How direct-hire (contingency) fees work
Most recruitment agencies in India charge a one-time fee when a candidate joins. The fee is quoted as a percentage of the candidate’s annual CTC. Publicly quoted ranges cluster between 8.33% and 15% of CTC for junior to mid-level roles; senior and leadership searches are often quoted higher, sometimes up to 20%.
The 8.33% figure is not arbitrary — it is exactly one month of salary (1/12 of annual CTC), which is why it has become a common floor in the Indian market.
A direct-hire fee normally includes sourcing, screening, coordination of interviews, and a replacement guarantee if the candidate leaves within an agreed window (30 to 90 days is typical). It normally does not include background verification beyond basic reference checks, and it does not include any process ownership — the agency sends candidates; your team runs everything else.
Because payment is contingent on a joining, the agency carries the risk of an unsuccessful search. That is also why contingency agencies tend to prioritise roles that are easy to fill and quietly de-prioritise the difficult ones.
How RPO pricing works
Recruitment process outsourcing (RPO) prices the capacity to hire rather than each individual hire. Three models are common in India:
- Dedicated recruiter retainer. A fixed monthly fee per recruiter assigned to your account. Quoted ranges typically fall between ₹80,000 and ₹2,00,000 per recruiter per month, depending on seniority and specialisation.
- Per-hire fee. A flat amount per successful joining, often ₹20,000 to ₹60,000 for mid-level roles — lower than a percentage fee because volume is committed upfront.
- Hybrid. A reduced monthly retainer plus a smaller per-hire component or a lower percentage of CTC (4–7% is a commonly quoted band).
RPO contracts usually carry a minimum term (three to six months is common) and define service levels: time to first shortlist, number of screened profiles per week, and reporting cadence. In exchange, the provider takes over more of the process — job-description drafting, sourcing, first-round screening, scheduling, offer coordination, and pipeline reporting.
Comparing the two on the same basis
The only fair comparison is total cost per successful joining over a year, including your own team’s time. A simplified, illustrative example:
| Scenario: 12 hires in a year at an average CTC of ₹12 lakh | Direct-hire at 10% | One dedicated RPO recruiter |
|---|---|---|
| Agency / provider fees | 12 × ₹1.2 lakh = ₹14.4 lakh | 12 months × ₹1.2 lakh = ₹14.4 lakh |
| Process ownership | Stays with your team | Sourcing, screening, scheduling handled |
| Cost if you hire only 6 | ₹7.2 lakh | ₹14.4 lakh (fixed) |
| Cost if you hire 20 | ₹24 lakh | ₹14.4 lakh + possible second recruiter |
The pattern holds across most fee bands: below roughly ten hires a year, direct-hire is usually cheaper; above that, RPO starts to win on cost and, more importantly, on consistency. The exact crossover depends on your CTC bands and how much of the process you want handled.
Two adjustments matter in practice. First, if your CTC bands are high (senior engineers, specialist clinicians), percentage fees grow while RPO retainers do not — RPO becomes attractive at lower volumes. Second, if your open roles are highly varied and one-off, a dedicated recruiter may be under-used; direct-hire or a project-based RPO for a fixed batch of roles fits better.
Costs that do not appear on the invoice
- Interviewer hours. A four-round loop for a role that receives 15 interviewed candidates consumes 40 to 60 hours of your engineers’ and managers’ time. Better screening upstream is the single largest cost saver in recruitment.
- Offer drop-outs. Offer-to-join ratios in the Indian technology market are frequently poor, and 60 to 90 day notice periods give candidates time to collect counter-offers. Ask any provider how they track and manage the offer-to-join stage.
- Time-to-fill. A role open for an extra two months costs the output of that role for two months. For revenue-linked or delivery-critical roles this often dwarfs the fee difference between models.
- Replacement clauses. Read the guarantee: does it promise a replacement search or a refund? Within what window? Does it apply if you terminate the candidate versus the candidate leaving?
- Statutory compliance. This mainly affects contract staffing rather than permanent placement, but if a provider also supplies contractors, confirm they hold current EPF and ESI registrations. The principal employer can carry liability if a staffing partner defaults.
Questions to ask any provider before signing
- What exactly is included in the fee, and what is billed separately (background verification, assessments, job-board spend)?
- What is the replacement or refund policy, and what triggers it?
- How many screened, interview-ready profiles per role per week can we expect, and who does the screening?
- How do you report pipeline status — a weekly sheet, a dashboard, or nothing until a shortlist appears?
- Who is the named person working our roles, and how many other clients are they working at the same time?
- For RPO: what is the minimum term, the notice period, and the process for scaling recruiters up or down?
A provider that answers these clearly is worth more than one that quotes the lowest percentage. In recruitment, the cheapest fee and the cheapest hire are rarely the same thing.
Not sure which model fits your hiring plan?
Share your open roles, expected volume for the year, and typical CTC bands. We will tell you honestly whether direct-hire, RPO, or a hybrid makes sense — including when it is cheaper to keep hiring in-house.