Why Contingency Recruiting Fails Startups: The Hourly Model Alternative in January 2026
Dover
January 14, 2026
•
5 mins
Contingency agencies typically charge 20 to 30% of first-year base salary. For a $100,000 engineer, that's $20,000 to $30,000 per placement.
The misalignment runs deeper than price. Contingency recruiters get paid when a candidate accepts an offer. Their financial incentive ends there. Whether that hire succeeds or quits in three months doesn't affect their bottom line. They've collected the fee and moved on.
Contingency recruiting costs for a $120,000 software engineer typically run $18,000 to $36,000. Fractional recruiting for that same role often falls between $4,000 and $20,000.
When you only get paid at the finish line, you run faster. Contingency recruiters face this exact pattern. Their commission arrives when a candidate accepts your offer, creating a race to placement instead of a search for fit.
They cast wide nets across multiple clients at once, submitting candidates who meet basic job requirements but may lack the cultural alignment or long-term potential your startup needs from a fractional recruiter. The goal becomes volume and speed, not precision.
The problem compounds when multiple recruiters compete for the same role. You've created a tournament where the prize goes to whoever submits an acceptable candidate first. They're not looking at who will thrive in your environment two years from now. They're assessing who can get through your interview process this week.
This is why contingency recruiting often fails to deliver hires that last. Your long-term retention isn't part of their success metric. When that engineer or salesperson leaves after six months, the recruiter still keeps the full fee.
Reportedly 46% of new hires fail within 18 months. The real issue: 89% purportedly fail due to attitude problems like coachability and emotional intelligence, not lack of technical ability.
Contingency recruiters get paid to move candidates fast. Their focus lands on resume credentials and technical question responses. The questions that predict long-term success get less attention: team communication fit, startup risk tolerance, ability to handle shifting priorities.
Assessing these soft factors takes time. Contingency recruiters racing against competitors for commission don't have that time built into their incentive structure.
How Hourly Models Realign Recruiter Incentives With Startup Success
Hourly billing changes the game. When fractional recruiters charge for time instead of placement, they stop optimizing for quick closes and start focusing on fit. Their next invoice depends on delivering value, not pushing candidates through your pipeline.
Rates run $70 to $250 per hour with no placement fees or multi-month commitments. If a recruiter doesn't grasp your needs after a few weeks, you walk away. This creates real accountability at every stage.
The relationship becomes collaborative. Your fractional recruiter has skin in the game for long-term success because their reputation and future work depend on it. There's no incentive to rush a mediocre candidate to offer.
You scale recruiting effort with actual hiring needs. Ramping three engineers this quarter? Add hours. Paused hiring after your last round? Scale back without penalty. The model bends to startup reality instead of locking you into fixed contracts.
Transparency and Control: What You Gain with Hourly Billing
Hourly billing provides visibility into recruiting activity. You see who your recruiter contacts, which channels they use, and how candidates respond. If initial outreach isn't working, you can adjust the approach mid-search.
Contingency recruiting lacks this visibility. Activity stays hidden until candidates appear in your inbox. You won't know which sourcing channels failed or why candidates declined until weeks have passed.
Fractional recruiters let you control the candidate experience. You review outreach messages, approve sourcing lists, and make sure every interaction reflects your culture. This protects your employer brand when reaching passive candidates who may remember how they were treated.
You also avoid duplicate outreach. When multiple contingency recruiters compete for the same role, candidates get conflicting messages from different people claiming to represent your company. Hourly recruiters work as dedicated extensions of your team, creating consistency.
When Hourly Models Make the Most Sense for Your Hiring Needs
Hiring volume determines your best recruiting approach. The right model depends on how many people you need to bring on annually and whether you have existing recruitment infrastructure.
If you're hiring 1 to 2 people per year, you don't need dedicated recruiting support. Traditional agencies or fractional recruiters both work here since volume stays low enough that even agency fees won't break your budget.
The sweet spot for hourly fractional recruiting hits between 3 to 6 annual hires. At this volume, you need consistent recruiting muscle but can't support a full-time salary. Fractional recruiters give you expertise when searches are active without burning cash during quiet months. You pay for roughly 40 hours to fill an engineering role, then pause until your next hire.
Above 6 hires annually, the math turns toward building internal capacity. A full-time recruiter costs $80,000 to $120,000+ but provides unlimited bandwidth. Fractional recruiting still works if your hiring comes in concentrated bursts instead of steady flow, but consistent high-volume recruiting eventually demands dedicated headcount.
Making the Switch: What to Expect When Moving from Contingency to Hourly
How Dover Supports Incentive-Aligned Recruiting for Startups
Frequently Asked Questions
Final Thoughts on Recruiting Models That Actually Align with Startup Success
Table of contents
