---
title: How contingency recruiting fees are calculated
description: Contingency fees are 20 to 25% of first-year pay, so $24,000 to $30,000 on a $120k hire. See the 4-step calculation and how bonuses can raise the fee.
image: https://funded.club/hubfs/blog-featured-images/fc-how-contingency-recruiting-fees-are-calculated.png
---

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# How contingency recruiting fees are calculated

![how-contingency-recruiting-fees-are-calculated](https://funded.club/hs-fs/hubfs/blog-featured-images/fc-how-contingency-recruiting-fees-are-calculated.png?width=1200&height=628&name=fc-how-contingency-recruiting-fees-are-calculated.png)

[Ray Gibson](https://funded.club/blog/author/ray-gibson)

 Sep 30, 2026, 1:54:02 AM

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*Updated September 2026*

A contingency recruiting fee is calculated as a percentage, typically 20 to 25%, of the new hire's first-year pay, and it is only charged once someone is hired. For a $120,000 base salary, that is $24,000 to $30,000. The detail that changes the number most is how the contract defines "first-year pay", because some include sign-on and guaranteed bonuses as well as base salary.

Founders tend to negotiate the percentage and skip the definition. That is usually the wrong way round. On an offer with a sign-on bonus or a guaranteed bonus, the definition of the fee base can add several thousand dollars to the invoice, often more than knocking a point off the rate would save.

## The calculation in four steps

Every contingency fee follows the same basic sequence. The percentage is the step people remember, but steps one and four are where the surprises live.

![Four-step diagram of how a contingency recruiting fee is calculated: find the fee base in the contract, add up first-year pay it includes, apply the rate of usually 20 to 25%, then check when it is due and what happens if the hire leaves](https://funded.club/hs-fs/hubfs/(01)%20Thumbnails/n08-calculation-steps.png?width=1200&name=n08-calculation-steps.png)

- **Find the fee base.** Look for the clause that defines salary or compensation. Common versions are "first-year base salary", "annualised base salary" and "total first-year compensation".
- **Add up year one.** Include everything the definition covers. That can mean sign-on bonuses, guaranteed bonuses, target commission for sales roles and sometimes relocation.
- **Apply the rate.** Multiply the total by the agreed percentage. Some recruiters use a sliding scale where the rate rises with seniority.
- **Check the terms.** Note when the invoice is due, often on the start date, and what happens if the hire leaves in the first months.

## Worked example at three salaries

Here is what the percentage alone does at three illustrative base salaries, with no bonuses included. Swap in your own offers to price your plan.

| Base salary | Fee at 20% | Fee at 25% | Each extra $10,000 of salary adds | Funded.club fixed fee |
| --- | --- | --- | --- | --- |
| $80,000 | $16,000 | $20,000 | $2,000 to $2,500 | $7,500 |
| $120,000 | $24,000 | $30,000 | $2,000 to $2,500 | $11,500 |
| $160,000 | $32,000 | $40,000 | $2,000 to $2,500 | $15,900 to $21,900 |

The fourth column is the one to keep in mind during negotiation. Every time the offer rises by $10,000, a contingency fee rises by $2,000 to $2,500 with it. The fixed fee in the last column only changes if the salary moves into a different band on our [pricing page](https://funded.club/pricing).

## How the fee base changes the answer

Now take a single illustrative offer of $130,000 base, a $15,000 sign-on bonus and a $13,000 guaranteed first-year bonus. The percentage stays the same. Only the definition changes.

![Bar chart of the contingency fee on one illustrative offer under three definitions: $26,000 to $32,500 on base salary only, $29,000 to $36,250 including a sign-on bonus, and $31,600 to $39,500 on total first-year compensation](https://funded.club/hs-fs/hubfs/(01)%20Thumbnails/n08-fee-base.png?width=1200&name=n08-fee-base.png)

On base salary only, the fee is $26,000 to $32,500. Include the sign-on bonus and it becomes $29,000 to $36,250. Count total first-year compensation and it reaches $31,600 to $39,500. That is up to $7,000 more for the same person, the same role and the same rate.

Sign-on bonuses are often added late, to close a candidate who has another offer. If your contract counts them, the recruiter's fee grows at the exact moment you are stretching your budget. Agree in writing which items are excluded before the search starts.

## What to check before you sign

- **The definition of compensation**, including whether bonuses, commission and equity are in or out.
- **Whether the rate is flat or sliding.** A sliding scale can put a senior hire in a higher bracket.
- **When the fee is invoiced** and how long you have to pay.
- **What happens if the hire leaves early**, such as a partial refund or a free replacement, and for how long.
- **Whether other recruiters can work the same role**, since two firms introducing the same candidate can lead to a dispute over who is owed the fee.

For a wider comparison of recruiter pricing, see [how much a recruiter costs for startups](https://funded.club/blog/how-much-does-a-recruiter-cost-for-startups).

## Where Funded.club fits

We use a fixed fee instead of a percentage, so there is no fee base to define. Funded.club is a fixed-fee recruiting partner for funded startups and fast-growing teams across North America, Europe and APAC, and we've helped 500+ startups from Seed to Series D. Our fees are agreed upfront, average 6 to 9% of salary and run from $4,900 to $21,900 per hire.

Part of the fee is an advance at the start of the search, with the balance due when your candidate accepts the offer. If we don't deliver a shortlist of at least 3 qualified candidates within 30 days, you can claim the advance back in full. One dedicated recruiter runs your search end to end, with first screened candidates within 7 days and an average of 33 days from kick-off to hire.

## Frequently asked questions

### How are contingency recruiting fees calculated?

The recruiter multiplies the new hire's first-year pay, as defined in the contract, by an agreed percentage, typically 20 to 25%. The fee is only charged once someone is hired.

### Is a recruiter fee based on base salary or total compensation?

Either, depending on the contract. Some recruiters use base salary only, others include sign-on bonuses, guaranteed bonuses or commission. On an offer with bonuses, the difference can be several thousand dollars.

### What is a typical contingency fee for a $120,000 hire?

At 20 to 25% of base salary, it is $24,000 to $30,000. Funded.club's fixed fee for the same salary is $11,500.

### When is a contingency fee paid?

It is usually invoiced once the candidate is hired, often on their start date. Check the payment terms and any early-leaver conditions in the contract.

Worth a brief chat about your next hire? [Book a free call](https://funded.club/contact-us).

## Hiring after a funding round?

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