When you are working with a permanent placement agency or recruiting company you have 2 basic choices when it comes to fee structure. There is Contingency and Retained. At Rockstar Recruiting we favor Contingency but understand that there are merits to both and a time and place for each.
If you hop on any recruiting blog you will find articles detailing what is best for recruiters but rarely will you find information about what is best for a client. This article covers the pros and cons from the perspective of a hiring company. Before you sign your search agreement make sure you know what you are signing and pick what works best for you.
Definitions
Contingency – A contingency fee agreement means that there are no upfront costs or cancellation costs. You only pay if the recruiting company is successful finding you the candidate that you hire.
Retained – A retained search involves paying throughout the process. Typically the fee is divided into 3 with 1/3rd paid up front to start the process, 1/3rd paid on the first interview and 1/3rd paid when the candidate is hired.
Contingency
Pros
- No Risk – No Guaranteed Costs
- No Obligations
- Flexibility to engage multiple recruiters
- Able to run your own ads, if you fill the position on your own you pay $0 to recruiter
- Quick Start Up Time
- Easy to fire/walk away from recruiter
- You have no money invested in the recruiter and no obligations so if the recruiter is not getting the job done you can quickly and easy walk away
- Motivated Recruiters
- Most good recruiters are motivated by the commission they receive by getting the placement completed, by not paying them until the job is done you ensure they are motivated for success
Cons
- More expensive fee
- There are not guaranteed fees so overall the cost is lower but if you do make a higher the total fee is likely to be more expensive than retained
- No control over recruiter
- Just like you are able to walk away from the recruiter they can walk away from you. If the search is not going well or if they do not think they can fill it they have no obligation ton continue working for you
Retained
Pros
- Payment divided into 3 payments as opposed to 1 lump sum
- Control over recruiter
- You have paid them and can direct them how to work, what to do etc.
- Treat them similar to an employee
- Cost certainty
- You have already budgeted what you will pay
- Often able to secure volume discounts
Cons
- Upfront costs
- Limits your options on ability to use additional recruiters
- If you fill the role on your own, you have still paid for a recruiting service
- Recruiters are less motivated to finish the job and more motivated to work the process
Overall, the choice is yours. If it is the first time you are engaging a recruiting firm I would highly recommend going contingency. You do not know the quality of work that they do, all you have is the word of their sales person that they are awesome. Don’t trust that, let them prove their worth with a contingency search. If they are confident in their abilities then they will have no problem agreeing to contingency.
If you have worked with a recruiter for some time and have had great success working with them you may want to consider putting them on retainer to save some costs. This works especially well if you are hiring multiple openings. For example, our Mechanic Branch – Rockstar Mechanics often works with large Mines that have 20+ Heavy Equipment Mechanic openings. We always take on the first search as contingency but as we prove that we know what we are doing it often leads to a retained agreement or a guaranteed search. This provides a bit of a discount for the client and guaranteed revenue for us, win – win.
Hopefully this helps you when negotiating a Search Agreement with your recruiter. If you need to hire Mechanics, HVAC Techs or Millwrights, Rockstar Recruiting is your best solution. We will take your search way beyond the job board to find you the techs that you need. Give us a call at 1-833-937-3546 or e-mail us at info@rockstarrecruitinggroup.com to get the search started. We can help with recruiting in both the USA and Canada.
