Agency fee models: how they are built, and why two quotes rarely compare

Two models that do not compare directly

Direct hire and agency employment differ not only in price but mainly in what is being bought. In direct hire you pay for finding and pre-selecting a candidate whom you then employ yourself; the fee is one-off and usually tied to the start. In agency employment the agency remains the employer, assigns the employee temporarily to you as the user, and invoices for time worked.

In the first case the payment to the supplier is one-off and you continue to carry the wage costs yourself. In the second, the whole wage and contribution element is contained in the hourly rate. Comparing a one-off fee with an hourly rate is comparing two different things.

How the one-off fee for direct hire is built

A direct-hire fee is usually derived from the earnings of the role being filled and expressed as a share of an agreed base. What decides is therefore not the share itself but the definition of the base: whether it is gross monthly pay or annual earnings, and whether it includes variable pay, shift premiums or a joining bonus. Two quotes with an identical share can end up far apart under a different definition.

The rest is a matter for the contract, and it is worth settling before a search begins. This page states neither a share nor an amount; both follow from the brief, the scope of the service and the difficulty of the specific role.

What the contract should make explicit:

• The exact definition of the base the fee is calculated from
• The moment the entitlement arises: signature of the employment contract, or an actual start
• When the fee falls due, and the invoicing terms
• How it is handled if the candidate starts in a role other than the one they were presented for

What an hourly rate for temporary assignment must contain

For temporary assignment the hourly rate is not a free commercial judgement. Under the Czech Labour Code an agency employee is entitled to pay and working conditions comparable with a comparable core employee of the user, so the rate has to carry pay at that level together with everything the law attaches to it. Only above that base sit the agency’s own costs.

A quote noticeably below the others usually does not mean a better deal but different content: missing premiums, a different assumption about hours worked, or items moved into separate invoicing. The more useful question than "how much" is therefore "what is contained in the rate, and what is charged on top".

What the rate has to carry:

• Pay at the level of comparable pay conditions at the user
• The employer’s statutory social and health insurance contributions
• Holiday and wage compensation under the Labour Code
• Premiums and allowances arising from shift scheduling and overtime
• The agency’s own costs of recruitment, payroll and administration

Exclusivity, staging, and tying the fee to the outcome

The models also differ in when payment happens. A fee tied entirely to the outcome moves the risk of an unsuccessful search onto the supplier, and that division of risk is reflected in its size. A staged model, where part is paid at the start and the rest on the start date, divides the risk and gives the supplier a reason to devote capacity to a brief that is difficult and may not end in a placement.

Exclusivity is a separate arrangement, not a surcharge. Giving a brief to a single supplier removes the situation where two of them present the same candidate and a dispute begins about who brought them; at the same time it binds you for the agreed period. If you do agree exclusivity, a period of validity and a clear procedure for the case where the brief is not filled belong with it.

Compensation for an early departure belongs in the contract

The question "what if the new person leaves soon" does not belong in a quote as a promise but in the contract as an arrangement. It should set out in writing the relevant period, the reasons that count within it, and the cases that exclude a claim — the role being cancelled, a substantial change to the brief, or termination by the user.

A promise that no departure will occur is a statement about a third party’s future behaviour, not a parameter of a service. Agreeing in advance what happens if it does is the more honest arrangement.

Why quotes are not comparable, and where an unfilled role belongs

Quotes usually diverge in scope rather than in price. Establish what is included and what is charged on top: advertising, verification of certificates, coordinating occupational health assessments, protective equipment, transport and accommodation, administration for foreign workers, or payroll. The difference in content is usually larger than the difference in the number.

The comparison also has to include an item that appears on no invoice — the cost of the unfilled role. Output not produced, overtime for the rest of the shift, orders declined and an overloaded operational management run every week the seat stays empty.

For two quotes to be comparable at all, the same things have to be on both sides:

• The same scope of service
• The same definition of the base the fee is calculated from
• The same terms of payment and invoicing
• A view of what is included and what is charged separately
• The cost of the unfilled role over the search period, counted in both