What Are Employment Agency Fees?

Employment agency fees are paid to an employment agency when they succeed in placing a suitable employee with an employer. Such fees are variable based on the difficulty of the placement, the industry, the position, market conditions, and several other factors. Fees may vary widely from one employment agency to another, as they are at the discretion of the agency. Such fees may be contingent on the employer and employee coming to an agreement on various issues before an employment contract starts, such as the terms of employment. Employment agency fees may also be referred to as "placement agency fees."

Employment Agency Fees Explained

There are two types of employment agency fees: The employer-paid fee and the applicant-paid fee. Under the employer-paid fee, the employer assumes the total responsibility for the fee. The employee pays nothing. Traditionally, this is the more common type of fee arrangement and is preferred by employment agencies. The employee may not ever notice that a fee has been attached to their job placement, as the hiring company may factor in their hiring costs when accounting for the compensation for a role.

Under the applicant-paid (or employee-paid) fee arrangement, the employment agency fees are costs charged to the applicant for the service of finding an employer. This is normally a one-time fee charged to the client-employee for obtaining employment. It may also entail an employment agency (acting as a staffing agency) claiming a portion of a worker's hourly pay during the term of a contract. For example, if a worker is offered a 12-month contract position at $49 an hour, the hiring company may have actually budgeted $60 an hour. The employment agency may pocket the difference or a portion of the difference in lieu of a one-time fee without the employee ever knowing of the arrangement.

Employment Agency Fee Trends

With the proliferation of telecommunications and IT companies, there is a different type of employer-paid fee arrangement. Some employment agencies have become the employer and a hiring company can contract for the services of such employees from them. The company pays the employment agency a monthly fee for employees instead of to the employee. The employees supplied by the employment agency remain employees of the agency, not the company.

Employment agencies may earn fees from any type of employer, such as public organizations and private companies. Different employment agencies may have different methods of negotiating and charging fees. How and how much to charge as a placement fee may depend on a variety of factors, such as job and labor market supply and demand.