FAR 31.205-34—Recruitment costs.
Plain-English Summary
FAR 31.205-34 addresses which recruitment costs are allowable as contractor costs under cost-reimbursement and other flexibly priced contracts, and which advertising-related costs must be excluded. It covers six allowable cost categories: help-wanted advertising, operating an employment office, aptitude and educational testing, recruiting travel for employees, applicant interview travel, and employment agency fees limited to standard commercial rates. It also imposes a specific limitation on help-wanted advertising: the ad must describe specific positions or classes of positions and must not include unrelated promotional material such as extensive product illustrations or company capability descriptions. In practice, this section helps contractors distinguish ordinary hiring expenses from unallowable promotional advertising, and it gives contracting officers a clear basis for reviewing labor-related indirect costs for reasonableness and allocability. The rule matters because recruitment is a normal business need, but federal reimbursement is limited to costs that are genuinely tied to filling positions rather than marketing the contractor’s brand or products.
Key Rules
Allowable recruitment cost types
The regulation allows six categories of recruitment costs: help-wanted advertising, employment office operating costs, aptitude and educational testing, recruiting travel for employees, applicant interview travel, and employment agency fees. These costs are allowable only when they are incurred to secure and maintain an adequate labor force.
Help-wanted ads must be job-specific
Help-wanted advertising is unallowable if it does not describe specific positions or classes of positions. General image advertising or broad corporate promotion does not qualify as allowable recruitment advertising.
No unrelated promotional content
Help-wanted advertising is also unallowable if it includes material not relevant to recruitment, such as extensive illustrations or descriptions of the company’s products or capabilities. The ad must stay focused on hiring, not marketing.
Employment office costs are limited
Costs of operating an employment office are allowable only when the office is needed to secure and maintain an adequate labor force. The costs must be tied to actual recruiting and hiring functions, not general administrative overhead unrelated to staffing.
Testing program costs may be allowed
Costs of operating aptitude and educational testing programs are allowable when used for recruitment or hiring purposes. The tests should be part of a legitimate selection process and not a disguised training or general personnel development expense.
Recruiting travel is allowable
Travel costs for employees engaged in recruiting personnel are allowable when the travel is for bona fide recruiting activities. The contractor must be able to show the travel was necessary and directly connected to hiring.
Applicant interview travel is allowable
Travel costs for applicants to come for interviews are allowable if they are part of the recruiting process. As with other travel, the costs should be reasonable, properly documented, and consistent with company policy and contract requirements.
Agency fees capped at standard rates
Employment agency fees are allowable, but only up to standard commercial rates. Any premium or above-market fee may be questioned or disallowed to the extent it exceeds normal commercial practice.
Responsibilities
Contractor
Identify recruitment costs correctly, charge only allowable amounts, and maintain documentation showing the costs were incurred to recruit for specific positions or classes of positions. The contractor must exclude promotional content from help-wanted ads and ensure employment agency fees do not exceed standard commercial rates.
Contracting Officer
Review claimed recruitment costs for allowability, allocability, and reasonableness, especially where advertising appears to be promotional rather than recruitment-focused. The contracting officer may question costs that include company branding, product promotion, or excessive agency fees.
Agency
Apply the cost principle consistently in evaluating indirect cost proposals, incurred cost submissions, and billing rates. The agency should ensure recruitment costs are treated as allowable only when they meet the regulatory conditions and are supported by adequate records.
Practical Implications
Contractors should separate true recruiting expenses from corporate advertising or public relations costs, because mixed-purpose ads are a common audit issue.
Help-wanted ads should clearly identify the job or job class and avoid glossy marketing language, product shots, or capability statements that could make the ad partly unallowable.
Travel and agency fees are not automatically allowable just because they relate to hiring; they still must be reasonable, documented, and tied to actual recruiting activity.
Employment office and testing costs are allowable only when they support staffing needs, so contractors should be ready to show how those functions relate to filling positions.
Contracting officers and auditors often focus on whether the cost was necessary for recruitment versus designed to enhance the contractor’s image, so contemporaneous records and clear cost segregation are important.
Official Regulatory Text
(a) Subject to paragraph (b) of this subsection, the following costs are allowable: (1) Costs of help-wanted advertising. (2) Costs of operating an employment office needed to secure and maintain an adequate labor force. (3) Costs of operating an aptitude and educational testing program. (4) Travel costs of employees engaged in recruiting personnel. (5) Travel costs of applicants for interviews. (6) Costs for employment agencies, not in excess of standard commercial rates. (b) Help-wanted advertising costs are unallowable if the advertising- (1) Does not describe specific positions or classes of positions; or (2) Includes material that is not relevant for recruitment purposes, such as extensive illustrations or descriptions of the company’s products or capabilities.