Contingency, retained or container search fees
How contingency, retained and container fees differ for a recruitment agency, when each suits a search, and how each one reaches its invoices.
By Achekam · · 4 min read · For Recruitment businesses in South Africa, Nigeria, Kenya
A client calls with a vacancy for a finance director. They want the agency to start tomorrow, and they want to pay only if the agency finds the right person. The consultant knows this search will take weeks of headhunting, reference calls and shortlist meetings, and that the client is also talking to two other agencies.
The fee model is the first commercial decision in every search, and agencies often make it by habit rather than by thinking about the role in front of them. This article sets out the three common models, when each makes sense, and how each one turns into invoices and cash.
Paid only on a hire: contingency
Investopedia says independent third-party recruiters are often paid on contingency, earning a fee only if their candidate is hired. It puts the typical fee at 20% to 30% of the new hire's total first-year salary, and a higher range of 25% to 35% for management executives. Treat those as a general reference rather than a South African, Nigerian or Kenyan benchmark; your own market and your clients will set your rate.
Contingency suits roles where:
- the agency already has suitable candidates on its books;
- the client is likely to hire quickly;
- several agencies may be working the same vacancy, so the agency is competing on speed.
The risk sits entirely with the agency. If the client hires through another route, or decides not to hire at all, the work earns nothing. For volume roles with a ready pool of candidates, that risk is often acceptable.
Paid for the search itself: retained
Investopedia says some executive search firms charge an upfront retainer to cover search costs, so that they are paid even if the search fails. That changes the relationship. The client is buying a search process, not just a successful placement, and often gives the agency exclusivity in return.
Retained search suits roles where:
- the right person is probably employed and not looking;
- the search will involve research, mapping a market and approaching people directly;
- the client wants confidentiality, for instance when replacing someone still in post.
A retained fee is commonly split into stages, with part payable when the search starts and the rest at agreed milestones. How to structure and invoice those stages is covered in retained search stages.
Somewhere in between: container
Investopedia describes a "container" arrangement as a hybrid of commission and retainer. In practice, the client pays a smaller amount upfront to secure the agency's commitment, and the balance only if the hire is made.
A container suits a client who wants priority attention but is not ready to commit to a full retainer, or an agency that wants some protection on a hard search without pricing itself out. The agreement should say clearly whether the upfront amount is deducted from the final fee or charged on top.
Executive search, wider recruitment and in-house hiring
Investopedia describes headhunters as typically filling high-level executive positions and often targeting people already in work, while recruiters fill a wider range of roles from people already looking. The main alternative to both is in-house recruitment, which is more common at larger firms.
That distinction often decides the model:
| Search type | Typical candidate | Model that tends to fit |
|---|---|---|
| Executive search | Senior, employed, not looking | Retained or container |
| General recruitment | Actively looking, wide range of roles | Contingency |
| Hard-to-fill specialist role | Scarce, may need approaching | Container, or retained |
Investopedia also notes that because headhunters work for the employer, they have an incentive to please the employer rather than the candidate, and that a good headhunter tells a candidate the salary range of a role rather than asking for their current or past salary. Whichever model you choose, being open with candidates protects the agency's reputation in a small market. Investopedia's explainer on what a headhunter does and how they are paid covers these points, including the contingency range.
How each model reaches the invoices
Each model produces a different invoicing pattern:
- Contingency: one invoice, raised when the candidate accepts or starts, depending on the terms.
- Retained: an invoice when the search starts, then one at each agreed milestone.
- Container: an upfront invoice for the container amount, then a final invoice on placement, net of the upfront amount if the agreement says so.
In Achekam, a business creates customer invoices as drafts it can change or delete. Issuing one takes the next number in its sequence and posts it to the ledger as debtors, sales and output VAT, so the fee is in the books the moment it is billed. Default terms are 30 days. The invoice should state clearly what the fee is calculated on; the fee basis on the invoice covers how to show it.
For upfront retainer and container invoices, speed of payment matters, because the agency is starting work on the strength of them. A business can create a payment link for an issued invoice, copy it or e-mail it with the invoice, and the client pays on a public page showing the agency's name and branding. A link lasts 14 days by default. When a payment through one of the agency's gateways is verified, it is recorded as a receipt against the invoice, debiting that gateway's clearing account and crediting trade receivables, and the invoice shows as paid or part-paid. So the invoice and the payment both reach the books without retyping.
Watching unpaid fees
Contingency and final placement fees tend to be large and paid late. Receivables in Achekam are aged into 0-30, 31-60, 61-90, 91-120 and over 120 days, with overdue totals. Look at that ageing every week. A placement fee drifting into the older columns is worth a phone call, especially if the candidate's guarantee period is still running.
Before the next search starts, write down which model you will offer for each type of role, and make sure your terms of business say when each invoice is raised.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
