A search fee is the compensation paid to an executive search firm for conducting a VP or C-suite placement. In retained executive search, the fee is typically 20–25% of the placed executive's total first-year compensation (base salary plus target bonus), paid in three instalments: one-third at engagement, one-third at candidate submission, and one-third at placement. Contingency search firms are paid only on placement, usually 15–25% of first-year base salary. The fee structure signals the model: retained firms are accountable to quality; contingency firms are incentivised by speed.
Retained vs Contingency Fee Structures
Retained search fees are structured in thirds: the first instalment (approximately 33% of the total fee) is paid when the mandate is signed, providing the firm with capital to invest in the search and aligning their commitment to the engagement. The second instalment is paid when the firm submits a defined number of qualified candidates (typically 3–5). The third is paid when a candidate accepts an offer.
Contingency search fees are paid only when a candidate accepts an offer. There is no upfront commitment and no obligation on either side to complete the engagement. The contingency model incentivises volume and speed over quality: firms present as many candidates as possible in the hope that one sticks, rather than investing in a rigorous market search.
Search Fee Structure — Retained vs Contingency
How Search Fees Are Calculated
The standard fee basis for retained executive search is total first-year compensation — base salary plus target annual bonus. At 25% of a $300K total comp ($250K base + $50K bonus target), the fee is $75,000. Some firms calculate the fee on base salary alone; others include equity in the calculation (less common in pure executive search; more common in certain specialist markets).
Flat-fee search (a fixed dollar amount regardless of compensation) is used by some boutique firms and technology-enabled search platforms. It is typically appropriate for roles with well-defined compensation ranges and highly standardised requirements.
“A 25% search fee on a $280K base VP hire is $70,000. A mis-hire on that same role costs $270,000–$450,000 in direct costs alone, plus 6–12 months of lost momentum. The fee is not the expensive option. The bad hire is.”
What a Search Fee Buys
In a retained executive search, the fee pays for: a dedicated search team's time over 60–120 days, a comprehensive market mapping and longlist research, structured candidate assessment and reference checking, candidate management and offer support, and the firm's accumulated candidate intelligence and relationships.
In a contingency arrangement, the fee pays for access to candidates who responded to outreach from one recruiter. The depth of search, the quality of assessment, and the commitment to the specific mandate are fundamentally different — and the outcomes data reflects this.