The agreement for fees between independent recruiters and employers can take many forms. For example, recruiters may perform contingency recruitment, container recruitment, or retained searches for full-time positions.
What are the differences between these fee arrangements for managers and other professional level positions?
1. Contingency Recruitment
As the name suggests, recruiters with a contingency recruitment fee arrangement agree to search for a candidate to fill an employer’s open position. The employer is obligated to pay the recruiter only if a candidate the recruiter presented to the employer is hired for the open position. The timing of the payment of the fee depends on the agreed upon payment terms and varies greatly by employer.
2. Container Recruitment
While different versions of this type of recruitment exist, typically a recruiter will receive $7,500 to $10,000 before the search begins. Of course, this upfront fee amount will vary depending upon the salary range of the open position. This portion of the fee is non-refundable and subtracted from the final fee payment after a candidate is hired.
This type of fee option is different than obtaining an engagement fee upfront. With this option, the recruiter changes the scope of the services provided to the employer. It is a hybrid fee option that adds retainer elements to a contingency model. It positions the recruiter as a professional service provider for an employer similar to the relationship an employer has with an accountant or attorney.
A recruiter with this type of fee arrangement will invest more time in the research phase of recruiting than recruiters with a contingency recruitment agreement. Independent recruiters with their own firm, either where they work alone or have a small staff, do not have the time to invest in research for a candidate if an employer isn’t willing to make a commitment to the candidate search by paying a partial fee upfront.
3. Retained Search
Retained searches focus on key management positions within a company including C-level positions. While fee arrangements for retained searches may vary, typically, the employer commits to three payments. The first payment to the recruiter is made before the search begins. The second payment is made to the recruiter after a certain number of candidates are presented to the employer. Final payment occurs after a candidate is hired.
Most employers do not commit to retained search arrangements except for key, high level positions within their organizations. However, employers may commit to the fee arrangement called container recruitment if they understand what additional actions an independent recruiter will take if they agree to container recruitment vs. contingency recruitment. As in any relationship, the best ones involve the commitment of both people.
As an independent recruiter, how committed are your clients to candidate searches?