Direct hire is a permanent placement where the candidate joins the client company's payroll from the first day and the staffing agency earns a one time placement fee. It is also called permanent placement or perm. The agency does not employ the worker at any point.
Staffing and agenciestopic
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In one line
A permanent placement where the candidate joins the client's payroll from day one and the agency earns a one time fee.
In a direct hire search, the agency finds, screens and presents candidates, and the client interviews and makes the offer. Once the person starts, the employment relationship is entirely between the client and the new hire. The agency invoices its fee, usually based on the hire's first year salary.
Direct hire is often worked on contingency, but it can also be retained, where part of the fee is paid upfront. Most agreements include a guarantee period during which the agency replaces a hire who leaves or refunds part of the fee.
It differs from temporary staffing, where the agency employs the worker and bills hourly, and from contract to hire, where the agency employs the worker first and the client may convert them later.
Why it matters to recruiters
Direct hire brings large single fees and no payroll risk for the agency, which makes it attractive. It is also less predictable than contract revenue, since fees arrive only when deals close. Agencies often blend direct hire with contract work to balance cash flow, and clients use it for core roles they plan to keep long term.
An example from a recruiting desk
A healthcare agency fills a director of nursing role for a rehab center. The candidate accepts an offer and starts on the center's payroll. The agency invoices a one time fee under its terms, with a 90 day guarantee. Two months later the director is doing well, and the client opens two more direct hire searches.
Tips that help
Agree the fee basis in writing, including whether bonuses or sign on payments count.
Confirm the guarantee period and refund or replacement terms before you start.
Stay in touch with both sides through the guarantee period.
Use contract roles to build relationships that later turn into direct hire work.
Mistakes to avoid
Starting a search before fee terms are signed by the client.
Losing contact with the candidate after the offer and missing early warning signs.
Frequently asked questions
What is the difference between direct hire and temp to hire?
With direct hire, the person joins the client's payroll immediately and the agency earns a one time fee. With temp to hire or contract to hire, the agency employs the person first and the client may convert them later.
How are direct hire fees calculated?
Most agencies charge a percentage of the hire's first year base salary, though some use flat fees. The exact basis and payment terms are set in the agreement between the agency and the client.
Does a candidate pay anything in direct hire?
No. In standard direct hire arrangements the employer pays the agency. Be cautious of any service that asks job seekers to pay to be placed.
