How much will contingency firms negotiate? That depends on the
marketplace, namely the unemployment rate, the scarcity of candidates in the particular discipline in question, and geographic differentials. In general, you’ll pay more for IT (information technology) andWeb development candidates than you will for generic secretaries. As a rule of thumb, though, you should ask for a 20 percent fee. That amount typically justifies the recruiter’s time and efforts. Fee agreements typically range anywhere from 10 to 33 percent. Avoid trying to negotiate deals down to 10 percent or 15 percent—the recruiter may agree to it, but you won’t see first-tier candidates. In fact, you may not see any candidates at all.

Remember as well that recruiters will trade off fees and time
guarantees. Contingency recruiters typically offer both (a) free trial
periods and (b) prorated refund periods. Those time guarantees may be negotiable as well. Here is how they work: A thirty-day free trial period will guarantee you that if the candidate ‘‘falls off’’ for any reason—termination, resignation, or layoff—you’ll receive your money back, plain and simple. If the candidate ‘‘falls off’’ between days 31 and 90, you’ll receive a prorated refund. How the search firm determines the prorated refund period is important.

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Contingency search firms charge a fee based on the candidate’s annual earnings (base salary usually, but sometimes the bonus may be factored in if it’s a significant portion of the estimated first year’s
income). The formula most often employed is a ‘‘1 percent per
$1,000’’ figure with a 33 percent maximum.

At full-fee contingency, for example, the cost for a $30,000-ayear
secretary would be 30 percent x $30,000, or $9,000. The cost for
a $90,000 senior UNIX systems administrator would be 33 percent x
$90,000, or $29,700. Bear in mind that many search firms will negotiate fees lower than the ‘‘1 percent per $1,000’’ full-fee formula.

In terms of refunds, some firms employ a ‘‘1/90 per day’’ prorated
formula so that each day (from days 1–90) guarantees them one-ninetieth of the total fee. If the $30,000 secretary in the example
above leaves on day 60, then the recruiter will have earned 60/90 of
the $9,000 fee, or $6,000.

Taken From : The Hiring and Firing Quention and Answer Book