1. They don't have enough time to recruit the open position.
2. They have had trouble filling the job for some time now.
3. They have seen high turnover rates for the position and seek expert help.
4. They have posted the position and have not received the response they desire.
5. They do not have internal HR and would rather outsource hiring than do it internally.
"When looking for a recruiter, you should not cut corners when it comes to fees. You get what you pay for. If a few extra thousand dollars in recruitment costs means better employees, it's well worth it."
Mainly, recruiters charge their clients in two ways - retained and contingency staffing agreements. Here is a rundown of the two:
1. Retained Fee Structure - This is when your firm pays an upfront, guaranteed fee to the recruiters for their services. While all retained recruiting contracts are different, more often than not retained agreements give the recruiter exclusive access to your open listing.
2. Contingency Fee Structure - Contingency agreements are entirely performance based and you don't pay a recruiter until they successfully recruit an employee for your company. Typically, this is a percentage of the employee's first year compensation package and can range from 15% - 25% of that individuals pay.
Contingency recruiting contracts are non-exclusive and you can work with as many headhunters as you wish.
It would seem that option #2 would be a no-brainer, but it's not so simple. There are pros and cons to each.
Retained Contract Advantages and Disadvantages
When you work with a retained recruiter, you do have to pay an upfront guaranteed fee and there is more risk associated with that account.
However, when you pay a headhunter upfront, they are more obligated to work on your account and prioritize above other searches they are doing.
Many times, with retained recruiters you are paying for expertise and important hiring insight that a contingency recruiter is not going to provide.
With retained recruiting firms, it's best that you get some references prior to signing the contract and have more than one conversation with the headhunters that will be working on your account.
This is in lieu of just speaking with the sales rep. selling those services. If you have a good feel for those individuals and believe that they can represent your company in a matter that other recruitment firms can't, you're getting your money's worth.
Contingency Contract Advantages and Disadvantages
With a contingency contract, you have the advantage of working with multiple recruiters and only pay when a staffing firm successfully places an applicant.
While this is a clear advantage, contingency recruitment agreements have their downsides including:
1. You have no guarantee that the staffing agency is going to prioritize your account.
2. You are able to get less insight regarding the job market from those recruiters.
3. Often, you have to keep on top of the headhunters working on your account as they can leave the agreement as easily as you can.
4. Most employee guarantees are only 90 days which is a very short time in which you must assess a new hire.
In the End
When and if your company decides to use a recruitment firm, do it correctly. If you're going to pay a significant fee for the hire, don't worry about a few thousand here and there. Rather, be concerned about the quality of employee you're going to get.