A recruiting agency finds permanent employees for client companies, usually on contingency: no hire, no fee. Recruiters source, screen, and shortlist candidates, then step out once an offer is accepted. Companies hire them when a role is urgent, confidential, or beyond the reach of their own job postings.
10,000 to 15,000
US entities
15 to 25 percent
Of first-year salary
30 to 90 days
Replacement guarantee
We estimate 10,000 to 15,000 US entities in this category. Directional estimate, not a census figure.
01
How they make money
The dominant model is contingency: the agency earns a fee only when its candidate starts, typically 15 to 25 percent of first-year base salary. Nothing is owed for the search itself, which is why contingency recruiters work fast and drop cold searches. Fees are usually due within 30 days of the start date and come with a guarantee: if the hire leaves in the first 30 to 90 days, the agency replaces them free or refunds part of the fee.
Two variants matter. Engaged or container searches take a modest upfront deposit, credited against the final fee, in exchange for prioritized effort. And a newer wave of flat-fee and subscription recruiters charge a fixed price per hire or per month, which can undercut percentage fees on high salaries. Ask which model you are in before the resumes start arriving.
02
What good ones have in common
A niche, not a generalist promise. The recruiters worth their fee live in one function or industry. They already know the candidates who are quietly open, which no job board can tell you.
A real intake call. Good firms interrogate the role: comp versus market, why the last person left, what failure looks like. If they take the job description and run, expect keyword matches.
A submit-to-interview ratio they will share. Strong recruiters send three to five candidates you actually want to meet, not thirty resumes. Ask what share of their submittals get interviews. The good ones know the number.
Candidates who knew they were submitted. Every candidate should have consented to your specific role. This is basic professionalism, and it protects you from awkward calls with people who never applied.
A guarantee with replacement, not just refund. A refund makes you whole on the fee, not on the lost months. Firms confident in their vetting will redo the search free.
03
Red flags
Resume blasting before any agreement. If unsolicited resumes arrive before a signed fee agreement, the firm is playing fee-trap games: claim credit if you ever hire the person. Do not open unsolicited resumes from recruiters.
Fees quoted on total compensation. The standard basis is first-year base salary. A contract quietly including bonus, equity value, or benefits in the fee calculation can raise the bill by thousands.
No sourcing beyond your own applicants. Some low-effort firms just repost your ad and forward whoever applies. You end up paying a fee for candidates you would have received anyway.
Silence on poaching your staff later. Any decent agreement says the firm will not recruit from you while working for you and for a period after. If they resist that clause, that tells you the plan.
A guarantee voided by fine print. Some agreements cancel the replacement guarantee if you change the role, pay a day late, or manage the hire in a way the agency disputes. A guarantee you cannot collect is marketing.
04
How the category is changing
Sourcing has been commoditized. Anyone can find names on LinkedIn, and AI tools now draft outreach and screen resumes, so the fee is harder to justify for easy roles. The recruiters holding their pricing are the ones who deliver what tools cannot: candidates who were not looking, honest assessment, offer negotiation, and a close. At the low end, flat-fee services and in-house talent teams are absorbing the routine hiring.
The other shift is trust. Candidates ghost, employers ghost, and AI-written applications flood every posting, which raises the value of a recruiter who has actually spoken with the person they are sending. Expect more contingency firms to push toward engaged models, because fully free searches increasingly do not get worked at all.
05
Frequently asked questions
How much does a recruiting agency charge?
Typically 15 to 25 percent of the hire's first-year base salary, paid by the employer after the candidate starts. On a 90,000 dollar salary that is roughly 13,500 to 22,500 dollars.
Who pays the recruiter, the company or the candidate?
The employer pays. Reputable recruiters never charge candidates for placement. If a candidate is being billed for a job, something is wrong.
What happens if the new hire quits right away?
Most agreements carry a 30 to 90 day guarantee: the agency replaces the hire at no charge or refunds a portion of the fee. Get the guarantee terms in writing before the search starts.
What is the difference between contingency and retained recruiting?
Contingency pays only on a successful hire and suits most roles. Retained search takes payment up front in stages and is reserved for executive and hard-to-fill positions where dedicated effort matters.
Is a recruiter worth it for a small business?
For a critical role you cannot afford to get wrong, usually yes: a bad hire costs far more than a fee. For roles your own posting can fill in a few weeks, probably not.
How long does it take a recruiter to fill a position?
For most professional roles, expect a first slate within one to two weeks and an accepted offer within four to eight. Slow client feedback, not sourcing, is the usual bottleneck, so commit to fast interview turnarounds.
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Recruiting firms grow the same way their clients do, generating demand through referrals and marketing agencies, and they sit at the center of the map of staffing agencies that every scaling company eventually calls.