Every recruitment agency eventually has to answer the same commercial question. Do you work on a contingent basis and get paid only when a candidate starts, or do you ask clients to commit with a retained fee before the search begins? The answer shapes your cash flow, your margins, how much risk you carry and how confidently you can forecast revenue. This guide explains how each model works, where the money really goes and how to decide which one to offer each client.
What contingent recruitment means
In contingent recruitment, the agency is paid only if a candidate it introduces is hired. The fee is usually a percentage of the first year salary, invoiced when the candidate starts. Clients often brief more than one agency on the same role, so the agency that presents the right candidate first tends to win the fee and everyone else earns nothing for the work.
Contingent work is familiar to clients and easy to sell, because there is no cost unless the role is filled. For the agency, it means speed matters, the volume of roles is often higher and a meaningful share of effort will never be paid for.
What retained recruitment means
In retained recruitment, the client engages one agency exclusively and pays part of the fee before or during the search. A common structure splits the fee into stages, such as an amount on engagement, another when a shortlist is presented and the balance when the candidate starts. The exact split and the fee percentage are agreed in your terms of business.
Retained work is most common for senior, specialist or confidential roles, where the client values a thorough search, a considered shortlist and a single point of accountability. The agency commits more time to each role, and the client commits money upfront in return.
Many agencies also offer a middle path
Between the two sits an engaged or exclusive contingent model. The client gives one agency exclusivity for a set period, sometimes with a modest engagement fee that is deducted from the final invoice. It suits clients who are not ready for a full retainer but want better service than a role sent to five agencies at once. If your clients resist retainers, this is often the easiest step to introduce.
How the two models compare
- Payment timing. Contingent fees arrive only when a candidate starts. Retained fees arrive in stages, so some cash comes in during the search.
- Risk. On contingent roles the agency carries most of the risk of the role being cancelled, filled internally or filled by a competitor. On retained roles that risk is shared with the client.
- Exclusivity. Contingent roles are often shared across several agencies. Retained roles are exclusive by design.
- Effort per role. Contingent recruiters tend to work more roles with less depth. Retained recruiters work fewer roles with more research, more candidate assessment and more reporting to the client.
- Client relationship. Retained work usually means closer partnership and regular updates. Contingent work can be more transactional unless you deliberately build the relationship.
Look at GP margin, not just the fee percentage
Comparing the two models on fee percentage alone misses the real story. What matters to an agency owner is gross profit and the margin left after the costs of delivering the role, such as advertising, assessments, background checks or contractor time.
The bigger difference is the unpaid work. On contingent roles, every search that ends with no placement still consumed consultant hours. When you look at GP per role worked rather than GP per placement, a contingent desk with a low fill rate can look far less profitable than its invoices suggest. Retained work usually has a much higher fill rate, because the client is committed, so the effort is more likely to turn into revenue.
To see this properly you need to record fees and direct costs against every placement and track how many roles each client gives you compared with how many you fill. Our guide on how to track GP margin per placement explains the method, and the placement fee calculator lets you test your own figures.
What each model does to your forecast
Revenue forecasting is where the models feel most different. Contingent pipelines are harder to predict because a role can disappear at any stage. A sensible forecast applies a lower probability to contingent deals at each stage of the pipeline.
Retained work gives you two kinds of visibility. Stage payments are scheduled, so part of the fee is close to certain once the client signs. The final fee still depends on a successful placement, but the probability is usually higher than for a shared contingent role. A weighted forecast that treats the two models differently will be far more accurate than one that applies the same percentages to everything. For the full approach, read recruitment revenue forecasting explained.
How to decide which model to offer
Rather than choosing one model for the whole agency, decide role by role and client by client. These questions help.
- How senior, specialist or confidential is the role? The harder the search, the stronger the case for a retainer.
- Is the client briefing other agencies? If so, ask for exclusivity before investing serious time.
- What has this client's fill rate been in the past? A client who often cancels roles is costing you margin on contingent terms.
- How much of your pipeline is already contingent? A mix with some retained or engaged work steadies cash flow.
- Can you clearly explain what the client gets for a retained fee, such as a defined search process, a shortlist date and regular progress reports?
If you cannot answer the last question confidently, start with engaged search on a few trusted clients, document your process and build towards retainers from there.
How to talk to clients about retained search
Clients agree to retainers when they understand what they are paying for. Explain your process, the timeline, how you will report progress and what happens if the search runs long. Put the stage payments, replacement terms and cancellation terms in writing. Then deliver the updates you promised. A client who sees steady, transparent progress on one retained search is far more likely to retain you again.
How Klose Recruit helps you run both models
Klose Recruit is all in one recruitment software built in Brisbane by Australian recruiters, with the ATS and CRM in one database. Every job moves through a visual seven stage pipeline, and placement fees, GP margin by client and a weighted revenue forecast update live as deals move. That means you can see which clients and which types of work actually make you money, not just which ones keep your consultants busy.
Business development tools help you find companies that are hiring, and CV branding with automatic redaction keeps shortlists polished for retained clients who expect a premium service. More than 30 prebuilt reports, a custom report builder and a live sales dashboard give owners a clear view of performance. Explore the financial insights or read what to expect from a recruitment CRM built in Australia. Pricing starts from A$75 per user per month on annual plans, or from A$89 per user per month on monthly plans.
The takeaway
Contingent recruitment is easy to sell and fast to start, but the agency carries most of the risk and plenty of unpaid work. Retained recruitment asks more of the client upfront, rewards deeper effort and makes revenue easier to predict. Most agencies do best with a deliberate mix, chosen role by role. Track GP margin and fill rate for each client, forecast each model with its own probabilities, and let the numbers tell you where to push for exclusivity or a retainer.