The Standard Retained Search Fee Structure
Retained search fees are almost universally calculated as a percentage of the placed executive's first-year total compensation — base salary plus target bonus (and sometimes the value of sign-on or other guaranteed compensation). Equity is typically excluded from the fee calculation at most firms, though some legacy firms include an equity component.
The fee is paid in three instalments tied to search milestones, not to a calendar:
| Instalment | Trigger | Purpose |
|---|---|---|
| First third | At engagement signing | Funds the brief development, market mapping, and outreach infrastructure |
| Second third | At shortlist delivery (typically 3–5 candidates) | Compensates for screening, qualification, and assessment work |
| Final third | At offer acceptance / start date | Completes the fee upon successful placement |
Retained Search Fee Benchmarks by Firm Type
| Firm Type | Fee Range | Minimum Fee | Typical Use Case |
|---|---|---|---|
| Global legacy (Korn Ferry, Spencer Stuart, Egon Zehnder, Heidrick) | 25–33% | $100K–$150K | Fortune 500, public company C-suite, board-level searches |
| Regional or specialist boutique | 20–25% | $40K–$75K | Growth-stage companies, VP-level, sector-specific searches |
| Startup-focused retained firms | 18–25% | $30K–$60K | Series A–C companies, first VP hires, founder-led searches |
| Majhi Group | 20–25% | No published minimum | Growth-stage VP and C-suite, complex mandates |
What's Typically Included in a Retained Search Fee
A properly structured retained fee covers the full search process, not just candidate sourcing:
- Brief development and success profile creation
- Market mapping and target identification
- Passive candidate outreach and engagement
- Screening calls and qualification assessment
- Shortlist presentation with evidence dossiers
- Interview process support and debrief facilitation
- Reference checking (structured, not surface-level)
- Offer facilitation and negotiation support
- 90-day replacement guarantee (at quality firms)
What's Not Included (Hidden Costs to Watch For)
Some search firms charge additional fees on top of the placement percentage. Before engaging, clarify whether these are included:
- Travel and expenses: Some firms bill travel to candidate or client cities separately. At legacy firms, this can add $5K–$20K per search.
- Background check fees: Professional background verification can run $500–$1,500 per candidate and is sometimes billed separately.
- Assessment tools: Psychometric or leadership assessments used as part of the evaluation may be billed as an add-on.
- Research fees: Some firms charge a flat research fee upfront in addition to the percentage. This is a red flag — it suggests the firm isn't confident in its ability to complete the search.
How to Evaluate Retained Search Fees
The right question is not "what's the cheapest fee?" it's "what's the cost of a wrong hire?"
A VP Sales hire at $250K OTE costs $50K–$62.5K in retained search fees at 20–25%. A mis-hire in that seat — discovered at month 14 when the role is vacated — costs 12 months of underperformance, 4–6 months of replacement search, and typically $400K–$800K in lost pipeline, severance, and process costs.
Fee Calculation Examples
| Role | Total Comp (Year 1) | Fee at 20% | Fee at 25% |
|---|---|---|---|
| VP Sales | $280K OTE | $56,000 | $70,000 |
| CFO | $320K total comp | $64,000 | $80,000 |
| CTO | $350K total comp | $70,000 | $87,500 |
| CMO | $300K total comp | $60,000 | $75,000 |
| COO | $380K total comp | $76,000 | $95,000 |
Red Flags in Retained Search Pricing
- Fees below 18%: Below-market fees usually mean below-market process — senior researchers replaced with junior staff, passive outreach replaced with database sourcing, and replacement guarantees with short windows or narrow terms.
- No replacement guarantee: Any retained firm that won't commit to a replacement guarantee is not confident in the quality of its work.
- 100% upfront payment structure: Legitimate retained firms tie payment to milestones — not 100% at signing. Full upfront payment removes the financial incentive to complete the search.
- No written brief or success profile deliverable: If the firm won't produce a written brief document, they're not running a structured process.
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