The Recruiting Blog | People First Recruiting

Have you ever wondered exactly what's in a recruitment fee? Download our latest whitepaper which demystifies recruitment fees and provides an overview of what you can expect with each type of fee.

This whitepaper explores the different fee structures including Contingent, Exclusive Contingent, Engagement Fees and Retained Searches and the pros and cons of each.

Click on the button below to download.
 

 

I previously wrote a blog on The Pros and Cons of Contingency Recruitment and even though we are an exclusivity recruitment firm, I know many companies do prefer to work with multiple recruitment firms. The purpose of that post was to show the benefits and potential challenges of contingency recruitment from my perspective.

I am going to conclude, for now, my posts on fees by shedding some light on exclusive, retained and retingent fees or as some call it, container fees.  Personally I don't care for the words container or retingent.  Here at People First we just call them engagement fees.

Why a recruiter promotes one fee contract over another is normally based on the complexity of the search and risk management.  We ask ourselves the following questions: 

Complexity of the recruitment:

• Is the role executive or a hard to find, scarce skill set?
• Is it a local, national or international search?
• Is the role in a specialized industry?
• Will the search process need to be changed or expanded due to the nature of the role? 

Risk Management:

• Has this position been vacant for a long time?
• Could there be challenges identifying candidates because of the total compensation?
• Is the scope of the role so narrow that it may take much longer to bring the search to a successful conclusion?
• What is the perception of the company in the marketplace?

As I attempt to provide definitions behind the exclusive and engagement fee options please keep in mind that every recruitment firm will structure them differently.

Exclusive Contingent:

• Typically this contract is promoted when the search is more junior in nature and the role can be filled locally.
• The company agrees to work with the recruiter exclusively and will not hire others.
• The company can continue to search for a candidate on their own and hire their candidate if preferred.
• Fees are charged only if the company hires the recruiter’s candidate.

Engagement and Retained Fees:

• These fees are almost always for executive level, professional and complex recruitments.  Essentially, recruitments that are potentially longer in duration due to the complexity.
• The fees are structured in installments with an installment being billed immediately upon starting the recruitment.
• The installments continue in stages either a) at the end of the recruitment or b) two additional installments during the recruitment.

There are of course many points to be considered when it comes to recruitment fees, these are only a few examples. In the end the recruiter must be completely confident they can fill the position and the company must trust that the recruiter has the experience and capabilities to find the best candidate.  It's always in your best interest to ask questions surrounding recruiting fees.

Truth to be told, we are not a contingency recruiting firm so this will be one of the more difficult blogs for me to write.  However prior to joining People First I spent over 15 years as Branch Manager of a few national contingency recruiting firms and I was once a big believer of the model.

With contingency recruitment you are not required to pay a recruiter a placement fee until you have selected your ideal candidate – “payment is contingent upon hire of candidate”.  The other key differentiator with contingency verses retained (which I will discuss in a later blog) is that you are not working with the recruitment firm exclusively.  You can continue to search on your own and work with multiple firms if you so choose.

Here are my views of the pros and cons:

Pros

• You don't pay fees unless the recruiter refers you a hireable candidate
• You can still recruit for the position on your own
• The recruitment can be cancelled at anytime with no fees charged
• You can work with as many recruiting firms as you choose
• You could receive a lot of resumes - fast
• You should have a lot of candidates to interview
• You may be able to negotiate fees

Cons

• You will generally hire a candidate that is available to you quickly but they may not necessarily be the right 'fit', resulting in turnover
• The chance for disputes is higher since the placement will be awarded to the recruiting firm that presents the resume first – determining “who got there first” can be very awkward
• Because of the "who got there first" point, a thorough and targeted search specific to your company and the role is rarely, if ever, performed
• You could face some potentially embarrassing candidate situations if the candidates are working with multiple recruiting firms
• Managing the communication and referral processes of one, two or even more recruiting firms can be challenging
• It takes much longer to bring the recruitment to a successful conclusion

Earlier I wrote that I was a big believer in the contingency fee model. Why?  Because once upon a time I felt that a Recruiter does not add value until the right candidate is found.  I don’t believe that any longer.  My belief now is that finding the right candidate is the end result of a strong, mutually rewarding partnership and, the value we provide the client and candidate leading up to the hire. 

A couple months ago I wrote a whitepaper called “Maximizing Your Recruiter Relationship”.  It gives companies simple tips for hiring and working with a Recruiter to ensure a successful partnership.  From a company perspective, the big question always is “what's this recruitment going to cost me?” 

Over the next few weeks I will be blogging about recruiting fees.  First up though is a summary of what you, the company, should get from the recruiting fees you are charged. 

The job posting

• A job posting is a tool to advertise the job.  There is an art to writing an effective job profile especially once you consider search optimization and key words.  A Recruiter that understands online search techniques knows how to write job profiles so your ad can be found online.  Finally a well networked Recruiter has the contacts to send the job profile to, as well as a library list of free job boards, associations and industry networks. 

Finding candidates

• Print and online advertising alone does not guarantee you results.  That is the “let’s wait and see what we get” mentality.  Sometimes timing works out perfectly though and you hire a candidate from an ad, but did you get the best candidate?  Unless you conduct a search you really don’t have the answer to that.  Recruiters go to the market and search.  They will identify companies or like companies in your industry where candidates are performing similar jobs.  They will identify competitors.  They will look for industry thought leaders. 

Interviewing

• If the Recruiter isn’t certified in Behavioural Based Interviewing at the very least most will have training.  Behavioural Interviewing is based on the theory that the best predictor of future success is past performance.  This method of interviewing allows for a more structured and fair assessment process and it takes away the “gut feeling”.  Fit is also assessed.  Recruiters interview every single day so they are quite skilled at it. 

Reference checking

• A good reference checker knows how to listen for cues, they don’t accept just any answer.  They know to probe, to ask the individual for more information to get an honest reference.  It’s amazing how many companies don’t do references before hiring an employee.  This step in itself is worth the money.

Simply put you are paying a Recruiter to find a candidate, qualify a candidate and present a short list of candidates.  Stay tuned for more blog posts on exclusive, retained, contingency searches, guarantees, refunds, credits and so on.