Fixed-Fee Recruitment vs. Agency Commissions: The Real Cost Comparison

The Hidden Cost of Commission-Based Recruitment

When a recruitment agency quotes you "8.33% of CTC per hire," it sounds reasonable. But let's do the actual math for a growing IT company.

The Commission Model: Breaking Down the Numbers

Scenario: A 300-person IT company hiring 30 engineers per year at an average CTC of ₹18 LPA.

• Agency commission: 8.33% × ₹18 LPA × 30 hires = ₹44.9 lakhs per year


• Additional costs: Job board subscriptions (₹3-5L), internal HR time (₹8-12L)


• Total annual recruitment cost: ₹55-62 lakhs


• Cost per hire: ₹1.8-2.1 lakhs

And this assumes everything goes smoothly. What about:

• Candidates who don't join after offer (agency still charges in many cases)


• Early attrition within 3-6 months (replacement fees)


• Niche roles that take 3-4 months to fill (lost productivity)

The Fixed-Fee RPO Model

Under an RPO model, you pay a fixed monthly retainer regardless of how many people you hire. For the same company:

• RPO monthly retainer: ₹1.2-1.8 lakhs/month


• Annual RPO cost: ₹14.4-21.6 lakhs


• Cost per hire (30 hires): ₹48,000-72,000


• Savings vs. commission model: ₹33-40 lakhs per year

Beyond Cost: The Quality Difference

The financial savings are significant, but the quality improvements are equally important:

• Dedicated sourcing: Your RPO team focuses exclusively on your roles, not 50 other clients


• Cultural alignment: After 2-3 months, your RPO team knows your culture better than any agency


• Proactive pipeline: Top candidates are identified before you even have an open role


• Reduced attrition: Better cultural fit = lower 6-month attrition rates

When Does RPO Make Sense?

RPO is ideal for companies that:

• Hire 10+ people per year


• Have consistent, ongoing hiring needs (not just one-time spikes)


• Want predictable hiring costs for budget planning


• Are growing fast and need a scalable recruitment engine

Conclusion

The math is clear: for any IT company hiring more than 10 people per year, the fixed-fee RPO model delivers significant cost savings, better quality hires, and more predictable budgeting.

The question isn't whether RPO makes financial sense — it does. The question is whether you're ready to make the switch from a reactive, transactional model to a strategic, partnership-based approach to talent acquisition.

Placemeright offers transparent, fixed-fee RPO packages designed specifically for IT companies across India. Get in touch for a free cost comparison analysis for your company.