Why, When, and How Companies Should Pay Recruiters
In our previous blog post, we addressed the issue of “Why, When, and How Companies Should Use Recruiters”.
However, let’s cut to the “nitty-gritty,” so to speak. What about paying them?
This might not come as a surprise, but some company officials and hiring managers are opposed to the idea of paying a recruiting fee. They think, “Why should I pay a recruiter for a job I can do?”
Recruiters are sometimes seen as an unneeded expense. However, that is not the case at all. Recruiters bring good employees forward and without hard-working employees, there is no significant profit for an organization.
The best thing a company can do to drive profits is to hire the right people. Hiring the wrong people, on the other hand, can be costly, and in some cases, disastrous.
With recruiters, you get what you pay for. Thus, if a few additional thousand dollars in recruiting fees means better employees, then your organization will be better off with better employees over the long-term. An effective recruitment process is well worth the money in the long run.
That brings us to our next question: how much does it cost to hire a recruiter?
Typically, recruiters charge their clients either through the contingency fee structure, the exclusive fee structure, or the retained fee structure.
A contingency fee agreement consists of a performance-based payment. That is, you do not pay the recruiter until he or she has successfully filled the open position. If the recruiter successfully places an applicant, the recruiter’s payment can typically range as some percent of the newly hired employee’s first year’s salary. These agreements are non-exclusive, and you can work with as many talent agents as you want.
In an exclusive fee agreement, a corporation will agree to only share details about a particular opportunity with one search firm, but, payment is only due to the search firm if one of the search firm’s candidates are hired.
With the retained fee agreement, a corporation agrees to a guaranteed payment to the recruiter for their services. Every retained agreement is different, but usually the retained recruiting contract provides the recruiter with premier access to your open listing.
Although the retained fee agreement can seem a little more risky, it can provide much better results. When you pay a recruiter in advance, he or she is more compelled to prioritize your search over other searches. Generally, you’re also going to receive meaningful hiring insight and expertise, something a contingency recruiter might not provide.
Conversely, the contingency contract gives you the advantage of working with multiple headhunters and paying only when a recruiting agency provides the ideal employee to fill your open position. However, you should be wary of the cons of this type of agreement:
- You have to check up on the recruiters working on your account frequently because they can leave the agreement as easily as you can.
- There is no certainty that the agency or firm is going to prioritize you over all of their other clients.
- Many employee guarantees last for 90 days, which is not a great amount of time to assess a new hire.
- These recruiters may deliver less insight with respect to the job market.
If your company decides to use a recruitment firm, know your options and understand that the quality of the employee you receive is the main priority, not the fees it takes to find them. As a result, most corporations tend to choose an exclusive or retained relationship.
Need help redefining your own corporation’s professional talent and human resources development strategies? Learn more about Lexacount Search’s talent management and development consulting services with our Finance and Accounting Group and our Legal Group.