Contingency Recruitment

What contingency recruitment is

Contingency recruitment (التوظيف بأتعاب مشروطة), also called contingency search, is an arrangement in which an organisation uses an external recruitment agency on the basis that the agency earns its fee only when a hire is made. If none of the agency’s candidates is hired, the agency earns nothing, however much work it has put in.

The alternative arrangement pays the fee for the work rather than for the result. The fee is split into instalments that begin when the agency is engaged, and the agency has the position to itself. This second arrangement is known as retained search. The difference between the two does not lie in the amount paid. It lies in who carries the risk that nobody is hired, and that changes how the agency behaves.

How contingency recruitment differs from recruitment fees for a worker who is not Saudi

Contingency recruitment does not cover the recruitment fees for a worker who is not Saudi (رسوم استقدام العامل غير السعودي), or anything connected with them. That subject is dealt with in the Saudi Labor Law (نظام العمل) and has its own authorities and procedures. It has its own sources, and this definition does not address it.

Contingency recruitment concerns a commercial fee that an employer pays to an agency in return for a candidate referral service. Confusing the two subjects can be costly, because anyone who reasons from one to the other builds on a rule that does not apply to the case in front of them.

The regulation and licensing of recruitment agencies have their own sources as well. Article 30(1) of the Labor Law prohibits practising the activity of employing Saudis, the activity of recruiting workers (استقدام) or the outsourcing activity without a licence from the Ministry of Human Resources and Social Development. The references we reviewed do not settle whether a given contingency agency’s work falls within those activities, and this definition does not address that question. The provision relied on is that of the Saudi Labor Law as published by the Ministry of Human Resources and Social Development: Article 30(1) (the licence requirement for employing Saudis, recruiting workers and outsourcing), in its wording as amended by Royal Decree M/44 of 1446H, in force since 19 February 2025.

How the contingency recruitment fee is calculated

The fee can be set as a percentage of the annual salary for the position. Take a position with an annual salary of SAR 180,000:

• At 18%, the fee is SAR 32,400.
• At 22%, it is SAR 39,600.
• At 25%, it is SAR 45,000.

These percentages are assumed in order to show how the fee is built. We have no published reference for the Saudi market on which to base a fee percentage.

Basing the percentage on the annual salary has an effect worth noticing: the higher the agreed salary, the higher the fee. An agency that mediates the salary negotiation is therefore not neutral in it, because its interest lies in the higher figure. That does not make its advice wrong, but relying on that advice alone is a mistake. The remedy is to build the offer on the organisation’s salary structure and the range of the grade, not on market figures passed along by word of mouth.

Comparing contingency recruitment costs on a single measure

The fee is not the whole cost of a hire, only one item in it. Suppose the fee is SAR 36,000 at a rate of 20%, and the cost of a hire through the organisation’s internal channels is SAR 18,461.54. The fee alone would then be about 1.95 times the full internal cost.

A comparison made this way is incomplete in two respects. The internal cost includes the time of the people who did the work, and an agency fee does not remove all of that time; it only reduces it. Beyond that, the positions referred to agencies are not a random sample. They may be the positions the internal channels could not fill, so comparing them with the average of what those channels did fill compares two different situations.

The correct measure is the blended average. Suppose an organisation makes 20 hires in a year: 6 through agencies at a fee of SAR 36,000 each, and 14 internally at a cost of SAR 18,461.54 each. The total is SAR 474,461.56 and the average is SAR 23,723.08 per hire. That average is the figure to compare with the previous year, not the figure for a single channel. How the calculation is structured is covered in cost per hire, the average an organisation spends to fill one position over a period.

What the contingency condition does to an agency’s behaviour

When an agency is paid only on a hire, its reckoning becomes a matter of probability: how many positions to work on at once, and which of them is nearer to closing. The behaviour that follows is predictable, the agency cannot be blamed for it, and the organisation has to manage the arrangement with it in mind:

• Speed before fit. The agency has a reason to send candidates early and in volume, because a candidate sent first stands a better chance of being interviewed. The screening then falls to the organisation, not to the agency.
• Easy positions first. When the agency is working on several positions, its effort goes where a close is nearer. A difficult position, referred to the agency because it was difficult, can be the one that slips.
• Silent withdrawal. An agency has no reason to announce that it has stopped working on a position, because keeping it open costs the agency nothing. The organisation then believes someone is working on the position when nobody is. What it loses is time, and that loss appears in no report.

The answer is not to change the condition but to set review points and make them known: the number of candidates put forward in the first two weeks, a review in the fourth week, and an explicit ending if nothing has moved. A position left open with an agency that is not working on it adds to the time it takes to fill that position and adds nothing else.

Contingency recruitment with several agencies on one position

The contingency arrangement makes it tempting to engage more than one agency for the same position, because the organisation pays only the agency that succeeds. That holds for the direct cost alone.

With three agencies on one position, each knows its chance is a third or less. Its effort can fall in the same proportion, and its incentive to send candidates quickly, before another agency does, rises. The result for the organisation can be a larger number of candidates, a lower share of them who are suitable, and a screening load that falls on it three times over.

A dispute over attribution comes on top of this. A candidate sent by two agencies in the same week raises the question of which one has earned the fee, and only a dated record and a written rule in the contract can settle it. The wider effect is that the candidate knows their name has passed through several hands. That is a matter of candidate experience, the impression an applicant forms of an organisation across the whole hiring journey, and its effect reaches the organisation’s reputation as an employer.

One middle course is to engage two agencies and no more, for a set period, and to tell each of them so explicitly. Telling them puts the calculation in the open, which serves the organisation better than an agency discovering it and drawing its own conclusions at the next engagement.

What to measure a contingency recruitment agency on

One figure for measuring an agency is the number of people the organisation hired through it, and on its own that figure says little about the agency’s work. Three other figures say more:

• The share of candidates accepted for interview out of those sent. This figure measures the accuracy of the agency’s screening, which is what the organisation is buying. An agency that sends thirty candidates for two to be interviewed is selling volume, not selection.
• The time to the first suitable candidate, counted from the date of engagement, not the time to the first message. The first measures work; the second measures how fast a list can be copied.
• The retention of hires after one year. This figure appears only long after the guarantee period has ended, and it separates an agency that understands the position from one that fills it. The figure is taken together with quality of hire. The underlying measure is the retention rate, the share of the people employed at the start of a period who are still employed at its end.

All three are gathered at agency level across several engagements. A single engagement is not enough to judge by, and an agency that failed on a difficult position may be a better fit than another for a different one.

Three contract clauses to settle in contingency recruitment

• The guarantee period and what follows from it. Agree a period within which, if the candidate leaves, the agency either replaces them or refunds the fee. Replacement and refund lead to different places: replacement keeps the organisation in the same arrangement, and a refund takes it out. The contract should also state what happens to a hire who leaves one day after the period ends, because that is a point on which disputes can arise.
• Ownership of the candidate and its duration. Set out when a candidate counts as attributed to the agency, and for how long that attribution lasts. A candidate who applied directly two months earlier, and whose name then arrives from an agency, creates a dispute that only a dated record in the applicant tracking system can resolve.
• A ban on approaching hires. State that the agency will not offer another opportunity to anyone the organisation hired through it, for a set period. Without that clause, the people the organisation hired can become a source of candidates for the agency a year later.

The guarantee period is a term the two parties agree, and in the sources we reviewed we found nothing that sets its length.

When contingency recruitment suits and when it does not

The arrangement suits a broad search in which the risk to the organisation is low: a position that the market can supply, that is not confidential, and that can be known to be open without harm.

It does not suit three cases: a position the organisation does not want advertised, since an agency makes a position known by the nature of its work; a scarce position that needs a long search, which an agency paid only on a result cannot sustain; and a position that recurs in the organisation, where building an internal channel costs less over time. In that last case, the internal channel is built through talent sourcing and a candidate database.

The choice between paying the fee on the result and paying it on the work depends on the position and on how long the organisation can wait. What follows from each arrangement is set out above.

What contingency recruitment is not

• Outsourcing hands over work to be performed outside the organisation. Contingency recruitment buys a referral for someone who will work inside the organisation and be hired by it.
• Employee referral comes from inside the organisation, with a reward paid to the employee who made it, while a contingency referral comes from outside, with a fee paid to an agency. The incentives in the two differ.
• Source of hire describes how hires are distributed across channels, and a contingency agency is one of those channels. An agency’s performance is judged within that frame, not in isolation.

Before a contingency recruitment engagement is signed

Four questions come first. What made this position leave the internal channels, and does the agency address that cause? What is the guarantee period, and what follows from it, in writing? When is the review, and at what figure does the engagement end if nothing moves? And what would the average cost per hire for the year become if six positions were referred this way?

Whoever answers the fourth question before signing will see that the decision is not about this position alone. Every referral on these terms raises the blended average, and an organisation that refers a position each time a channel runs short can find a year later that its costs have risen without any single decision having been made to raise them.

This is an explanation of the concept and of the Labor Law provision cited, not legal advice.

Related terms

• Cost per Hire
• Candidate Experience
• Retention Rate
• High Volume Hiring
• Boolean Search