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Recruitment Fee Agreement Full Guide

Recruiting new talent for your company can be an extremely time-consuming process, as well as an expensive endeavor. While there are some cost-effective recruiting methods you can employ to stay within your desired budget, sometimes the best solution is to outsource the search and placement to a recruiting firm. The recruiters not only have the years of professional experience, making sure they get you the best candidates, they also have many connections in their industries, which can help speed up the process, eventually saving money as well. You can find even more reasons why you should hire a recruiting firm here. But let’s say you’ve already made up your mind. Before it’s a done deal, you have to sign a fee agreement and to make sure you get the most for your money, here’s everything you need to know.

 

Recruitment Fee: Flat Fees & Percentage Fees

The most typical recruitment fees are collected as a percentage, ranging between 20% to 33% with the average being 25%. The percentage will be taken out of the annual salary of the position you are hiring for. Meaning, the more senior the position in, the more money you’ll end up paying the recruiting firm. As you can see, there is a range, but there’s room for negotiation. If you are hiring for several positions, for instance, you may be able to request a lower percentage. On the other end of the spectrum, with hard to fill positions, the recruiting agency fees may be as high as 33%, because they require much more work.

Flat fee recruitment is not as common in the recruiting world, but it is still an option you should be familiar with, and sometimes it may be the better one. This creates transparency for the services provided by the recruiter and lets you know exactly what services you’d be getting, and at what price. Some firms will agree to flat fee recruiting if they know they’ll be getting additional work from you in the future or if the positions that you’re looking to fill are relatively easy. If you’re looking to work within a very specific budget, and don’t want to be surprised when the bill comes, this may be the way to go.

 

Typical recruitment fees: Contingency vs. Retained

There are mainly two types of recruiters, contingency and retained, and both are paid differently. The contingency recruiter fees are very straightforward. They only get paid once a placement is made. They are basically taking a risk working for you, as they may fail and end up not getting paid. This has several pros and cons, but the biggest thing to remember is that as long as the role is not filled, your money is safe. This may make them work faster and less efficiently, so that is something to take into consideration.

Retained recruiting firms charge upfront to start conducting the search. This may pose more of a risk for you but may be worth it for more complex positions, where you want a more dedicated recruiter. The main ways these recruiters charge are a fixed fee established upon signing and/ or a pay structure of a third of the sum upon signing, another third 30 days after, and the final sum after the placement. The retained recruiter will usually also demand to be the only one working on that position. You can read more about that here.

 

Recruiting agency fees: The fine print

When signing any contract, in life and with recruiting agency fees, you should always make sure you read every last part of it and understand the smallest detail. Some things you should keep in mind before signing.

  • Is the recruiter’s fee calculated from the position’s compensation total or just from the base?
  • How long are the candidates considered the recruiting firm’s candidates (the common period is one year)?
  • Are you signing exclusively with one firm? This may be worth considering if you trust them, and it lowers costs, but may not be a good idea if you just started working with them.
  • What is the guaranteed replacement period? This means that if the candidate leaves during that time, the recruiter will do his/her best to find a 1-time replacement at no additional charge.
  • Are there any additional charges?

If you now feel confident looking for a recruiting firm to match your industry and company needs, simply click on the right side of the screen and get started.