Contingency or retained recruitment – what are the differences?
If you are working within human resources, it is highly likely that you will have come across the two different styles of recruitment methods and associated fee structures used for permanent hires. Within these different styles of recruitment, some key factors that need to be taken into consideration when deciding which may be best for your business:
This style of recruitment sometimes referred to as ‘head hunting’, is usually engaged when looking for very specific skill-sets or confidential senior roles that necessitate the use of search skills to be used by the agency. Retained recruitment is very targeted and will require the recruiter to work closely with their client, therefore, fees will start being charged from the outset before any work commences.
Retained recruitment fee structure
Prior to working on a vacancy, an agency that works on a retainer will normally require an initial fee that is typically 25% – 50% of the overall fee that has been agreed with the client. The remaining amount will either be charged in a further 1 or 2 instalments, depending on the agreement that is set.
If the agency is for any reason unsuccessful at finding the right person for the role, the initial (and possibly the second) fee is still payable. This is one of the main differences between retained and contingency recruitment – agencies using contingency recruitment methods will only charge when they have successfully found the right person for a position.
A large proportion of recruitment agencies work on a contingency basis, whilst also using proactive search and attraction methods to find the right candidates. Additionally, those that have a strong foothold in their market will also maintain a solid database of ‘passive candidates’ (candidates that are open to new opportunities but are not actively searching) therefore, having a broad pool of talent to access for their clients.
Recruiters that work on a contingency basis can adapt their recruitment methods to reflect the needs of their clients, whether recruiting for entry or director-level roles. Likewise, more experienced recruiters can sharpen their approach, so that if recruiting for more specialist roles, they can be more targeted and collaborative, whilst also using a more general ‘attraction’ approach for less-skilled positions.
Contingency recruitment – no hire, no fee
One of the most significant differences between retained and contingency recruitment is the charging of fees.
Recruitment agencies that recruit on a contingency basis will only receive payment after their successful candidate is hired into their new job. There are no incremental payments required prior to the candidate starting….no placement, no fee.
A good contingency agency will also offer a guaranteed rebate period, should a new hire not work as planned. This period will normally be calculated on a sliding scale, so that should the new hire leave within a specific time frame, a percentage of the placement fee will be rebated to the client. Or, as an alternative, a new candidate is found at no additional cost to the client.