A contingency recruiting agreement is the document a recruitment agency and a client sign to say what happens when a placement is made, and three of its numbers decide whether the arrangement is profitable: the fee percentage, the rebate period and the payment terms. The fee is the one everybody negotiates. The other two are usually accepted as standard and they are where small agencies quietly lose money. On the worked example, a $90,000 placement at 20% is an $18,000 fee, and twelve of those a year is $216,000 of income. But a 90 day rebate means roughly $4,438 of fee is refundable at any moment, and 30 day terms mean $17,753 is money you have earned and cannot spend. Neither figure appears in the fee negotiation and both determine whether the desk has cash. This page sets out what the agreement has to settle and what each number does to the business.
The fee percentage
The number that gets negotiated, commonly a percentage of first-year salary. It is worth knowing what your effective average is across clients rather than what your rate card says, because discounts granted to win a client tend to outlive the reason for them.
The rebate period
What you refund if a placement leaves within a window, and often on a sliding scale. It is a genuine liability rather than a formality: it is small until two placements leave in the same month, which is exactly when the cash is needed elsewhere.
The payment terms
How long after invoicing you are paid. Shortening terms is usually worth more to a small agency than raising the fee by a point, because it changes when money exists rather than how much of it eventually does.
Questions people ask about contingency recruiting agreement
Is contingency better than retained?
Different risk rather than better. Contingency is paid on success and priced for that risk; retained is paid in stages and pays for the work whether or not it lands.
What rebate period is normal?
Commonly somewhere between 30 and 90 days and often sliding. This site publishes no standard: the sheet works whatever your agreement actually says.
Does this replace legal advice?
No. It works the money inside an agreement; the drafting, the enforceability and the terms are for your solicitor, and nothing on this site is legal advice.