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Split Placements

Should I Start A Recruitment Agency During A Pandemic?

by Sarah Freiburger

As this unprecedented pandemic continues to make it’s mark on the world and various industries, one of the emerging layoffs that seem to be happening is internal and corporate recruiters. Each day various social media groups include postings of these laid off recruiters searching for their next opportunity or wanting to be hired by others. A question you should be asking yourself if you are in this position might be, whose name do I want to end up seeing at the top of a client check?

That’s an easy question for most to answer, but for various reasons over the course of their recruitment careers, instead the answer to that question has been the internal corporation they work for, or perhaps a franchise name, or the firm they work for. While it can be daunting to attempt to go out on your own, here are some reasons behind why it may be the time to do so.

  1. Regardless of where you are hired, you are expected to generate business. Recruitment is a sales industry at the forefront, and while it may help to have a bigger name to say on an intro call, ultimately it you that is securing the contract and then closing the placement. Why not make the move now to get a business plan in place so that the next placement you close you see all of it?
  2. The world is at your fingertips. As our network has been around since 1956, many firms in business for so many years comment at how difficult recruitment used to be. Clients names found in books, paper mailing communication, and phone charges by the minute were all obstacles. Now, you are really able to be an independent recruiter with your cell phone and a laptop with WiFi. Granted, you have to use both skillfully, but now more than ever with the world moving at almost a standstill, you have the opportunity to build up a brand, get marketing in place, touch in with candidates and old contacts about your new venture, and start a business plan.
  3. You don’t have to be alone as an independent. Many times the attraction of working on a team or with partners keeps recruiters in the corporate or large office set up. However, as an independent in the world today, more just like you willing to exchange business practices and opportunities are easy to leverage once you find your community. There are free groups to join on linked-in or facebook to make split placements or more formal organization and companies like NPAworldwide to join to leverage the power of many independents working together. Use your current recruitment experience to recruit on other’s jobs for 50% of a fee as you negotiate and land your own contracts to get off to a great start.

Our full blog found at www.npaworldwide.com/blog is a great resource of articles as to next steps to starting your own agency, however above else use some recruitment common sense during this time: be diverse, manage your time, don’t over-focus and stay positive.

Not All Split Placement Platforms are Created Equally

by Sarah Freiburger

As the Director of Membership of a split placement network, one of the first topics that come up with recruiters considering membership is if they have formerly, or are currently making split placements. Further questions reveal they didn’t make the split placements the “traditional” way. Instead, they provided a candidate to an employer via an online service like BountyJobs or Scout. 

In 2020, I have found that  the “recruiter community” language for split placements has changed. You can no longer assume that when recruiters state they have made split placements that it occurred the “traditional” way.  Specifically, what I mean by “traditional” way is when a recruiter with a job works directly with a recruiter with a candidate and the candidate is hired by the employer. This results in the two recruiters splitting the client fee.

“Traditional” split placements happen in one of the following ways:

  1. Informal Network
  • Recruiters form their own, usually small, network of trusted trading partners. Most savvy recruiters will have signed split fee agreements even if they make splits with recruiters they have known for a long time.
  • In addition, larger informal split networks exist online in various Facebook groups or on Linked-In. It is not unusual for recruiters in these informal networks to have never met face-to-face or know much about the others background. 
  • If you are a recruiter considering making split placements with other recruiters or are currently making split placements and do not have an agreement signed with the other recruiter, check out our sample split fee agreement which can be used as a starting point to create your split agreement.
  1. Formal Network
  •  A recruiter pays to participate in a formal network. In NPAworldwide, members pay one-time enrollment fees, monthly dues, and brokerage payments when split placements occur.
  •  Networks can have a general focus or specialize in an industry or niche. In NPAworldwide, we have over 10 practice groups that help specialized recruiters navigate the community and easily form relationships or customize their experience to their most prevalent industry.  Some networks may include members located in only one country or state and others, like NPAworldwide, have members throughout the world.
  • Formal networks should have rules of engagement so that trust can build among its members. If the formal network is not built on trust, an environment develops where split placements will not flourish. The rules of engagement will typically include how to handle candidate referrals, client poaching, permission to advertise, etc . Also, a formal network should address what happens if something in the split placement process does not go well. Of course, clear and written communication between the recruiters can minimize these situations. As a cooperative of independently-owned recruiting firms, NPAworldwide recruiters are bound to act within the Bylaws approved by our members.
  • Signing the network’s membership agreement or contract binds its members to abide by its rules of engagement and may eliminate the need for a split fee agreement to be signed between trading partners. In NPAworldwide, a separate split fee agreement between trading partners is not necessary since the owners of the member firms signed the NPA Membership Agreement.

In contrast, split placements that come about from a client utilizing Bountyjobs or Scout are only labeled splits because the online platform itself is taking a percentage of the fee off the top. Many frustrations can exist in these types of splits due to the transactional nature of the placement, as well as the loss of candidate ownership and lack of direct communication and relationship building. 

If you are considering adding to your bottom line, consider all of the above when making the best decision for your independent recruiting business.

Improve Client Service with a Split Fee Model

by Veronica Blatt

There are a lot of reasons why we believe a split fee model makes sense for recruitment firms across the globe. NPAworldwide Chair-Elect Jason Elias of Elias Recruitment in Sydney was a recent guest on The Resilient Recruiter podcast to discuss this topic. We often discuss splits as an option to even out cyclical fluctuations in cash flow, or as an economical means of business expansion. Jason sees value in split fee placements that allow him to serve his clients more effectively. Read the rest of this entry »

Year-End Split Placement Summary

by Veronica Blatt

split placement summaryNow that 2019 is officially in the rear-view mirror, it’s a good time to show a split placement summary of the activity we saw in our network. We break down split placement data in lots of different ways. Today I will focus on salaries and practice areas. Read the rest of this entry »

The Benefits of Member-Ownership

by Veronica Blatt

Our Global Conference is just 8 weeks away, and I’m neck-deep in the details that lead to a successful event. NPAworldwide’s member-owners elect officers and directors and make decisions about network policies and future plans during the annual meeting portion of the conference.. Member-ownership is perhaps THE thing that makes NPAworldwide different from other split placement organizations. I love this time of year when owners come together to share ideas and debate a wide variety of topics. I’m always impressed and excited by the passionate enthusiasm that members display.

What exactly does member-ownership mean? Well, in it’s simplest terms, the entire network is owned by its members. Each firm becomes an equal co-owner upon joining. We are governed by a board of directors elected from the membership. Members have control over the rules, which are established via a democratic process. Members pool their resources and work cooperatively to reach common goals. Profits can be reinvested in the network or shared among the owners. There is not a private individual or corporate structure that benefits from the profits of the network. Because each member firm is an equal owner of the network, a small recruitment firm can have just as much influence as a larger business.

NPAworldwide members determine the rules that define split placements, membership qualifications, financial responsibilities, dispute resolution and more. Our bylaws were modernized and rewritten in 2012 (not for the first time) and have been amended almost every year since then. As recruitment changes and evolves, our governing documents strive to keep up with that change. Member-ownership means that members can help shape the way they want to work with other members in the network. Members are accountable to each other to ensure the rules are followed. This helps foster a high degree of trust among partners and an increase in split deals.

The ownership of a split placement organization is an important detail. Learn more about different ownership structures here.

Add Split Placements in 2020!

by Veronica Blatt

NPAworldwide will celebrate its 64th year of facilitating split placements next year, so it’s fair to say we’re biased on this topic. Splits are an excellent way to diversify your business focus. They can help you increase your geographic reach. Splits also offer economical business expansion for boutique recruitment firms. If any of these items keep you awake at night, consider adding splits in 2020.

Diversify Your Business

Split placements can help you fill roles in additional occupations and niches. If your engineering client suddenly needs a CFO, a good split partner means you can say yes with confidence. If your niche is softening, let your split partners serve as your business development division and source candidates for THEIR jobs.

Increase Your Geographic Reach

Do you have the ability to source candidates in Germany when your client opens a new manufacturing facility there? Are you knowledgeable of the salary and compliance laws in Australia? How do you interview candidates effectively with a 9 hour time difference between your locations? Many recruiters are intimidated at the prospect of accepting global assignments. Split placements are a perfect solution. Your in-country partner can help source and interview candidates, and may also be able to assist in the details of the offer, local business customs and more.

Economical Business Expansion

As a business owner, you’ve likely grappled with how to effectively grow your business. In many instances, real growth involves a significant investment of capital. Since the outcome is not guaranteed, it’s a risky model. For recruitment firms, it typically means hiring additional recruiters. In turn, you may also need to provide equipment, software, tools and support, and training. You’re committing to ongoing overhead costs with no guarantee that they will be productive enough, all the time, to cover those costs. Split placements mean reaching out to trusted partners when you need them. You don’t need to train them or purchase a LinkedIn seat. When the role is filled, you’re not continuing to pay. If managing people is not your strength, this model will reduce the amount of time you spend on that activity. In turn, that gives you more time to spend on placement activity.

Split placements are not a magic pill to cure all of your business pain, but when done properly can be an outstanding supplement for your firm.

Year in Review: Split Placements Up in 2019

by Sarah Freiburger

NPAworldwide is a global network of independently-owned, professional recruiting firms working together to increase revenue through split fee placements. The network enables members to better serve their clients through extended geographic reach and greater access to industry specialization. In the process, NPAworldwide members benefit from increased production and a stronger competitive position.

Not only did the number of NPAworldwide member firms grow immensely in 2019, the number of split fee placements made by members also drastically increased, with total member revenue reaching 7 million dollars!  Split placement activity occurred around the world with North America leading the network in deals. The following information highlights key 2019 results:

  • Placements of positions with US$100,000 and above salaries were 35% of total split fee placements
  • Placements of positions with US$70,000 and above salaries were 59% of total split fee placements

Top 5 Practice Groups based on number of split fee placements, listed high to low. Click here  to view industries/niches included in these Practice Groups.

  • Engineering/Operations/Manufacturing
  • Technology
  • Sales / Marketing / Business Development
  • Accounting / Financial Services
  • Chemical Process

It’s not even the end of the year yet and our members are sharing jobs and placing candidates with one another at a rapid pace, excited to see what the rest of the year holds for the network! What does 2020 look like for you? If you are leaving additional revenue out of your business model by not leveraging other independent recruiters there is still time to set yourself up for success in the new year.

4 Ways to Increase Recruitment Revenue in 2020

by Sarah Freiburger

The end of the year is typically the time where annual contracts are renewing for your tools and services, you’re evaluating what you still need to close to hit financial goals, and always thinking about how to increase your bottom line. This means now is the perfect time to reflect on what happened in 2019 and create your plan to increase recruiter revenue in 2020.This article focuses on four ways that recruiters may increase recruitment revenue in 2020. 

  1. Engaged Recruitment

While different versions of this type of recruitment exist, typically a recruiter will receive $1,500 to $2,000 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.

With this option, the recruiter changes the scope of the services provided to the employer. It is a great start to add 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.

  1. Split Fee Placements

Are you currently making split fee placements?  If not, you may want to consider this option as a way to better serve your clients and candidates.  Isn’t 50% of a fee better than no fee? When you are working in a high level network such as NPAworldwide, many recruiters have 25-30% fees they are splitting, which is a better certainty than hoping a brand new  contingent client you signed will agree to a 12-15% fee. Independent recruiters who make split fee placements serve their clients better than those who don’t by being able to increase the pool of candidates in their niche by working with other recruiters. In addition, they ask for and fill positions located in other geographies because they are confident their trading partners will be able to assist them.  On the candidate side, a recruiter making split fee placements is able to provide more opportunities to candidates.

Independent recruiters can increase their revenue by developing informal networks of other independent recruiters interested in splitting fees. Another option is for a recruiter or recruiting firm to consider joining a formal split fee placement network.

All of a recruiter’s business doesn’t have to result from split fee placements.  Decide on a target percent of your revenue and create actions steps to meet your target.

  1. Contract Placements

If you are not currently making contract placements, 2020 might be the year to add them to the mix! Many recruiters offer contract placement services to their usually direct clients, helping them to fill their temporary assignments. With contract placements, a recruiter usually receives a small fee on a weekly or bi-weekly basis, earning money for every hour the contractor works. While this seems complicated to keep track of, there are now so many back office support companies that are affordable and manage all of that for you.

Let’s say in addition to one permanent placement, a recruiter also places a contract employee at his client’s company for a short term assignment of lets say 8 months. During that time, the recruiter earns $16,000 in placement fees. That’s a steady income of $2,000 per month that you know will cover some tools/services, etc your firm is using monthly while the direct placements become more like bonuses on top of any contract placements that slowly start to add up. 

  1. No Guarantee

Yes, I said no guarantee! One of NPAworldwide’s new members explained how she has not had a guarantee for more than 10 years. Instead, she charges a fee of 30% of the candidate’s annual salary which is paid in three equal payments on the date of hire, 30 days after hire, and 60 days after hire.  In addition, she offers the client a discount off the 30% fee if the client pays sooner than agreed; 25% if the fee is paid within 10 days and 27% if paid within 30 days.

The reasoning behind not giving a guarantee is that the independent recruiter supplying the candidate to the client has no control over what happens after the candidate is hired. The client must accept responsibility if the candidate does not work out. Other professionals – accountants, attorneys, etc. – do not return fees.  Why should you? This is a paradigm shift worth implementing in 2020.

Do you have any other suggestions as to how independent recruiters may increase recruiter revenue in 2020?

When a 50/50 Split Placement Isn’t Equal

by Veronica Blatt

In NPAworldwide, our default position is that members share in a 50/50 split placement. That is likely your split placement expectation as well, but what about unique or unusual circumstances? There are times when a 50/50 split might not be the best option. Here are some examples I have seen: Read the rest of this entry »

What Happens When a Split Placement Falls Off?

by Veronica Blatt

In a split placement, the prevailing wisdom is that the partner providing the candidate is at the most risk of financial harm. The fee is paid to the partner working with the client. The candidate provider (we say ‘exporter’ in NPAworldwide) is completely at the mercy of the partner to pay them as promised.

However, the job order partner (we say ‘importer’) also faces financial risk. What happens if the candidate quits (or is terminated) AFTER the fee is paid, but BEFORE the guarantee period expires? How do you handle refunds to your client when you’ve given half of the fee to a partner? This does happen, although it’s not common. Make sure you understand this scenario before you enter into a split placement arrangement. Here are some things to consider: Read the rest of this entry »

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