How much does a headhunter cost, and how does it differ from a recruitment agency?

A headhunter or executive search firm focuses on proactively approaching top candidates for senior leadership roles or highly specialized positions. This fundamentally differs from a recruitment agency, which typically relies on job advertisements and waits for candidates to apply for open positions—essentially ‘fishing’ in a pool of available talent. Headhunters, on the other hand, ‘hunt’ actively for the best candidates, often individuals who aren’t even seeking new opportunities. They directly approach these passive candidates and work to spark their interest in the opportunity. This proactive approach from headhunters typically results in higher fees but also delivers more strategic outcomes.

The cost of a headhunter varies widely and depends on several factors, including the firm’s specialization, reputation, the services provided, the country, and the industry you operate in.

There are different fee structures used by headhunters and recruitment agencies. In this article, I’ll explain the most common models and how they work.

1. Contingency-based search (No cure, no pay)

In the contingency model, you only pay if one of their proposed candidates signs a contract. This fee structure, often used by recruitment and temp agencies, ensures you incur no costs if the search doesn’t yield results. Fees typically range between 20-30% of the candidate's annual gross salary or, for example, the cost of three months’ salary.

While this model might seem appealing since you only pay for success, it comes with drawbacks. As agencies often work with multiple clients at once and don’t have exclusivity, they might invest less time and energy into finding the perfect match for your role. This increases the risk of settling for the “best available” candidate rather than the best candidate for the position.

2. Retained search

The retained search model, which we use at Freshfield, is typically applied for executive and leadership roles. In this model, the headhunter is paid upfront to conduct an in-depth search. Fees are usually divided into three installments: the first upon assignment (regardless of outcome), the second upon presenting a shortlist of candidates, and the third when a contract is signed.

Fees typically range between 25-35% of the candidate’s gross annual salary. Since the headhunter is paid for the work they perform, they can dedicate more resources to a thorough, strategic search. As a result, this often provides companies with access to better-qualified candidates and a deeper market analysis, ensuring higher engagement from the search firm.

3. Flat fee

In a flat fee model, a fixed fee is agreed upon upfront, independent of the candidate’s salary. Though less common, this model can be advantageous in certain situations, such as when it’s important to have a predetermined budget or for highly specialized roles where the outcome is uncertain.

There are two variations: either the fee is paid regardless of success, or it’s paid only upon filling the position. While this model offers cost transparency, there’s a risk of paying even if the search doesn’t yield a hire.

4. Insourcing

Insourcing involves bringing in a recruiter or search executive to work temporarily as an internal recruiter for your company. Payment is based on a daily, monthly, or hourly rate. This model is typically used when a company expects a hiring surge or needs to hire continuously over a longer period. The fee is not tied to successful placements.

This model works well for companies with large hiring needs and offers more flexibility than expanding the internal HR team.

Key considerations and tips

It's always wise to thoroughly review your contract with a headhunter or recruitment agency. Pay close attention to what's included in the fee and what the exact terms are. A few things to watch out for:

• Gross annual salary definitions can vary. In Belgium, for instance, it’s often defined as gross salary x 13.92 (including holiday pay and the 13th month), plus any bonuses or commissions. Company cars, meal vouchers, and insurance benefits may or may not be included in the calculation.

• For contingency-based, flat fee, and insourcing models, any assessment tests are typically charged separately. Even with retained search, they are usually not included. Always ask if the assessment applies only to the final candidate or to all shortlisted ones, and check the quality of the tests being used. These can range from basic online questionnaires to comprehensive assessments performed by external specialists.

Conclusion

There are also hybrid models, combining fixed and variable fees, depending on the role, salary, or difficulty of the search.

While fees are generally non-negotiable, contract terms and modalities can often be discussed. Ultimately, the cost of hiring a headhunter should not be viewed as an expense, but as a strategic investment in your company's future. Bringing in the right leaders and talent can elevate your organization, directly contributing to growth and success. On the other hand, a bad hire can be costly—whether through reduced performance, wasted time, or high replacement costs. So, think carefully about what it really costs to forego an experienced headhunter and settle for a suboptimal candidate.

How do you see headhunter fees—are they a cost or an investment in your organization? What collaboration model do you believe delivers the best results? And which strategy do you think works best for attracting top talent? Share your thoughts and experiences in the comments below!

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