Dealing with recruiters: What is the difference between contingency and engagement fee?
Businesses that work with recruiters and recruiting companies to help fill mission-critical positions have various options available when looking to hire a recruiter to provide these services. The two most common remuneration methods are contingency and engagement fee.
This is the most common method currently employed, and is based on a predetermined percentage charged on a placed candidates total cost to company package.
A contingency arrangement tends to be more of a client-vendor relationship. A client may have several recruiters that are attempting to fill a position. While a client may assume that having multiple recruiters to find a candidate is advantageous; and it can be, there are definitely some drawbacks.
When recruiters know they are in competition with others for a search, there is a tendency to rush the process. After all, the first “good” candidate presented can become the front runner in a search. That said, when there is serious time constraints to present viable candidates to a client, then ‘’good’’ can become the enemy of great!
Sometimes the best fit for a position isn’t someone who is immediately available. The recruiter must do some digging and networking to find the ideal candidate. However, knowing that time is of the essence with the competitive nature of contingency working arrangements, there can be a tendency to go with people that are readily available to present to a client.
In addition, contingency searches involving more recruiters can be considerably more demanding from a time perspective for a client. There tends to be more people to interview with this approach. Unfortunately, if multiple candidates are presented that miss the mark, the contingency process can take up valuable time that many clients simply do not have available.
An engagement fee agreement with a recruiter represents a middle ground. It is part contingency (most of the payment comes at the end) and part retainer (it involves an upfront fee). With this type of arrangement a company pays a recruiter an engagement fee – usually one-third of the expected overall fee.
The recruiter collects the balance upon final job acceptance. Companies that have embraced this structure like this method because both parties have “skin in the game” and are motivated for the right reasons.
The engagement fee method is rapidly gaining traction locally, especially in the executive and senior management searches.
Every business must examine its own internal needs to determine the best way to utilise outside recruiting assistance. That said, our dynamic Headhunters team would welcome discussing your recruitment requirements with you and assessing which would be the most viable recruitment option to employ.
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