Permanent Placement — Contingency Search Fee (No Fee If No Hire)

💡 Accountant's Note

Contingency search is the dominant model for mid-market permanent placement (Robert Half, Kforce, Randstad for direct hire). The fee is contingent — NO fee is paid unless a qualified candidate is successfully hired. Typical fee: 20–33% of the candidate's first-year base salary. For a $145,000 salary role at 25%: $36,250 fee. Wait — the $48,500 in the entry implies a higher salary or percentage. Staffing firms simultaneously work multiple candidates; only the 'winning' placement generates a fee. Revenue recognition under ASC 606: the performance obligation is fulfilled when the candidate is hired AND starts employment (the firm's service — sourcing and presenting candidates — is complete). The constraint: most contingency search agreements include a 30–90 day guarantee period (if the placed candidate leaves within the guarantee, the firm refunds the fee or provides a free replacement search). Variable consideration: the guarantee creates uncertainty — is the fee 'highly probable not to be reversed'? Most firms recognize the fee at start date but record a placement refund reserve (estimated refunds for guarantee-period departures based on historical experience, typically 3–7% of gross placements).