Success fee

A success fee is a fee structure in which the recruitment firm is paid only when a candidate is hired, and receives no payment if the assignment does not result in a job offer.

This model is also known as a performance-based fee or ”no cure, no pay.” It is one of the most common models for specialist and professional roles in Sweden. For the client, it shifts the risk further along in the process, but it also affects how the assignment is actually carried out.

What is a success fee?

The fee is contingent on the outcome. You sign a contract, the recruitment firm does its work, and the invoice is issued once the candidate has signed on. If no hire is made, you normally pay nothing, except for any expenses that have been specifically agreed upon, such as advertising or occupational psychology tests.

The fee is almost always set as a percentage of the candidate’s first-year salary. For specialist and professional roles, the rate typically ranges from 15 to 25 percent, but it varies among providers and depends on the role level, complexity, and volume. For specialized search and executive assignments, the rate is higher, often 20 to 30 percent. Granting exclusive rights to the assignment, however, rarely affects the percentage rate itself. What is included in the annual salary must be specified in the agreement: a fixed salary is a given, but bonuses, commissions, car benefits, and other allowances must be explicitly addressed to avoid disputes later on.

The difference compared to retainer is a matter of principle. A retainer is paid in installments throughout the course of the assignment, regardless of whether it leads to a placement. A success fee is paid only upon a successful outcome. This means that the provider bears the entire financial risk with a success fee, and therefore prioritizes the assignments most likely to be successful. If your assignment is with three agencies at the same time, you’re competing for their attention.

A success fee agreement should always specify:

• The percentage rate of the fee and the exact components of pay on which it is calculated.
• Whether the assignment is exclusive or not, and for how long.
• Payment terms and when the invoice is issued: upon signing or upon taking possession.
• Possible recruitment guarantee, that is, what happens if the employment is terminated early.
• What expenses are incurred in addition to the fee?.

When is a success fee most appropriate?

The model works best when the position is open to applications and there is a reasonable pool of candidates. In that case, the likelihood of a successful placement is high, and the provider can devote its full efforts without risking having to work for free.

A success fee is usually a good fit when:

1. The role is well defined. Requirements Profile is finalized, and you have reached an internal consensus on what the person should do.
2. There are candidates in the market. Specialist and key roles where direct search can be combined with job postings.
3. You can grant exclusivity. A supplier with an exclusive contract works much more thoroughly than one of three.
4. You have the authority to make decisions. Prompt feedback from you is what makes the performance model effective.

The drawbacks of this model include confidential searches, highly specialized skills, and roles where the work consists primarily of research and the time-consuming process of approaching people who aren’t actively looking for a job. In such cases, the risk to the provider is so high that the work is either priced higher or done superficially. If the role is of this nature, a retainer or a shared model with a startup fee is usually fairer for both parties.

Common Pitfalls with Success Fees

1. To assign the project to several agencies. It feels like spreading risk, but it has the opposite effect. Everyone searches quickly and broadly; no one does the in-depth work; and the same candidates are contacted by multiple parties.
2. Unclear definition of annual salary. If bonuses and commissions are not specified in the contract, the issue will come up after the appointment, when you have the least room to negotiate.
3. To think that the model is free if nothing comes of it. You pay for the time you spend on this. Interviews, internal consultations, and having the position unfilled for half a year cost money regardless of the fee structure.
4. There are no rules regarding what happens in the event of early termination. Without a clear written guarantee, you'll be left to cover the cost on your own if the person quits after two months.

How Talent Search Works with Success Fees

Most of our assignment range from two to twelve years of experience, and in those cases, a success fee is often the most suitable model. However, we want the assignment on an exclusive basis. That is a prerequisite for us to be able to conduct a true direct search rather than simply reaching out to those who are already looking for a job.

• We will review the fee, the basis for calculation, and the payment terms in writing before we begin.
• We work on an exclusive basis and present the first candidates early in the process.
• We propose a different model if we determine that the role is too limited to warrant performance-based compensation.
• We will set forth in writing the terms that apply if the employment is terminated early.

Frequently Asked Questions About Success Fees

How much does a recruitment with a success fee cost?

The fee is typically 15 to 25 percent of the candidate’s first-year salary, with variations depending on the role, level of difficulty, and contract terms. Payment is made only after a candidate has been hired. Check which salary components the percentage is based on and what additional expenses may apply.

What is the difference between a success fee and a retainer?

A success fee is paid only if the assignment results in a job offer, while a retainer is paid in installments throughout the assignment regardless of the outcome. A success fee shifts the financial risk to the provider, while a retainer shifts it to the client. In return, the retainer model typically offers higher priority, dedicated research, and full transparency into the work.

Is exclusivity required for a success fee?

No, but it affects the quality of the work. Without exclusivity, multiple vendors work in parallel with a short timeframe, which favors quick matches over in-depth search efforts. The fee level, however, is rarely determined by exclusivity alone, but rather by the difficulty of the role and the amount of work required.

When is the success fee paid?

In most cases, the invoice is issued once the employment contract is signed, but some contracts tie it to the start date. The difference can be several months in cases of long notice periods, so be sure to clarify this before the assignment begins.

Email the role to us, you'll get a straight answer as to whether a success fee is the right model for that particular project.