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What Is a Placement Fee?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 September 2014
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Placement fees are charges that are assessed for services rendered in a number of business applications. This concept is found in situations where brokers handle investments for clients, as well as when a new hire is placed with the aid of an employment agency. Fees of this type may be paid by a client, or in cases of employment placement, by the new hire.

With investing activity, the placement fee is usually defined as the charges incurred by the investor during the process of the purchase or sale of shares of stock, bonds, commodities, and other forms of investment. The fee is normally assessed by the broker who handles the financial transactions, and may be calculated as a percentage of the total worth of the transaction. In other cases, the placement fee is a set fee that the brokerage charges for each transaction conducted on behalf of a client.

Different nations have laws that govern how and when a broker can apply a placement fee to an investor account. In some cases, the fee is charged immediately and is due at that time. At other times, the fee may be assessed and be payable within the next thirty days. Investors sometimes arrange for the brokers to automatically deduct the placement fee from an existing account, usually on the business day that the investment transaction is completed.

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When used in a process focused on employment, the fee for placement usually has to do with a payment rendered to an employment agency. The exact provisions of the placement agency fee vary, depending on regulations that define the scope of charges of this type. In some nations, an employment agency can charge what is known as a contingency placement fee. This is a charge that essentially guarantees the agency a portion of the payment up front, with the remainder due after the employee remains in the secured position for a specific period of time, usually three months.

There are other situations in which the idea of a placement fee is common. The term is sometimes employed in real estate deals, as well as in situations where corporate headhunters locate executives to fill open positions within a company. In general, whenever a contracted agency or individual seeks to secure goods or services for a client, some sort of placement fee is included in the overall charges related to the transaction.

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Sunny27
Post 2

Oasis11- Sometimes a company will want to hire a contractor for an indefinite amount of time, but not offer a permanent position to the person.

Usually these jobs are billed by the hour and there are not a placement fee, nor are there a fee paid by the employee. Sometimes the placement firm might even allow the company to have the contractor work on a trial basis and not charge for the first few days.

This is usually done for long- term contracts where the client is unsure, or they’re may be many options for the client. In order to entice the client to take on this contractor, a staffing firm will use this tactic to get their person in.

oasis11
Post 1

When a company seeks a placement search from placement companies they are looking to find the right employee for their firm.

Placement firms often charge a percentage of the potential employee’s salary as a placement fee. Usually these fees range from 10% to 30% of the annual salary of the employee.

Most companies sign a contract that should the employee terminate his or her employment or should the employee be terminated for any reason, the company is refunded the fee.

Usually this probationary period ranges from four to six months. The employee also signs paperwork with the search firm that should their employment end before the probationary period on the contract, they would repay the client’s fee to the search firm.

This holds the employee accountable for their job performance and ensures that the firm will not fail in its placement.

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