In today’s competitive marketplace, there is a constant push to shave more off the bottom line, and the recruitment budget is no exception. With the tightening of the purse strings, it becomes more and more important to justify your recruitment spend. However, with recruiting fees – like many things in life – you usually get what you pay for. The competition in the market extends to talent as well. If you hope to find the best employees, investing in third-party talent acquisition partners may be necessary. If you find yourself balancing these two opposing forces, it’s important to understand the anatomy of a recruitment fee and to know what you are paying for. This is so you can accurately determine whether the investment is paying off.

The Types of Recruitment Fees

Not all fee structures are created equal. There are several common models to choose from. Many firms offer a contingent fee structure, which means that you pay a predetermined amount (which may be based on a percentage of salary or a flat rate), but only after a successful hire. A popular competing fee structure is the engaged (or retained) model, in which a retainer is paid at the commencement of the search. The remainder of the engagement fee can be paid out on a variety of schedules, so it’s important to clarify with your staffing partners what their payment schedule is at the start. There are certainly some industry standards, but every firm is different.

Cheapest Isn’t Always Best

In the interest of keeping costs low, it can be tempting to look first and foremost for the lowest fee. While there is certainly nothing wrong with partnering with a recruiter who charges a reasonable fee, there is something to be said for the old bromide, “you get what you pay for.” Staffing firms who can afford to charge a fee well under market value are likely to subsist on volume, so you may not get as many dedicated resources or as much consultation as you would elsewhere. This means searches could take longer and the caliber of talent may not be the same.  If you are filling a key position, for instance, it may be worth a higher fee to receive a higher level of service. A good employee should more than pay for the cost of hire, so make sure that you focus on finding a partner who can find you the best talent and provide you with the level of service you need.

Fee is Only as Good as Guarantee

Before you agree to pay a fee, you should make sure that you fully understand what is being covered. For instance, if an employee doesn’t work out the recruiter may be responsible for refunding their fee or replacing the employee. Fees may also guarantee advertisement on major job boards or background checks and drug screens. Pay attention to contracts and make sure you know what your payment will and won’t cover in order to determine the real value of what you’re buying.

There is no true standard for a recruiting fee and every firm will be a little different. Depending on the level of the role you are filling, the industry, and the job function itself, the dollar amounts can differ immensely, so do your market research and choose the fee structure that best suits your needs. Try to keep in mind that the lowest bidder may not be the best suited to meet your needs and make sure that you know what you are paying for. When you pay a recruiting fee, you are essentially buying the dedicated resources, man hours, expertise, and networking power of your staffing partner, so make sure you are getting the most out of the partnership and positioning yourself to find the best possible talent available.

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