Startup Recruiter Commission Structure: Contingency vs. Retained vs. Full Time vs. Fractional
Dover
June 20, 2025
•
5 mins
Startup recruiters specialize in the unique challenges of early-stage companies. They understand equity compensation, fast-paced environments, and the need to find the right talent to fit the startup culture.
But here's the thing: how you pay your recruiter affects your hiring budget and outcomes.
The wrong commission structure can eat up 30% of your Series A funding on recruiting fees alone. We've seen startups burn through $200K in contingency fees for five hires when a fractional approach would have cost $50K.
Understanding these models is about hiring top talent efficiently within your budget.
Contingency Recruiting: Pay-for-Success Model
Contingency recruiting follows a simple "no hire, no fee" structure. You only pay when the recruiter successfully places a candidate who accepts your offer.
How it works:
Recruiter works on your role alongside other clients
Fee ranges from 15-25% of first-year salary
Payment due when candidate starts
No upfront costs. For a $120K engineering role, you're looking at $18K-30K in fees
The appeal here is obvious, zero risk if they don't deliver. However, since recruiters juggle multiple clients, your role might not get priority attention or will be managed by different team members. The quality can vary because speed often trumps fit in this situation.
Vetting external recruiters becomes important in contingency setups. You need recruiters who understand startup culture and won't just throw resumes at you.
Contingency recruiters typically fill 25% of assigned roles. The success rate varies a lot based on role difficulty and market conditions.
Retained Search: Premium Executive Recruitment
Retained search represents the high end of recruiting services. Clients pay 30-50% of the projected first-year salary, typically split into installments regardless of outcome.
The retained model breakdown:
30-50% upfront retainer
Additional payments at 30 and 60 days
Dedicated focus on your search
96% fill rate according to industry studies
Complete candidate assessment and market mapping.
Retained search makes sense for C-level hires where the cost of a bad hire exceeds the search fee. For a $200K CEO role, a $60K-100K retained search fee might be worth it. Most startup roles don't need retained search. You're paying premium prices for a level of service that's overkill for individual contributor roles.
Full-Time In-House Recruiters: Building Internal Capacity
Full-time recruiters provide focused in-house resources. While recruiter salaries vary, the total investment includes base compensation plus benefits and payroll taxes, making this a serious commitment for growing companies.
When full-time makes sense:
Hiring 20+ people annually
Multiple searches running at the same time
Need for company culture knowledge
Long-term recruiting strategy development. The math is straightforward: If you're paying $25K per contingency hire and making 5+ hires annually, a full-time recruiter starts looking budget friendly
Recruiting process bottlenecks aren't solved by adding headcount. You need solid systems first. That's where tools like Dover's free ATS become important. Even with internal recruiters, you still need systems to track and organize candidates. The biggest mistake? Scaling up recruiting without setting up processes first. A full-time recruiter without proper tools is just an expensive coordinator.
Fractional Recruiters: The Sweet Spot for Startups
Fractional recruiting offers the knowledge of senior recruiters on an hourly or project basis. Rates usually range from $150-$250 per hour, with most projects requiring 20-40 hours per successful hire.
Why fractional works for startups:
Pay only for time invested
Access to senior-level expertise
Flexibility to scale up or down
No long-term employment commitments
Typically costs 50% less than contingency for multiple hires.
A fractional recruiter might spend 30 hours on a $120K engineering role, costing $4,500-7,500 vs. $18K-30K for contingency. The savings add up quick.
What makes recruiting a perfect fit for fractional work is that it's project-based with clear goals. You're buying expertise and execution, not ongoing management. The key is finding experienced fractional recruiters who understand startup dynamics.
Let's get specific about what these models actually cost for common startup scenarios.
Role | Salary | Contingency (20%) | Full-Time (Annual) | Fractional (30 hrs) |
|---|---|---|---|---|
Software Engineer | $120K | $24K | $105K+ | $3K-4.5K |
Product Manager | $130K | $26K | $105K+ | $3K-4.5K |
Sales Rep | $100K | $20K | $105K+ | $2.5K-4K |
Marketing Manager | $110K | $22K | $105K+ | $3K-4K |
Contingency Costs for Common Startup Roles
The math gets scary fast. Five hires at 20% contingency fees:
2 Engineers: $48K
1 Product Manager: $26K
1 Sales Rep: $20K
1 Marketing Manager: $22K
Total: $116K in recruiting fees That's nearly the cost of a full-time recruiter, but you get no ongoing capacity.
The Hidden Costs of Full-Time Recruiters
The $87K base salary is just the beginning. Factor in:
Payroll taxes: 7.65%
Benefits: $15K-25K annually
Equipment and software: $3K-5K
Management costs: 10-15% of salary. Your "affordable" $87K recruiter actually costs $110K-125K annually. That's before considering the opportunity cost of management time and onboarding.
For context, that's equivalent to 4-5 successful fractional recruiting projects.
When to Choose Each Recruiting Model by Company Stage
Pre-Seed to Seed Stage: Bootstrap Smart
Early-stage startups should focus on fractional recruiting. You're typically hiring 1-3 people, making contingency fees overly expensive.
Pre-seed priorities:
Find PMF and not run out of money.
Focus on critical first hires.
Build recruiting foundation with free tools.
Use fractional expertise for key roles. Top hiring practices for early-stage startups help you focus on getting the foundation right. That means solid job descriptions, clear interview processes, and basic ATS functionality.
Paying $25K for your second engineer hire when you've raised $500K makes no sense. A fractional recruiter can deliver the same outcome for $4K-7K.
Series A to B: Scale with Flexibility
Series A companies often deal with fast hiring needs. You might go from 5 to 25 employees in 12 months. Fractional recruiting scales perfectly with this growth.
Series A considerations:
Hiring speed becomes important
Multiple ongoing searches
Need for specific role expertise
Budget for quality, but watch burn rate. Dover's marketplace model shines here. You can engage multiple fractional recruiters, each focused on their specific areas.
The flexibility to scale recruiting capability up and down with hiring needs makes fractional the obvious choice for most Series A companies.
It is incredibly easy to get started on Dover, it took me 15 minutes to get onboarded, and at the end of it, I was already calibrating whether or not a set of candidates were a good fit based on what I wanted in a hire.”
Eric Martin, Vanta
Series B+: Hybrid Approaches
Later-stage startups might benefit from hybrid options. A full-time recruiter for ongoing needs, retained search for executive roles, and fractional support for specialty positions.
At this stage, you have the budget and hiring volume to support multiple approaches. The key is matching the recruiting model to the role requirements.
The Dover Advantage: Fractional Recruiting Made Better
We've built Dover's marketplace to tackle the limitations of traditional recruiting models. Here's how we make fractional recruiting work better:
Vetted network: Every recruiter in our marketplace has been screened for startup experience and track record.
Transparent pricing: Hourly billing means you know exactly what you're paying for. No surprise fees.
Integrated tools: Our free ATS works smoothly with fractional recruiters, giving consistency across projects.
Accountability from day one: Dover’s recruiting model makes sure recruiters are incentivized for good outcomes, not just activity.
The Dover Way puts startup success over recruiting industry standards. We've designed our model around what actually works for growing companies.
Making the Right Choice for Your Startup
Here's your decision framework:
Choose fractional recruiting if:
You're hiring fewer than 15 people annually
Budget preservation is required
You need expertise for specific roles
Flexibility matters more than capacity
Consider full-time recruiting if:
You're consistently hiring 20+ people annually
You have multiple ongoing searches happening
Internal culture knowledge is important
You have management resources for the recruiting team
Use retained search for:
C-level executive roles
Necessary hires where failure isn't an option
Roles requiring in-depth market mapping
For most startups reading this, fractional recruiting offers the best balance of cost, quality, and flexibility. The key is finding the right fractional recruiters and supporting them with a solid foundation. Our marketplace of recruiters is designed for companies just like yours, offering the knowledge you need with the flexibility you want.
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