What you are actually buying
| Model | How it is paid | Suits |
|---|---|---|
| Contingency | A percentage of annual salary, payable only on joining | Roles with a reasonable supply of candidates, where several agencies can compete |
| Retained | Staged fee, part paid at engagement, independent of outcome | Senior or scarce roles where the search itself is the work |
| Fixed fee per hire | A flat amount per joiner | Volume hiring at similar salary levels |
| Recruitment process outsourcing | A monthly or per-role charge for running part of the process | Sustained hiring volume with no internal recruiting capacity |
| Contract staffing | A monthly mark-up on the worker's cost | Roles you do not want on your own rolls, with the obligations that follow |
The last row is the one that gets confused with the others. In contract staffing the agency employs the worker, and the arrangement engages contractor licensing, the principal employer's responsibilities and the wage and social security obligations that go with them. Calling it recruitment does not change what it is. Verify the position under the Occupational Safety, Health and Working Conditions Code, 2020 and the Code on Social Security, 2020 before treating a deployed worker as somebody else's problem.
Where the disputes come from
Almost every argument with an agency is about who introduced the candidate, and it happens because introduction was never defined.
- Two agencies submit the same person within a week, each claiming the fee.
- An agency submits a candidate who is already in your database from a direct application six months ago.
- A candidate rejected for one role is hired into another eight months later, and the agency claims the fee.
- An agency sends a hundred unsolicited CVs to establish ownership of a market rather than to fill a role.
Four contract terms remove most of this. A submission validity window, typically stated in months, after which ownership lapses. Acknowledgement of submission by a named person, so ownership starts when you accept it rather than when they send it. A rule that a candidate already in your system from a direct application belongs to you, which requires you to be able to prove the date. And a bar on unsolicited submissions counting at all.
The database point is where employers lose. If you cannot show when a candidate first entered your records, you will pay the fee.
The terms worth negotiating
- Replacement, not refund. A free replacement if the hire leaves within a stated period is worth more than a lower percentage, because your loss is the vacancy rather than the fee. Check whether it survives a resignation, a termination, and the candidate never joining at all.
- The definition of salary the fee is calculated on. Fixed pay, or cost to company including variable pay, retention bonuses and employer contributions, is a material difference in the invoice.
- Payment trigger. On joining is standard; on offer acceptance is not, since a large share of Indian offers never convert to joiners.
- Off-limits. An agency that places a candidate with you and approaches them again a year later is selling your employee. A non-solicitation of placed candidates for a stated period is normal and worth insisting on.
- Data. What the agency may do with candidate data it collects for you, how long it keeps it, and what happens at termination of the agreement.
- Exclusivity and timelines for retained work, with a stated deliverable such as a market map and a shortlist by a date, rather than an open engagement.
The limits an agency works under
Some of these are the agency's obligations, and some become yours because the agency is acting for you.
- No fee may be charged to the candidate. Registration charges, training kits, deposits and processing fees demanded from job seekers are not a lawful part of a placement business, and an agency doing it in your name is a reputational and legal problem you inherit.
- Several states regulate private placement agencies through registration requirements, and recruitment for employment outside India requires registration as a recruiting agent under the emigration regime. Check the position before engaging an agency for overseas placement.
- Candidate data the agency handles on your behalf is processed for you, and the obligations to those candidates, including notice and retention, remain yours.
- Selection criteria you give an agency are your criteria. An instruction to shortlist only male candidates, only candidates below a certain age, or only candidates of a particular community is discriminatory whether it is applied by your recruiter or by theirs.
- Where the agency also runs background verification, check what it actually verifies and how, since the report is what you will rely on and, if challenged, defend.
What the Occupational Safety, Health and Working Conditions Code, 2020 replaced
13 enactments stand repealed under s. 143, in force 21 November 2025.
- Factories Act, 1948
- Plantations Labour Act, 1951
- Mines Act, 1952
- Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955
- Working Journalists (Fixation of Rates of Wages) Act, 1958
- Motor Transport Workers Act, 1961
- Beedi and Cigar Workers (Conditions of Employment) Act, 1966
- Contract Labour (Regulation and Abolition) Act, 1970
- Sales Promotion Employees (Conditions of Service) Act, 1976
- Inter-State Migrant Workmen Act, 1979
- Cine-Workers and Cinema Theatre Workers Act, 1981
- Dock Workers (Safety, Health and Welfare) Act, 1986
- Building and Other Construction Workers Act, 1996
Across all four labour Codes, 29 enactments stand repealed. A policy or handbook that still cites one of them by name is describing rules that no longer exist.
Statutory reference
- Act
- Occupational Safety, Health and Working Conditions Code, 2020
- Section
- Code on Social Security, 2020: liability for contributions in respect of workers engaged through a contractor. Code on Wages, 2019: prohibition of discrimination in recruitment, which applies to criteria given to an agency. Emigration Act, 1983: registration as a recruiting agent for recruitment for employment outside India. Digital Personal Data Protection Act, 2023: candidate data processed by an agency on the employer's behalf. State enactments regulating private placement agencies, which vary by state. Codes in force 21 November 2025
- Key limits
- Contract staffing is not recruitment: it engages contractor licensing, principal employer responsibility and contribution liability, none of which are removed by the label on the invoice. No fee may be charged to a candidate. Recruitment for overseas employment requires registration under the emigration regime, and several states separately register placement agencies. Verify the contractor licensing thresholds, the principal employer obligations, the state registration position and the overseas recruitment requirements before engaging an agency. Under notification G.S.R. 843(E) dated 13 November 2025, sections 3 to 17 - the grounds for processing, notice, consent, the general obligations of a data fiduciary and all of the data principal rights - take effect eighteen months from that date, on 13 May 2027. Only the definitions and the Data Protection Board and penalty machinery are in force now. Separately, processing for employment purposes runs on the section 7(i) legitimate use and not on consent, and the erasure duty in section 8(7) yields where retention is necessary for compliance with any law, which is the position for statutory payroll and register retention. The 1970 Act has never been fetched or read, and its blocked record states that its repeal is known from s. 143 of the OSH Code alone, which is not sufficient to restate what it said. Sections 3 to 17, which carry the duties described here, commence on 13 May 2027 under G.S.R. 843(E) of 13 November 2025. In force now are the definitions, the Data Protection Board and the penalty provisions. REPEALED-ACT REFERENCE DECLARED 2026-08-21: the Contract Labour (Regulation and Abolition) Act, 1970 is named in this statutory block only, to record that the OSH Code threshold is higher than the one that Act applied.
Frequently asked questions
What is the difference between a recruitment agency and a staffing company?
A recruitment agency finds candidates for your own rolls and its involvement ends when they join you. A staffing company employs the worker itself and deploys them to you, which engages contractor licensing, principal employer responsibilities and contribution liability.
What is a normal agency fee in India?
Contingency fees are usually quoted as a percentage of annual salary, with retained search staged and paid partly upfront. The percentage matters less than what it is calculated on and what the replacement guarantee covers, which are the two terms that change what you actually pay.
Two agencies submitted the same candidate. Who gets the fee?
Whoever your contract says, which is why the contract needs a submission validity window and an acknowledgement step. If neither exists and you cannot show when the candidate first entered your database, you will end up paying.
Can an agency charge the candidate?
No. Registration charges, training kits, deposits or processing fees demanded from job seekers are not a lawful part of a placement business, and an agency doing it while acting in your name creates a problem you inherit.
Who is responsible for candidate data the agency holds?
You remain responsible to the candidates for data processed on your behalf. The agreement should say what the agency may do with the data, how long it keeps it, and what happens to it when the engagement ends.
How Engage settles the ownership question
Engage records when a candidate first entered your pipeline and through which source, so a duplicate submission from an agency is visible at submission rather than at invoice. Agency submissions, acknowledgements and joining dates sit on the same record as direct applications, which is what makes a submission validity window enforceable at all.
See recruitment in Engage