, which matters more as candidate privacy rules spread.

Clauses that cause disputes, and better wording

Getting it signed and keeping it current

• Before the first submittal, not after. Send the terms when the client gives you a role. A candidate sent before terms are agreed is a candidate you may not be paid for.
• One version, dated. Put a version date in the footer. When you update your terms, send the new version to active clients and get it confirmed; do not assume the new one applies to a signed client.
• Their paper or yours. Larger clients will send their own supplier agreement. Compare it with the six questions at the top of this page, and put anything missing into a signed addendum.
• Who signed. Check the person signing can bind the company. A hiring manager's "fine by me" may not be enough if procurement later disputes it.
• Keep the trail. Store signed terms, role schedules, submittal emails and offer confirmations together. When a dispute comes, that folder is your whole case.

The same trail helps with candidates. When you can show what a candidate agreed to, when, and what the client was sent, most disputes end at the first email.