What is a Conversion Fee?

If you’ve been thinking about placing a contract worker, then you might have seen the words “conversion fee” when looking for information about the process on the internet. You might have even ended up here after typing “what is a conversion fee” on Google. 

Today we are going to talk about that very topic. Conversion fees are a simple but vital part of the contractor-client-recruiter process that every good recruiter will use. They ensure that all parties are getting what they deserve, no matter what happens to the contractor during their assignment. We’ll start with the conversion fee, then the conversation fee agreement, and finally, how they work and why they are always unique. 

What is a Conversion Fee?

A conversion fee is the placement fee earned by a recruiter when a candidate is hired as an employee of the client company. The conversion fee is in addition to the hourly fee collected during the term of the contract. Think about this as a commission on a sale similar to insurance for cars.

While your candidate is working as a contractor, you make a commission off of their hourly rate. However, should the client decide to hire them outright, the conversion fee will kick in. This is the fee that you will make when the employee goes from hourly contractor to employee. 

What is a Conversion Fee Agreement?

The conversion fee agreement is the space in the contract for the contractor where both parties agree to either be paid or pay a certain amount if the contractor goes from contract hire to permanent employee. This is a standard part of any contract and the best situation to make sure that all parties are getting what they deserve in any case, even if you don’t plan on hiring a contractor to a permanent position.

How does it Work?

When you place a contractor, you will sign a contract with the client you found and placed them with. It will talk about what the hire will be doing, where they will be working, how much they will be making an hour, and what the recruiter will get in return. 

At the end of the contract, you will see a conversion fee agreement. This is the space where it will describe what will happen if the hire goes from temp-worker to permanent salaried worker, hired directly by the company. 

No two conversion fee agreements are guaranteed to be the same. Just as no two contracts are going to be the same. Each arrangement is unique because each placement is different. This ensures that each person is getting just what they need for the position they need to be filled. 

Posted in EOR