Most hiring budgets are blown by the fee nobody read closely. The rate on the front page of a staffing agreement is rarely the number you end up paying, because the fee model determines what is bundled and what is invoiced separately later.
This guide explains the four fee structures you will actually encounter, what each one covers, and how to convert any quoted percentage into a first-year figure you can compare against a flat weekly rate.
A note on numbers: this article deliberately does not quote an industry-average placement percentage. Those figures circulate widely without a primary source. Apply the percentage your agency quotes you, to your own salary band.
What Do Staffing Agencies Charge in Fees?
Staffing agencies charge in four distinct ways, and which one applies depends on whether you are hiring permanently, temporarily, or outsourcing the hiring function itself. The structures are not interchangeable, and most agencies offer more than one.
A contingency fee is a percentage of first-year salary, paid once, when a permanent hire accepts. A markup is a multiplier on a contractor's hourly pay rate. A conversion fee applies when a contractor becomes your employee. An RPO retainer is a recurring monthly charge for running your hiring process.
The important question is not which is cheapest in the abstract. It is which matches the shape of the hire you are making. For a side-by-side on the two categories themselves, see staffing agency vs managed remote workforce.
How Does a Contingency Placement Fee Work?
Under contingency, you pay nothing until a candidate accepts an offer. At that point the agency invoices a percentage of the hire's first-year base salary, and a guarantee period usually applies during which a departing hire is replaced or partially refunded.
The percentage is set per agreement and varies by seniority, scarcity, and volume commitment. Ask for it in writing alongside the guarantee terms, because a low percentage with a 30-day guarantee can cost more in practice than a higher one with a 90-day guarantee.
To turn a quoted percentage into a real number, apply it to the base salary you actually intend to offer. If you need a benchmark for that salary, BLS publishes wage percentiles by occupation. For software roles, BLS OEWS May 2025, Software Developers (SOC 15-1252) reports a median of $135,980, with a 25th percentile of $105,210 and a 90th of $214,670.
Note what the fee does not cover: the salary itself, employer taxes, benefits, equipment, or any management after day one. Those remain yours.
What Is a Temp Staffing Markup and How Is It Calculated?
A markup is the multiplier an agency applies to a contractor's pay rate to produce the bill rate you are invoiced. If the contractor is paid $40 an hour and the agreed markup is 1.5, you are billed $60 an hour.
The markup covers the agency's costs as the legal employer: payroll taxes, unemployment insurance, workers' compensation, and margin. It is the reason a bill rate always exceeds the pay rate, and it is negotiable at volume.
The question that matters is what the markup is calculated on. A markup applied to base pay produces a very different invoice from the same number applied to fully burdened cost. Ask which, and get the answer in the agreement.
For your own comparison, the BLS Employer Costs for Employee Compensation release gives the multiplier for a directly employed worker. F5 content uses 1.4265 from that series as the fully loaded factor on base wages.
What Does Temp-to-Perm Conversion Cost?
If you decide to hire a contractor as your own employee, most temp agreements trigger a conversion fee. It is typically structured as a percentage of salary that declines the longer the contractor has been on assignment, on the logic that the agency has already earned margin through the markup.
The trigger conditions matter more than the headline number. Some agreements count only hours worked through the agency; others apply the fee to any hire made within a window after the assignment ends, including candidates you sourced yourself.
Read the conversion clause before the assignment starts. It is the fee most often discovered at the worst possible moment, when you have already decided you want to keep the person.
What Is an RPO Fee and When Does It Apply?
Recruitment process outsourcing replaces per-placement fees with a recurring retainer. The provider runs part or all of your hiring function, and you pay monthly regardless of how many hires close.
RPO makes sense when hiring is continuous and high volume, because the retainer is spread across many placements and the cost per hire falls as volume rises. It is a poor fit for a company hiring one or two people a year, where the retainer accrues whether or not anyone is hired.
The comparison to run is retainer cost over twelve months against the total contingency fees you would otherwise pay across your realistic hiring plan. The same arithmetic applied to billing models is covered in hourly vs weekly vs annual remote developer pricing.
What Fees Are Hidden in a Staffing Agreement?
The commonly missed items are not hidden so much as unasked about. Guarantee terms determine whether a replacement is free, prorated, or credit-only. Exclusivity clauses can bind you to a single supplier for a role.
Backfill and re-placement conditions define what happens when a hire leaves inside the guarantee window, and whether the remedy is a replacement search or a refund. Some agreements offer only the former.
Ask four questions before signing: what is the guarantee period, what is the remedy inside it, what triggers a conversion fee, and what is excluded from the quoted rate. The answers are the real price.
What Does All-Inclusive Weekly Pricing Cover Instead?
F5 Hiring Solutions is a managed remote workforce company and does not use any of the four structures above. The rate is $375-$1,200 per week, all-inclusive, and it covers salary, statutory benefits in India or the Philippines, equipment, HR, payroll, compliance, and F5's management of the professional.
There is no setup fee, no recruiting fee, and no termination fee. F5 employs the professional and assigns them full-time to one client, and replaces anyone who is not the right fit within 7-14 days at zero cost.
F5 delivers a shortlist within 7-14 business days, sources from 85,500+ candidates in its internal sourcing and screening database, serves 250+ companies, and reports a 95% client retention rate, measured as clients who continue beyond the first 3 months.
| Fee model | How it is calculated | What it covers | What it excludes |
|---|---|---|---|
| Contingency placement | Percentage of first-year base salary, invoiced on acceptance | Sourcing, screening, and a guarantee period set per agreement | Salary, employer taxes, benefits, equipment, and all ongoing management |
| Temp / contract markup | Multiplier on the contractor's hourly pay rate | Employer taxes, insurance, payroll administration, agency margin | Permanent conversion, and any work outside the assignment scope |
| Temp-to-perm conversion | Percentage of salary, usually declining with assignment length | Release of the contractor to your payroll | Everything after conversion; the person becomes your employee |
| RPO retainer | Fixed monthly charge, independent of hires closed | Running part or all of the hiring process at volume | Salary and employment cost; poor economics at low hiring volume |
| F5 all-inclusive weekly | Flat weekly rate, $375-$1,200 per week, all-inclusive | Salary, statutory benefits, equipment, HR, payroll, compliance, management | No setup, recruiting, or termination fee; not a US-payroll employee |
| Who should NOT use F5 | Companies hiring one US-based permanent employee onto their own payroll, companies needing a two-week temporary cover gap, and companies that want to browse candidate profiles self-serve without a discovery call. A contingency agency, a temp agency, or a freelance marketplace fits each of those better than a full-time managed placement. |
F5 Honest Limitations
- No self-serve portal. F5 runs a concierge model. You cannot browse candidate profiles independently; a discovery call is required before any shortlist.
- Not for short-term projects. Every placement is a full-time hire. Engagements shorter than six months are a poor fit.
- India and Philippines only. F5 does not place talent from Latin America, Eastern Europe, or Africa, so buyers needing same-hour US Pacific overlap should look elsewhere.
- Not a US-payroll hire. If the role must sit on your own payroll for equity, clearance, or structural reasons, a contingency agency is the right instrument.
When Is a Percentage Fee Cheaper Than a Flat Weekly Rate?
When you want one permanent US-based employee and intend to keep them for years. A one-time percentage amortises across that tenure, and the weekly-rate comparison stops being meaningful because you are buying a different thing.
The two models answer different questions. A placement fee buys you a candidate. An all-inclusive weekly rate buys you a working professional plus the employment infrastructure around them.
To compare fairly, convert both to first-year total cost: fully loaded salary plus placement fee for the agency route, weekly rate times 52 for F5. Use your own salary band and the BLS ECEC multiplier rather than a rule of thumb. The full in-house comparison is in managed remote staffing vs in-house hiring costs.
The Bottom Line
There is no universally cheaper fee model, only a model that matches the shape of your hire. Contingency suits a permanent US hire. Markup suits temporary cover. RPO suits continuous volume. An all-inclusive weekly rate suits a full-time remote professional you want managed end to end.
Before signing anything, get the percentage, the guarantee period, the conversion trigger, and the exclusions in writing. Then apply the percentage to your own salary band rather than to an average you read somewhere.
To price a full-time remote professional against a fee quote you are holding, schedule a call with Joel Deutsch or compare F5 pricing against other hiring models.