Recruiter Hustle
Your client refuses to pay your placement fee; what options do you have?
Chris Allen
Aug 16, 2025
TL;DR
Non-payment affects up to 60% of recruitment agencies
Well-drafted placement agreements are the foundation of successful fee collection
Non-payment can constitute a breach of contract, subject to legal remedies
Over 60% of payment disputes arise due to misunderstandings
Mediation and arbitration now appear in over 60% of new recruitment contracts
The hustle is real, but sometimes your clients act fake. Don’t be pushed around by clients who refuse to pay. Protect your agency’s bottom line using amicable intervention and, if needed, legal action.
Start with the Contract
When it comes to contracts, clarity is crucial. Placement agreements are communication tools. How will your client pay? When? And what are they expecting for that payment? Be sure to document every expectation, not just the fees. When is the payment owed? On the placement start date or a post-guarantee period? Write out the timeline, what a refund would look like, and definitely include what makes a placement “successful.”
Agreement types come in all shapes and sizes; however, a full-time placement typically earns the agency 15–20% of the placement’s first-year salary, with more specialized placements earning fees closer to 30% (LinkedIn). Agencies can also require retainers or flat fees. All of these prices should be outlined clearly in the client’s contract.
What are the Legal Implications?
Your placement agreement is a legally binding document, and when a client doesn’t pay, that’s likely a breach of said document. Upon non-payment, a client could be legally required to remediate the situation. That means payment is the bare minimum. They may be on the hook for damages, fee interest, and even legal costs, IF your contract outlines the right clauses.
Outline payment terms and triggers, including what happens when a payment is late. Consider charging interest or late fees on late payments. Another clause to consider is for exclusivity and ownership of the candidate. What happens if the candidate talks to another recruiter after being introduced by you?
Include a governing law clause to ensure that if legal action needs to be taken, you don’t have to travel too far to appear in court. Commonly, jurisdiction is set in the contract to be the agency’s home state.
Not including these clauses could increase the costs and risk of litigation. The less clear the contract, the less you have to stake your claim.
Friendly Resolution
Prevent escalation through open communication. Disputes often arise from misunderstanding as opposed to maliciousness. If a non-payment occurs, start at why. Is the client dissatisfied with the candidate? Are there cash-flow problems? Contract misinterpretations? Uncovering the root of the problem can lessen the likelihood of needing legal action.
Once you understand the problem, consider proposing a solution that works for both parties. For instance, you could extend payment terms to help a client low on cash flow. Mutual problem-solving is a great way to maintain relationships with clients you want to keep.
Less-friendly, though Amicable, Resolution
If resolution cannot be reach individually by your agency and the client, mediation and arbitration could be a great path. Mediation is when a neutral facilitator untangles disagreements with no legal action. Arbitration is legally binding but often faster than court.
Select a mediator/arbitrator with experience in recruitment fee disputes. Find referrals through national staffing association referral boards and other methods. Expect fees for each mediation or arbitration session.
To prepare for mediation and arbitration, gather all documentation pertaining to your relationship with the client. Signed agreements, emails, candidate resumes, and proof of introduction and placement are all helpful in navigating disagreements. Organize your notes chronologically, and decide what satisfactory resolution would look like to you.
Legal Action
Avoid this at all costs. Legal action is expensive and time-consuming. Think months to years. Costs can become insurmountable, especially if you don’t have a clause in your contract for the client to pay for all litigation.
Send a formal demand letter to the client before taking legal action. Be sure to reference the contract you have both signed, the outstanding payment, and a response deadline. The dispute may be resolved solely by the threat of litigation.
Double-check that you have abided by the contract fully, and that the client is the only one breaking the rules. Do this before filing the lawsuit with the court that has jurisdiction (based on your contract).
There are different kinds of courts and claims. Small claims are under $20,000. Larger claims can be taken to civil court. Inadequate documentation can lead to a loss, so be sure to gather as much evidence as you have: contracts, proof of introduction, candidate start date, invoices, payment reminders, and other communications.
Different states have different statutes of limitations. For example, a contract claim that is 3 years old may be too old to be seen by the legal system with jurisdiction.
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Client Consequences
Clients can have their reputation, credit, and future vendor procurements impacted by legal action. Clients who consistently withhold payments may have very real social consequences. ATS forums and other network channels may convince recruiters to avoid working for the client.
Regardless, understand that the agency relationship with the client will be completely broken, and you likely will never work together again. Winning in court can also end in non-payment, which would need to be further enforced by more legal action. Garnishment, liens, and bailiffs all come with costly fees.
Preventative Measures
In addition to contract clarity, there are other preventative actions you can take to decrease the likelihood of non-payment. Client screening can increase trust and help an agency avoid red flags. Regularly communicating with clients can decrease misunderstandings.
Maintaining organized records that can be later presented to the client helps bolster your confidence and shows the client you won’t accept non-payment. You can also reduce the sting of a non-payment by charging a retainer fee. Retainer models can be great upfront security for smaller agencies that require cash flow to survive.
Start with the Contract
When it comes to contracts, clarity is crucial. Placement agreements are communication tools. How will your client pay? When? And what are they expecting for that payment? Be sure to document every expectation, not just the fees. When is the payment owed? On the placement start date or a post-guarantee period? Write out the timeline, what a refund would look like, and definitely include what makes a placement “successful.”
Agreement types come in all shapes and sizes; however, a full-time placement typically earns the agency 15–20% of the placement’s first-year salary, with more specialized placements earning fees closer to 30% (LinkedIn). Agencies can also require retainers or flat fees. All of these prices should be outlined clearly in the client’s contract.
Final Thoughts
The best approach to handling clients not paying is prevention. Start all client relationships with a clear contract. Communicate often. Take portions of payment upfront, and consider retainer fees. When there are disputes, pursue friendly problem-solving. If friendly fails, move on to mediation, arbitration, or legal action.
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