Recruiters operate many different ways. The ones I am most familiar with are contingent recruiters, who charge a fee for successful hires. They only get paid when a hire is made. That structure is itself a long opportunity for discussion. I always joke with my friends that it would be nice if your accountant or health club charged this way. I guess some may? Seems that most are just working on increased fees.
With the slow but sustained recovery from the Global Financial Crisis, more recruitment firms are reporting increased revenues and profits. If you have not considered it, the demographics of our world should drive a continued shortage of a qualified supply of workers for years to come. That should mean increased fees for recruiters and higher cost to employers to recruit talent. But what is happening in the marketplace is slightly different than what basic supply and demand theory might predict. Some firms are lowering fees in a time of limited supply. Recruiters and employers alike should take note of the reason. When recruiters have a poor quality of candidate, source talent from the same pool as employers (LinkedIn etc.), or offer an unreliable process for headhunting the best talent, then a recruitment firm’s service becomes a commodity and must be discounted.
While some questionable suppliers may not be pricing their services at appropriately lower levels, it is fair to say that a recruitment firm with a solid process of finding unique talent will be in a position to increase fees. Ultimately the service may be worth every dollar. This is the “you get what you pay for” principal at work.
For recruiters working the same old process, the same way and not adding value to the recruitment process, beware. Employers are willing to hire staff to search LinkedIn and to post on job boards. That means recruiters will be forced to accept lower fees or to work only an employer’s most difficult jobs, their least important jobs, or the ones that are always open. These all offer less chance of a fee.
If you are feeling downward pressure on fees, that means it is time to differentiate, add value and up your margins.
RECRUITERS: If you don’t mind me asking, what are things you have done as a recruiter to support higher margins and fees in the last few years? What do you feel employer clients value?
EMPLOYERS: Have you paid a recruiter a 30% fee instead of a 20% or 25% fee? Why?
The value I add, for higher than mid-range fees, is market research (weekly snapshots of what we are finding in the marketplace, salaries, details beyond candidate presentations) as well as just a pulse on progress. So many clients are frustrated that they don’t hear from their recruiting firm (who maybe switched gears to something else, as contingency promotes jumping around to the “hot” job. I am a firm believer in the Engagement fee model that secures a strong working relationship but doesn’t cross into the full Retained model. I often will sacrifice even some of a commission rate in lieu of a retainer, as our documentation shows our rate of closure of that format is almost 100% vs a much smaller percentage of straight contingency.
In the past, I had worked on engagements for less than a 20% fee with the carrot of a higher volume of orders.
What I found is that it was no easier to fill those positions with a 15% to 18% fee (or those awful flat fee) than the ones that were at 20%, 25% or 30%.
When going from a 20% to a 15% they may have the mindset that it is a 5% reduction but in reality it is a 33% discount.
If I am approached about any position at less than a 20% I quickly and politely decline.
If there is a volume situation, I’ve found that a tier still works. History shows if we accept a 5-6 job assignment, and tier the structure to show flexibility for the client, RARELY do they ever hire the full amount they intended. So we will do a tier, three at 27%, two at 25%, and beyond 20% – do we ever charge the 20%. (We have gone lesser %’s even, but never had to pay that). It shows flexibility to the client. But I totally agree that lesser jobs do not mean EASIER in any way!!