In a retained search, the client hires one firm to fill one role and pays for the work as it happens, not only for the result. A typical structure is an instalment on signing, a second at an agreed milestone such as the shortlist, and a final payment on placement or start. The first instalments are usually payable whether or not anyone is hired. In return, the firm commits a dedicated team, maps the market systematically, approaches people who are not looking, and reports on what it finds.
In Japan this model sits inside the same legal framework as all fee-charging placement. The firm needs a licence under the Employment Security Act. Fees above the statutory cap, which is 11% of the first six months' wages, must follow a fee schedule filed with the Ministry of Health, Labour and Welfare, and any retainer has to fit within that filed schedule. Total fees are normally a percentage of the hire's expected first-year pay including bonus. For senior roles in Japan that is commonly 30 to 35% or more. Rates in the United States, United Kingdom or Singapore are lower, typically 18 to 25%.
Retained search is a smaller part of the Japanese market than in the United States or United Kingdom. Global search firms and specialist boutiques offer it, and many agencies offer hybrid terms with a smaller upfront fee.
What it means for a foreign employer
- You are paying for process, not just outcome. The case for retaining a firm is strongest when the candidates you need are not looking, when the search must stay confidential, or when you need an honest read of the market as well as names.
- Exclusivity means one firm. Running contingency agencies on the same role alongside a retained firm undermines the arrangement and confuses candidates.
- Read the terms closely. Check the fee base, the instalment triggers, what happens if you cancel or redefine the role, and the replacement guarantee if the hire leaves early.
- Continuity has value. A firm that has worked with you across several searches knows your business, your Japan leadership and how you decide. Each search starts further ahead.
Sources
- Employment Security Act, Articles 30 and 32-3 (licensing and fees).
- Ministry of Health, Labour and Welfare guidance on capped and filed fee systems for fee-charging placement businesses.
- Fee ranges by market from the author's book.