Recruitment agency fees explained: percentages, rebates and temp to perm

8 minute read · Updated 2026-08-27

Recruitment agency fees are easy to describe and surprisingly hard to compare, because the headline percentage is only one of four or five terms that decide what you actually pay. This guide sets out how permanent fees, rebates, temporary charge rates and transfer fees work in the UK, what to read before you sign terms of business, and the situations where an agency genuinely earns its money. It is written for employers, and the arithmetic is all yours to check.

How recruitment agency fees are calculated

A permanent placement fee is normally a percentage of the candidate's first year gross salary. Fifteen per cent of £30,000 is £4,500. Eighteen per cent of £45,000 is £8,100. Twenty five per cent of £70,000 is £17,500, and VAT at twenty per cent takes that to £21,000. Percentages tend to rise with seniority and with scarcity, so a specialist engineering or qualified finance search will cost more than a warehouse team leader.

Read the definition of salary in the terms. Some agreements calculate the fee on basic salary only, others include a car allowance, a guaranteed bonus, London weighting or an estimate of first year commission. On a £45,000 basic with a £5,000 car allowance, an eighteen per cent fee is £8,100 or £9,000 depending purely on that definition.

Two working models sit behind the percentage:

• Contingency. You pay only if you hire someone the agency introduced. Nothing is due otherwise, which is why several agencies often work the same role and why the same CVs can arrive from three sources.
• Retained or engaged search. You pay in stages, commonly a portion on instruction, a portion on shortlist and the balance on start. It costs more up front and buys dedicated work, which suits confidential replacements and genuinely scarce senior roles.

Rebates and guarantees: the clause that matters most

A rebate returns part of the fee if the person leaves early. The usual structure is a sliding scale over the first weeks or months, with the largest refund in the first fortnight and nothing after the guarantee period ends. Check three things.

1. Rebate or replacement. Many agreements offer a free replacement rather than cash back. If you no longer want the role filled, that is worth nothing to you.
2. The triggers. Rebates commonly exclude redundancy, restructure, a change to the role and dismissal for anything other than capability, which covers a lot of real world departures.
3. The payment condition. Some rebates apply only if the original invoice was paid within terms, so a late payment can quietly remove your protection.

Temporary, temp to perm and fixed term

Temporary staff are charged at an hourly or daily charge rate rather than a percentage. That rate is not the worker's pay: it covers pay, holiday accrual, employer National Insurance, pension, any umbrella margin and the agency's own margin. A £14 an hour worker on a £19 an hour charge rate is normal arithmetic, not a mark up on wages.

Two rules are worth knowing. Under the Agency Workers Regulations 2010, after twelve weeks in the same role an agency worker is entitled to the same basic pay and conditions as a comparable direct employee, so long assignments cost more than they first appear. Under the Conduct of Employment Agencies and Employment Businesses Regulations 2003, an employment business cannot charge a transfer fee for taking on a temporary worker permanently unless it has offered you the alternative of an extended period of hire instead, and the transfer fee itself must be time limited. If the terms in front of you say a flat fee is payable whenever you hire any worker they ever supplied, ask for the extended hire option in writing.

Introduction clauses deserve the same attention. Most terms make a fee payable if you employ an introduced candidate within a set period of the introduction, often six or twelve months, whether or not they were placed by the agency at the time. If a candidate applied to you directly first, keep the dated evidence.

When an agency is genuinely worth it

Agencies are not a tax on hiring, they are a service with a specific value, and it is highest when:

• The role is genuinely scarce and the people who can do it are not looking, so someone has to approach them.
• The vacancy is confidential, for example replacing someone still in post.
• You need temporary cover this week and cannot wait for notice periods.
• You hire irregularly and have nobody who can sift, phone screen and schedule interviews quickly.
• The cost of the seat staying empty is larger than the fee, which is often true for revenue generating and safety critical roles.

The value is lower where the role attracts applications on its own: most hourly, administrative, retail, hospitality, warehouse, care and trades vacancies. For those, a fixed price advert usually fills the job for a fraction of a percentage fee, which is the comparison set out in our guide to the cost of hiring an employee.

Running both routes without paying twice

There is no rule against advertising and instructing an agency at the same time, and it often makes sense. Protect yourself by keeping one candidate list with the date and source of every application, telling agencies in writing that a fee is not payable for anyone already on file, and agreeing terms before you accept the first CV rather than after.

Negotiate the terms, not just the percentage: a longer rebate window, a cap in pounds on senior roles, a fee based on basic salary only, or staged payment on completion of probation. Most agencies will discuss all of these on a role they want.

If you are a recruitment agency yourself rather than a direct employer, you are welcome to advertise here on the same fixed price basis: see the recruitment agencies page for how that works.

Next step: work out your own fee arithmetic for the role you are filling, then advertise it first and see what a fixed cost produces before you commit to a percentage. Current prices are on the pricing page.