Recruitment agency fee structure in India

Fees are not an afterthought to a recruiting desk. They are the business. Yet a lot of recruiters, especially when they are starting out, quote a number they half-remember from a previous firm, skip the terms, and discover the gaps only when a client delays a payment or a candidate leaves in the second month. A clear fee structure, written down before you start a mandate, is what turns a placement into money you actually collect.

This is a practical guide to how recruitment agency fees work in India, and how to set yours. The figures here are market benchmarks drawn from across the industry, not a regulated rate, so treat them as a starting point and adjust to the role, the scarcity of the skill, and the value you bring. None of this is legal or tax advice, and a chartered accountant or lawyer should review your template agreement before you rely on it.

The two fee models, and when each fits

Almost every arrangement in India is a version of one of two models.

Contingency. You are paid only if your candidate is hired. You source, screen and submit at your own risk, and you invoice when the candidate joins. This is by far the most common model for permanent placement, because it costs the client nothing until there is a result. The trade is that you carry all the risk and effort up front, so a contingency desk lives or dies on how tightly you qualify a mandate before you spend time on it.

Retained. The client pays in stages, regardless of outcome, in exchange for your committed, often exclusive effort. The usual shape is thirds: an engagement fee when you start, a second payment when you deliver a shortlist, and the balance on placement. Retained search suits senior, confidential or hard-to-fill roles where the work is real whether or not a hire happens in the first slate, and where the client wants your full attention rather than a race against three other agencies.

There is a middle option, sometimes called an engaged or container search, where a smaller upfront fee buys priority and exclusivity, and the larger balance is still contingent on a placement. It is a fair compromise for a client who will not pay a full retainer but wants you to commit.

A simple rule: use contingency for volume and mid-level roles where speed and a wide net matter, and push for retained or engaged terms on senior and specialist mandates where the value is in depth, discretion and a defensible shortlist.

What percentage to charge

Fees are almost always expressed as a percentage of the candidate’s annual CTC, and the rate rises with seniority and scarcity. As a guide to the current market:

• Junior roles: around 8.33%, which equals one month’s salary. This figure is so widely used that it has become the informal floor in India.
• Mid-level roles: roughly 10% to 12.5%.
• Senior roles and niche skills: about 15% to 20%, sometimes expressed as one and a half to two months’ salary.
• Retained executive and leadership search: commonly 25% to 33% of annual CTC, billed in stages.

Some agencies also offer a flat fee per hire for predictable, high-volume roles, for example a fixed amount for an entry-level position rather than a percentage. That can be fair for both sides when the salaries are low and the volume is steady, but for anything senior a percentage protects you, because the work does not get easier as the salary rises.

What should move your number up: a scarce skill, a confidential or exclusive mandate, a tight deadline, a difficult location, and a strong track record with that client. What pulls it down: volume commitments, a long-term retainer relationship, and roles you can fill from a talent pool you already hold. Decide your floor and hold it. Competing on price against every agency in the city is a race you do not want to win.

Define the fee base before you argue about the rate

The percentage means nothing until you both agree what it applies to. The single most common dispute is the base.

Is your fee calculated on fixed pay, or on total CTC including variable components the candidate may never actually earn? A number that looks like a discount on paper can be richer than a higher rate applied to a smaller base. Write the definition into the agreement: state exactly what CTC means for the fee, whether it includes the joining bonus, retention bonus, variable pay, and the value of stock, and whether it is the offered figure or the actual drawn salary. Ambiguity here is where goodwill goes to die, so remove it in one sentence before the first submission.

The replacement guarantee is part of the price

Clients weigh the guarantee as heavily as the rate, and rightly so. The standard in India is a replacement guarantee of 30 to 90 days from the candidate’s joining date, with 90 days common. If the candidate leaves inside that window, you find a replacement free of charge, or offer a pro-rata refund if you cannot.

Three things make this clause work for you rather than against you:

• Start from the joining date, not the offer date, and say so, so a delayed start does not quietly eat your guarantee period.
• List what voids it. The role or reporting line changing materially after joining, the salary or terms being revised after the offer, a redundancy or restructure, or the candidate being let go for reasons unrelated to fit. These are reasonable exclusions, and naming them protects you from carrying risk you did not create.
• Decide replacement versus refund up front. Most agencies offer a free replacement first and a refund only if a replacement is not possible. Make that order explicit.

A fair, clearly written guarantee is a selling point. A vague one is a liability, because the client will read it in their favour when a hire falls through.

Invoicing, payment terms and GST

Settle the money mechanics in the agreement, not over email after the fact.

• The trigger and the due date. State what raises the invoice (usually the candidate’s joining date) and when payment is due (commonly within 30 days, sometimes 45). A clear trigger and a clear window are what let you chase a late payment without an argument.
• GST. Recruitment and manpower supply services attract 18% GST on top of your fee. Always say whether a quoted rate is inclusive or exclusive of GST, because an 18% surprise at invoice time sours a relationship. A GST-registered client can generally claim input tax credit on a proper tax invoice, so a clean invoice helps them as much as you. The mechanics, from the registration threshold to the SAC and the tax invoice fields, are in the separate guide on GST for recruitment agencies in India.
• Extras, if any. If you charge separately for anything, such as background verification passed through at cost, name it in advance rather than adding it to the final bill.

Put it in a one-page agreement

You do not need a thick contract. You need one clear page, signed before you submit the first candidate, that covers:

• the fee percentage and the exact CTC base it applies to;
• the fee model (contingency, engaged or retained) and, for retained work, the stage payments;
• the event that triggers the invoice and the payment window;
• that the fee is exclusive of 18% GST (or inclusive, if you choose);
• the replacement guarantee, its length, its start point and what voids it;
• ownership of candidates you introduce, so a profile you submit is credited to you if hired within an agreed period;
• any exclusivity, and how long the terms are valid.

The agreement is not there for the easy placements. It is there for the one that goes wrong, and a page that both sides signed when things were friendly is worth far more then than a rate you agreed verbally.

How RecruiterDesk keeps the fee side honest

Once your terms are set, the work is applying them to every mandate without it becoming a spreadsheet of its own. In RecruiterDesk, each mandate carries its client’s fee terms, so a placement derives the fee from those terms rather than a number typed from memory, raises the client receivable, and tracks it from billed to collected, with the replacement window on the record. The free recruitment fee calculator works out a placement fee from a CTC and your rate, adds GST and shows a split, and the placements and settlements workflow carries it through to the money actually landing. The formal GST tax invoice is still issued through your accounting system; RecruiterDesk tracks the receivable and the terms behind it.

Set your fee structure once, write it down, and let the desk apply it. That is the difference between a rate you quote and a fee you collect.