Industry Trends & Insights
Should you charge retainers? 3 models that actually work for small recruitment agencies
Chris Allen
Nov 3, 2025
TL;DR
Retainer agreements offer agencies predictable income, improved cash flow, and stronger client relationships
The classic retainer uses a phased payment structure, typically 25-30% upfront, 40-50% after shortlisting, and 20-25% upon placement
Performance-based retainers link payments to quantifiable results like hires, quality, and time-to-fill, aligning incentives with outcomes
The hybrid retainer combines a base fee for guaranteed service with performance bonuses, balancing stability and motivation
Choose the right model based on your agency's strengths, client needs, and growth goals, and continuously monitor and refine your strategy
Retainer agreements are becoming a go-to option for many recruitment agencies, especially when it comes to executive, niche, or hard-to-fill roles.
They create a closer, more committed partnership between you and your client than a standard contingency setup ever could. Plus, they offer big perks like more predictable income, better cash flow, and stronger long-term relationships.
Of course, retainers aren’t without their challenges.
They can be less flexible and come with a bit more pressure to deliver. But when managed well, they’re a powerful way to grow your business.
In this article, we’ll break down three retainer models that work particularly well for small agencies: the classic retainer, the performance-based retainer, and the hybrid retainer.
The classic retainer: a foundational approach
The classic retainer model is the most traditional (and still one of the most effective) ways to structure a recruitment partnership.
It’s usually built around phased payments, such as 25–30% upfront, 40–50% after shortlisting or interviews, and 20–25% upon placement (RecruitersLineUp). Retainer fees typically sit between 15–25% of the candidate’s first-year salary, divided across these key milestones (Techneeds).
For example, an agency might charge £10,000 for a senior engineering role in London, splitting payments 50% upfront and 50% upon hire, or $3,000 for a marketing manager, with 20% upfront and 80% at placement (Relancer).
To make this model work smoothly, clear communication is everything.
Define the scope and deliverables upfront: what constitutes a shortlist, how many interviews will be scheduled, and what milestones trigger each payment (RecruitersLineUp).
As FunctionFox advises, set expectations in writing, revisit agreements regularly, and keep communication open and responsive.
The classic retainer comes with some great benefits:
Predictable income that smooths out those feast-or-famine cash flow cycles
Better financial planning, with more consistent revenue forecasting
Stronger client relationships, built on trust, exclusivity, and collaboration
Of course, it’s not without challenges.
There’s less flexibility due to the client’s upfront commitment, the risk of scope creep if agreements aren’t clear, and a bit of added pressure to deliver quickly and effectively once retainers are in place.
Still, for many agencies, the classic retainer is the perfect blend of stability and partnership: a dependable structure that rewards consistency and trust on both sides.
The performance-based retainer: aligning incentives with results
The performance-based retainer takes the traditional model a step further by tying payments directly to measurable outcomes: things like hires made, candidate quality, retention rates, or time-to-fill (SPP).
For example, an agency might charge a base fee of $2,500 per month, plus $500 for every 10% improvement in a specific KPI. This approach keeps both sides focused on what truly matters: results that create business impact.
To make this model work, agencies and clients need to agree on clear metrics and payout tiers upfront.
Common KPIs include hires per quarter, average time-to-fill, candidate retention, and diversity benchmarks. Some companies even offer tiered bonuses for exceeding baseline goals, creating a true win-win when performance goes above expectations.
This model brings plenty of upside: higher motivation, stronger alignment with client goals, and the potential to earn more when you overdeliver. It also boosts client confidence, since compensation is directly tied to outcomes.
That said, it comes with a few caveats:
Define metrics clearly to avoid misunderstandings, as vague goals can lead to tension later.
Account for external factors that might impact results and payouts, like market changes or client-side delays.
Manage expectations carefully: not every role can be filled overnight, and transparency helps keep both sides on the same page.
When structured well, a performance-based retainer builds trust, drives accountability, and rewards agencies that consistently deliver measurable success.
The hybrid retainer: balancing stability and performance
The hybrid retainer blends the best of both worlds: the steady income of a classic retainer and the results-driven rewards of a performance-based model (SPP).
In practice, this often means a structure where about 60% of the fee is guaranteed as a base retainer, and the remaining 40% is tied to hitting performance milestones. It’s a balanced setup that keeps revenue predictable while still offering room for upside when targets are exceeded.
This model appeals to clients who want a strong partnership with built-in accountability, and it helps agencies win a wider range of business by offering both security and incentives.
It also helps minimize risks like scope creep or under-delivery, which can be more common in purely performance-based agreements.
To make the hybrid model work, clarity is everything.
Clearly outline what’s covered by the base fee, how performance bonuses are earned, and how often reviews or adjustments will take place (SPP).
Define milestones and KPIs in simple, measurable terms that both sides agree on.
Regular check-ins (ideally quarterly) help keep the partnership aligned, ensure satisfaction, and fine-tune the model as needed.
For small or growing agencies, the hybrid retainer offers a powerful way to build recurring revenue, motivate performance, and scale with confidence.
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Choosing the right retainer model for your agency
There’s no one-size-fits-all approach to retainers.
The right model depends on your agency’s strengths, clients, and goals. Agencies that specialize in executive or technical roles often see the most success with retainers, while more generalist firms may find clients less open to them (HRLineUp).
It’s also important to consider client preferences. Factors like hiring urgency, budget flexibility, and appetite for a strategic partnership all play a role. For instance, high-growth startups often value exclusivity and speed, making them great candidates for retainer-based work (FidForward).
Your agency’s growth stage matters too. If you’re focused on building predictable revenue and deeper, more strategic client relationships, retainers can be an ideal fit.
When it comes to pricing, benchmark your fees carefully. Contingency rates typically range from 15–35% of the candidate’s first-year salary, while retainers are often negotiated slightly lower but come with added strategic value (FidForward).
Highlight the value you bring, like market insights, faster hiring times, stronger candidate quality, and access to passive talent networks (HRLineUp).
Also, don’t set it and forget it – continuously monitor and refine your retainer strategy. Ask for client feedback after every hire or milestone, and track KPIs like time-to-fill, placement retention, and client satisfaction (SPP).
Adjust your fees and approach as the market evolves. For example, hard-to-fill roles now take 50% longer to close than general positions, and the average cost-per-hire for tech roles has surpassed $4,000. With 50% of employees projected to need reskilling by 2025, clients are looking for recruiters who can adapt and deliver real strategic value (FidForward).
Finding the right fit for your agency and clients
Retainer agreements can be a real game-changer for small agencies, as they offer steady income, stronger partnerships, and higher earning potential.
Each model (classic, performance-based, or hybrid) has its advantages and trade-offs, and the best fit will depend on your agency’s niche, client mix, and growth plans.
When rolling out a retainer model, make sure your agreements are clear, your fees reflect your value, and your processes are built for continuous improvement.
At the end of the day, success with retainers comes down to trust and results. Whether you’re partnering with a global enterprise or a fast-growing startup, take the time to truly understand your clients’ needs and tailor your approach around them.
With the right retainer structure and a consistent focus on delivering value, your agency can build stronger relationships, achieve steady growth, and thrive in an increasingly competitive market.
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