Somewhere around month six of an agency engagement, a lot of founders notice the same thing. One developer on the agency team is carrying the product. They answer the hard questions, they catch the bugs before you do, and they understand your business better than the account manager does. The obvious thought follows: why not hire them directly?
It is often a good idea. It is also the moment a clause you skimmed at signing becomes expensive. Nearly every agency contract has a non-solicitation provision, and the ones that are enforceable usually come with a fee. Before you send that LinkedIn message, you need to know what the clause says, what hiring them will really cost, and whether it is the right move in the first place.
What the non-solicit clause usually says
A non-solicitation clause in a services contract stops the client from hiring the vendor's staff, directly or indirectly, during the engagement and for a period after it ends. Twelve months after the end of the engagement is common. Many clauses cover contractors as well as employees, and some cover anyone who "worked on the services," which can include people you never met.
The clause usually carries a conversion fee or liquidated damages. The ranges vary widely. Fees around 25% of the developer's first-year salary are common, and some contracts ask for 50% or even a full year's salary. Staffing firms that place contractors with an explicit temp-to-hire path often use a fee that shrinks the longer the person has billed through them. Read your specific wording, because the difference between 25% and 100% of a senior salary is the price of a second engineer.
Enforceability depends on where you are, and it is shifting. Some US states have limited these provisions. Minnesota, for example, has since July 2024 voided most terms in service-provider contracts that stop a customer from hiring the provider's employees, with a narrow exception for software consultants placed through staffing agencies on a path to permanent hire (summary from Epstein Becker Green). Do not rely on a clause being unenforceable without asking a lawyer in your jurisdiction. And even when a clause might not hold up, breaking it on purpose burns the relationship with the agency on the day you most need their cooperation.
Do the math against a normal hire
Founders tend to see the conversion fee as a pure penalty. Compare it instead with what the alternative costs. Recruiting a senior engineer through a recruiter commonly costs 20 to 25% of first-year salary. Then there is the time: sourcing, interviewing and closing typically takes two to three months, and the new person needs more months after that to learn your codebase and your business.
The agency developer already knows your product. If the conversion fee is in the same range as a recruiter fee, hiring them can be the cheapest senior hire you will ever make, because you skip the ramp-up entirely. If the fee is 100% of salary, the answer changes, and you should negotiate.
Ask the agency, not the developer
The clean path is to go to the agency first. Tell them you want to build an in-house team and that you would like to convert this person as part of it. Many agencies handle this regularly and would rather collect a fee and keep a good client than lose both.
That conversation also gives you room to negotiate:
- Ask for the fee to be reduced or waived if you commit to a further period of work with the agency
- Offer a longer transition, with the developer staying on the agency's payroll for a few more months while they hand over their other clients
- Ask for the fee to be paid in instalments rather than up front
Going to the developer first, quietly, is the version that goes wrong. The developer may be bound by their own non-compete or notice terms with the agency, may tell their manager, and may lose their job over it. You also give the agency a reason to stop cooperating on the handover you still need.
Check that you are hiring the person, not the setting
The developer who looks brilliant inside the agency is working with a project manager, a QA person, a designer, a DevOps engineer, and senior colleagues to ask. At your startup they may be the only engineer. Some people thrive in that. Others were excellent precisely because the structure around them was good.
Before you pay the fee, find out:
- Have they ever owned production alone, including being the person paged at 2 a.m.?
- Do they make architecture decisions today, or implement decisions a senior colleague made?
- Do they want the job? Many agency developers like the variety of client work, and a single product can feel narrow after a year.
- Is their pay expectation realistic for a direct hire? Agency rates and direct salaries are not the same thing, and the developer often sees only a fraction of what you are billed.
A short paid trial project or a structured conversation about how they would run the system alone tells you more than six months of watching them inside someone else's process. Who vets your engineer covers how to judge that when you cannot evaluate the code yourself.
Plan the transition, not only the hire
Moving one developer changes the agency relationship. If they were the person who understood your product, the agency team left behind loses its best knowledge at the same moment. Decide whether the agency keeps working with you after the conversion, and if so, what they will be responsible for. If the plan is to bring development fully in-house, this hire is the first step of that, and it should come with a proper handover plan rather than an assumption that the knowledge walks over with one person.
Also think about the bus factor. You are about to concentrate everything the company knows about its product into one employee. Get documentation written during the transition, while the agency is still around to fill the gaps.
FAQ
Can I hire the developer after the engagement ends to avoid the fee?
Usually not immediately. Most clauses run for a period after the contract ends, commonly 12 months. Waiting it out is possible, but the developer may have moved on, and you will have spent a year without them.
What if the developer approaches me first?
Many clauses cover hiring, not only soliciting, so who made the first move may not matter. Tell the developer you are interested, then speak with the agency before any offer is made.
Is a conversion fee negotiable?
Almost always. Agencies set it high to discourage poaching, not because they expect to collect the full amount. A commitment to more work or a longer transition is the usual trade.
If you are weighing an in-house team against staying with your agency, our comparison lays out the options, and a call is the fastest way to pressure-test the plan.