Placement fee calculator: how recruitment fees are worked out

Placement fees are the foundation of agency revenue, yet the way they are calculated varies from agency to agency and client to client. Use the calculator above to work out a fee and the gross profit on a placement, then read on for a plain English explanation of how recruitment fees are usually structured.

How the calculator works

Enter the candidate's annual salary or package, the fee percentage agreed with the client, and any direct costs tied to that placement, such as paid advertising or a split fee. The calculator shows the placement fee, the gross profit after direct costs and the gross profit margin as a percentage. It runs entirely in your browser and nothing you type is stored.

Percentage fees

The most common structure for permanent placements is a percentage of the candidate's first year remuneration. The calculation is simple: salary multiplied by the fee percentage. The details that matter are in the agreement.

• Base salary or package. Some terms use base salary only, others include superannuation, bonuses or allowances. Make sure you know which.
• The percentage. This is usually negotiated and often varies by seniority, specialism and volume.
• Rebates or guarantees. Many terms include a partial refund or replacement if the candidate leaves within a set period.

Fixed fees

Some agencies and clients agree a fixed fee per placement instead of a percentage. This is common for high volume roles or where salary bands are narrow. Fixed fees are easy to forecast but should still be checked against the effort the role requires.

Retained and engaged searches

For senior or hard to fill roles, fees may be paid in stages, for example part at the start of the search, part at shortlist and the balance on placement. Each stage should be recorded so your forecast and revenue reporting reflect when money is actually due.

Contract and temp margins

Contract roles work differently. Instead of a one off fee, the agency earns a margin on every hour or day worked, which is the difference between the charge rate to the client and the cost of the contractor. Our guide to tracking GP margin per placement covers contract margins in more detail.

Why gross profit matters more than fee

The fee is what you invoice, but the gross profit is what the placement is really worth to your agency. Two placements with identical fees can produce very different gross profit if one needed heavy advertising or was split with another agency. That is why the calculator shows both.

Agreeing fees with clients

Clear terms prevent disputes later. Before you start work on a role, confirm in writing:

• How the fee is calculated and what remuneration it is based on.
• When the invoice is raised, for example on acceptance or on start.
• Payment terms.
• The rebate or guarantee period and how it works.
• Whether the terms cover candidates introduced who are later hired into other roles.

Recording fees properly

Once a placement is made, record the fee, the costs and the dates against the placement itself rather than in a separate spreadsheet. That way your revenue reporting, margin analysis and forecast all stay accurate without extra work. Our article on revenue forecasting explains how fees feed the forecast.

Worked example

Suppose a candidate accepts a role with a base salary of A$100,000 and your agreed fee is 20 percent of base. The placement fee is A$20,000. If you spent A$1,000 on advertising for that role, the gross profit is A$19,000, which is a gross profit margin of 95 percent. If the same placement had been shared equally with another agency, your share of the fee would be A$10,000 before costs, and the margin picture changes again. These numbers are purely illustrative, but they show why it pays to record costs against every placement.

Fees in your forecast

Before a placement is confirmed, the expected fee is a pipeline value rather than revenue. A weighted forecast counts a share of that expected fee based on the stage the candidate has reached, and the full fee once the placement is made. Recording an accurate expected salary early, and updating it once the offer is confirmed, keeps your forecast honest.

Common fee mistakes

• Calculating the fee on base salary when the terms say package, or the other way round.
• Forgetting to record a split with another agency.
• Not tracking the guarantee period, so a rebate arrives as a surprise.
• Invoicing late because nobody noticed the start date had passed.

How Klose Recruit helps

In Klose Recruit, placement fees and costs are recorded against each deal, and GP margin and the weighted revenue forecast update automatically. Owners see fees and margins by consultant, desk and client in one live dashboard. Learn more about financial insights.

The takeaway

Most permanent fees are a percentage of first year remuneration, but the details in your terms matter. Agree them clearly, record them against every placement, and always look at gross profit as well as the fee itself.