What to Review in an Executive Search Service Agreement Before Signing

An executive search service agreement should be reviewed for five elements: fee percentage and calculation base, payment trigger, replacement guarantee scope, exclusivity terms, and candidate ownership after the search. Reqruit Asia’s standard agreement is a 20% success fee payable on day 1, with a 90-day replacement guarantee and no exclusivity clause.

Why the Agreement Review Matters Beyond the Percentage

Most hiring managers focus on the fee percentage when reviewing an executive search proposal. The terms that create the greatest risk to the client, including exclusivity obligations, guarantee exclusions, and candidate ownership scope, are rarely highlighted in the summary proposal and frequently appear only in the standard agreement or terms of engagement document.

A 20% fee with favorable terms on all five clauses produces a better outcome than a 15% fee with onerous exclusivity, a narrow guarantee, and a broad candidate ownership provision. Understanding what each clause means and what the industry standard looks like allows a fair comparison between proposals from different firms.

The Five Clauses to Review Before Signing

Clause 1: Fee percentage and calculation base

The fee percentage (15 to 25% for success-based models, 30 to 33% for retained models) is the most visible number. Equally important is what it applies to. Confirm in writing before signing which components of the candidate’s compensation are included in the fee base.

Standard inclusion in Indonesia: base salary, fixed monthly allowances, and THR (Tunjangan Hari Raya, the statutory religious holiday bonus, equal to one month’s base salary). Standard exclusion: variable performance bonuses, BPJS contributions, and discretionary benefits. A fee quoted as “20% of total package” that includes an expected annual bonus will be materially higher than 20% of base salary alone.

Reqruit Asia’s fee base: 20% of first-year gross package, defined as base salary plus fixed allowances plus THR. Variable bonus and BPJS are excluded. The exact package components are confirmed in writing before the mandate begins.

Clause 2: Payment trigger and timing

When exactly is the fee payable? Three structures exist in the market. Success-based, client-favorable: the fee is payable in30 days after invoice issued. The client bears no financial risk if the placement does not occur. This is Reqruit Asia’s standard structure.

Success-based, offer-stage: the fee is payable on offer acceptance rather than employment start. If the candidate withdraws between acceptance and start, the fee may already be due depending on the agreement. Retained: a portion of the fee (typically 30 to 33%) is payable before the search begins, non-refundable. The remaining portions are payable at shortlist delivery and at placement. Review this structure carefully before signing: the upfront portion represents money spent whether or not a placement is made.

Clause 3: Replacement guarantee scope, duration, and exclusions

A replacement guarantee commits the firm to restart the search at no additional fee if the placed candidate exits within the guarantee period. Review three elements: duration (how many days?), scope (what triggers the replacement search?), and exclusions (what voids the guarantee?).

Standard duration: 60 to 90 days. Reqruit Asia: 90 days. Standard scope: candidate exits for any fit or performance-related reason. Standard exclusions: client-initiated role change after placement, organizational restructuring that eliminates the role, and changes to the candidate’s compensation or scope not disclosed at offer stage. Review the exclusion list carefully. A guarantee with 7 or more exclusion conditions is effectively narrow.

Clause 4: Exclusivity and its impact on your flexibility

An exclusivity clause prevents the client from engaging other executive search firms or sourcing internally for the same role during the search period. This is standard in retained search agreements and uncommon in success-based agreements.

The risk of exclusivity: if the search stalls or the firm cannot produce a qualified shortlist, the client cannot escalate to another firm without breaching the agreement. Before accepting any exclusivity obligation, confirm the duration, the conditions under which the exclusivity can be terminated, and whether a penalty applies for early exit. Reqruit Asia does not require exclusivity from its clients. Clients may engage multiple firms or continue internal sourcing while Reqruit Asia conducts the search.

Clause 5: Candidate ownership and poaching restriction

A candidate ownership clause states that if the client directly hires any candidate who was presented by the search firm within a specified period, the placement fee is payable. The period is typically 12 to 24 months. This clause protects the firm’s investment in identifying and presenting candidates.

Review whether the clause applies to all candidates presented or only the one placed. A broad clause covering all presented candidates means that rejecting a candidate during the search does not prevent a fee if the client later hires them directly within 24 months. Reqruit Asia’s clause applies to the placed candidate only: candidates who were presented but not selected are not subject to the ownership restriction.

Red Flags in Executive Search Agreements

Five provisions in an executive search agreement merit particular scrutiny before signing.

1.  Non-refundable retainer with a vague definition of “success.” Ensure the success event that triggers the final payment is clearly defined as candidate employment start, not offer acceptance or shortlist delivery.

2.  Replacement guarantee with more than three exclusion conditions. Every additional exclusion narrows the scope of the guarantee. A guarantee with seven or more exclusions may provide no practical protection.

3.  Open-ended exclusivity without a time limit or termination clause. Exclusivity without an exit mechanism locks the client into the relationship regardless of performance.

4.  Candidate ownership that extends to all candidates shown, not only the placed candidate. Confirm the exact scope before accepting.

5.  Vague definition of the fee calculation base. “Total compensation” without a written component list may include variable bonus, BPJS, or other elements that materially increase the fee.

Reqruit Asia’s Standard Agreement: What to Expect

Reqruit Asia operates on a standardized success-based agreement: 20% of first-year gross package (base salary, fixed allowances, THR), payable on day 1 of the candidate’s employment. No payment is due if no placement is made. The agreement includes a 90-day, one-time free replacement guarantee with two standard exclusions: client-initiated role scope change after placement, and organizational restructuring that eliminates the role. No exclusivity is required. Candidate ownership applies to the placed candidate only.

The complete agreement terms are shared in writing before the mandate begins. Contact +62 21 5095 8011 or [email protected] to request a copy of the standard engagement terms.

Illustrative Case Study: Agreement Review, Director of Business Development, East Jakarta

The following scenario is a hypothetical illustration based on actual Reqruit Asia recruitment parameters. All figures and processes reflect real terms and conditions. The candidate profile is fictional and does not represent any real individual.

A female HR Director, 39, at a construction company in East Jakarta, was reviewing two executive search proposals for a Director of Business Development role. A retained search firm proposed Rp 132 million upfront (non-refundable), 90-day exclusivity, and a replacement guarantee with seven exclusion conditions including any organizational change affecting the role.

Reqruit Asia’s proposal: 20% success fee on an estimated annual package of Rp 400 million (Rp 80 million fee), payable on day 1 of employment only. No upfront payment. No exclusivity. Replacement guarantee: 90 days, with two standard exclusions. Candidate ownership: placed candidate only.

The HR Director selected Reqruit Asia. The Director of Business Development was placed in 6 weeks. The fee of Rp 80 million was paid on the candidate’s first day. Net saving versus the retained proposal: Rp 132 million in upfront fees avoided, with the same outcome and a stronger guarantee structure.

Conclusion

An executive search agreement should be reviewed for five elements: the fee base calculation, the payment trigger, the replacement guarantee scope and exclusions, exclusivity obligations, and the scope of candidate ownership. The percentage alone does not determine the total value of the agreement.

Reqruit Asia’s standard agreement: 20% success fee, day 1 payment, 90-day replacement guarantee with two standard exclusions, no exclusivity, candidate ownership for the placed candidate only.

Contact our team: +62 21 5095 8011 | WhatsApp +62 857-7940-7583 | [email protected].

FAQ: Executive Search Agreement Review

Q: What should I look for in an executive search agreement before signing?

A: Review five elements: fee percentage and which package components it applies to, payment trigger (start date, offer date, or upfront retainer), replacement guarantee scope and number of exclusion conditions, exclusivity terms and exit provisions, and candidate ownership duration and scope. Reqruit Asia’s standard agreement: 20% fee on day 1, 90-day guarantee, no exclusivity.

Q: What is the difference between a success-based and a retained executive search fee?

A: A success-based fee is payable only when a candidate is placed, typically 15 to 25% of annual package payable on start date. No payment is due if no placement is made. A retained fee requires an upfront payment, typically 30 to 33% of estimated annual salary, before the search begins. The upfront portion is non-refundable if no placement results. Reqruit Asia uses a success-based model.

Q: What does a 90-day replacement guarantee cover in an executive search agreement?

A: A 90-day replacement guarantee commits the firm to restart the search at no additional fee if the placed candidate exits within 90 days. Standard exclusions include client-initiated role changes after placement and organizational restructuring that eliminates the position. Review the number of exclusion conditions: more than three exclusions narrow the guarantee materially. Reqruit Asia’s guarantee has two standard exclusions.

Q: Is exclusivity in an executive search agreement a standard requirement?

A: Exclusivity is standard in retained search agreements and uncommon in success-based agreements. It prevents the client from engaging other firms or sourcing internally for the same role during the search period. If the search stalls, the client cannot escalate without breaching the agreement. Reqruit Asia does not require exclusivity: clients may engage multiple firms or continue internal sourcing simultaneously.

Q: What is a candidate ownership clause in an executive search agreement?

A: A candidate ownership clause makes the placement fee payable if the client directly hires any candidate presented by the firm within a specified period, typically 12 to 24 months, even if that candidate was not selected during the search. Confirm whether the clause covers all presented candidates or only the placed candidate. Reqruit Asia’s clause applies to the placed candidate only.