Other contingency firms charge the client ‘‘50 percent of the
candidate’s gross earnings’’ up to the time of the fall-off. In the example just given, the secretary who earns $30,000 per year will have earned $5,000 by the end of her second month ($2,500/month x 2 months). Therefore, the fee earned by the agency would be $2,500. That’s a lot cheaper than the 1/90 formula that rewarded the agency with $6,000! Therefore, it’s to your advantage to insist on the ‘‘50 percent of gross earnings,’’ rather than the ‘‘1/90 per day’’ prorated refund formula.

Contingency recruiters are optimists by nature. They’ll always
negotiate a greater time guarantee in exchange for a higher fee. So
if you ask for 20 percent and the recruiter won’t budge below 25
percent, then ask for a higher refund guarantee. For example, you
might ask for a sixty-day free trial period and a 120-day prorated
refund (instead of the more common thirty-day free trial period and
ninety-day guarantee). You might also ask for a ‘‘50 percent of gross
earnings’’ formula, rather than the more common ‘‘1/90 per day’’
practice. Savvy negotiations will not only save your company money; they’ll demonstrate to the recruiter your thorough understanding of their business.

What about negotiations with retained search firms? Unfortunately,
there’s far less to talk about there. Retained search firms, or
headhunters, charge their clients a flat 33 percent fee based on the
candidate’s annual earnings. A $150,000 chief technology officer
costs $49,500. That fee is a ‘‘retainer’’ that is typically paid in three
increments: 1/3 upon acceptance of the search, 1/3 approximately
thirty days into the search, and 1/3 approximately sixty days into
the search.

The largest search firms rarely discount or negotiate these terms. Smaller boutique firms, however, will often make that final third of the fee contingent upon their filling the search. In other words, if they don’t find the candidate that you ultimately hire, you’ll be charged only two-thirds of the $49,500 fee, or $32,670. Always
be sure to ask that the final third of the fee be made payable
upon completion of the assignment. In most cases, you won’t face
stiff resistance from the recruiter, and you’ll likewise end up saving
your company significant recruitment dollars.

Taken From : The Hiring and Firing Quention and Answer Book