A tiered commission plan pays a recruiter a higher percentage of billed fees as their cumulative billings cross set thresholds within a period, usually a calendar or fiscal year. The higher rate applies only to the billings inside the new tier, not retroactively to everything before it, the same way tax brackets work.

Example: Tier 1 pays 30% on $0–$200,000, Tier 2 pays 35% on $200,001–$400,000, Tier 3 pays 40% above $400,000. A recruiter who has billed $380,000 closes a $60,000 deal. She earns 35% on the first $20,000 ($7,000) and 40% on the remaining $40,000 ($16,000): $23,000 on that deal.

Why it matters: tiers keep recruiters closing late in the year, but one edit to a past deal (a changed fee, a split, a clawback) can shift which tier every later deal falls into, which is why spreadsheets break. See how to design a tiered commission plan.

Retained search is a placement model where the client pays an upfront retainer to engage one recruiting firm exclusively. The firm is paid for the search process regardless of outcome, unlike contingent search, where the fee depends on a hire.

Typical structure (the thirds model): one third on engagement when the agreement is signed, one third when a shortlist is presented, and one third when the candidate accepts or starts. Total fee is commonly 30–33% of first-year compensation.

Why clients pay it: exclusivity, dedicated effort, and senior-level attention on VP, director, C-suite, and hard-to-fill roles where a wrong hire is expensive.

Why it matters operationally: three installments mean three invoices, three payment dates, and commission that has to be tied to the right tranche rather than a single placement event. See finance operations for executive search firms.

A placement guarantee is the period after a candidate's start date, typically 30 to 90 days, during which the recruiting firm remains responsible for the placement. If the candidate leaves in that window, voluntarily or not, the firm either runs a free replacement search or refunds part of the fee (see clawback).

Typical lengths: 30 days for entry to mid-level roles, 60 days for standard executive search, 90 days for senior executive and C-suite placements. Some firms offer six-month or one-year guarantees as a differentiator.

Why it matters: until the guarantee expires, the fee carries a known risk of being returned. Many firms hold recruiter commission until the window closes for that reason, and firms that invoice late into the guarantee period are the ones most likely to write the fee off if the placement falls through. For the day-by-day version of what to do inside that window, see the falloff prevention playbook.

A draw against commission is an advance paid to a recruiter against future commission earnings. The recruiter receives a set amount each pay period, the draw, which is then recouped from commissions earned in the same or later periods.

Recoverable draw: must be repaid from future commissions. A recruiter with a $5,000 draw who earns $8,000 in commission that month nets $3,000; if she earns only $3,000, she carries a $2,000 deficit forward.

Non-recoverable draw: does not have to be repaid. If commissions fall short, the recruiter keeps the full draw and the shortfall is forgiven, which makes it a guaranteed minimum.

Why it matters: draws retain junior recruiters, fund ramp periods, and smooth income in slow months, but tracking balances across pay periods and variable tiers is where spreadsheets go wrong. See how to track recruiter payouts without spreadsheet errors.

A direct hire fee, also called a placement fee or finder's fee, is the one-time payment a client makes to a recruiting firm when a candidate is permanently placed. It is the primary revenue model for direct hire and executive search firms.

How it is calculated: almost always a percentage of the candidate's first-year base compensation, typically 15–30%, with executive search firms often at 25–33%. The percentage is fixed in the search agreement before work starts.

Example: a VP of Sales placed at a $220,000 base with a 25% fee produces a $55,000 invoice.

When it is due: terms vary by agreement. Common options are due on the candidate's start date, net 30, or in installments. Retained search fees are structured differently (see retained search). See also how to invoice clients as a recruiting firm.

Contingent search, or contingency recruiting, is a placement model where the recruiting firm is paid only if and when it places a candidate. There is no retainer; the fee is contingent on a hire.

Key characteristics: the client often works several contingent firms at once on the same role, only the firm whose candidate is hired gets paid, fees are typically 15–25% of first-year base salary, and payment is due when the candidate starts or after a short term such as net 30.

Why it matters: higher risk for the firm (zero revenue without a placement) and lower barrier for the client. Invoice and commission timing in a contingent model is triggered by the start date, so the guarantee period and the collection window overlap. Contrast with retained search, where part of the fee is paid upfront for exclusivity.

A clawback is a clause in a placement agreement that requires the recruiting firm to return some or all of its fee if the placed candidate leaves within a defined period, typically 30 to 90 days after the start date. Resignation, termination, or mutual separation can all trigger it.

Common structures: full clawback (100% of the fee returned if the candidate leaves within 30 days), prorated clawback (a sliding scale such as 75% in weeks 1–4, 50% in weeks 5–8, 25% in weeks 9–12), or a replacement guarantee with no cash refund.

Why it matters: a clawback hits cash flow twice. The firm returns money to the client and usually has to recoup commission already paid to the recruiter. Firms that miss a clawback window either pay commission too early or find the liability after the money is gone. See placement guarantee, and the falloff prevention playbook for how clawback and replacement terms compare in practice.

Accounts receivable (AR) aging is a report that groups every unpaid client invoice by how long it has been outstanding, usually in buckets of 0–30, 31–60, 61–90, and 90+ days from the invoice date.

Why it matters: it is the primary collections tool for a recruiting firm. An invoice in the 0–30 bucket will probably be paid without intervention. One at 61–90 needs active follow-up. Anything past 90 days needs escalation or a formal collections process.

Example: a firm's aging report shows $45,000 current, $18,000 at 31–60 days, $7,500 at 61–90 days, and $3,200 past 90 days. The calls this week go to the $7,500 and the $3,200 first. See accounts receivable for recruiting agencies.