You’re a potential client looking to hire new people to your organisation.
Many potential hire managers are reporting that they have been approached about using an agency that uses a retained recruitment service vs the contingency model.
Those clients that are not familiar with retained recruitment, will then ask what it is and how does it work.
The answer is very straight forward and surprising simple so, let start with the one area that most companies are familiar with, and this called ‘Contingency’.
In simple terms contingency is effectively a no win no fee model.
If the appointed recruitment agency does not place the candidate in a job that is open by that company. Then that recruitment agency does not get paid.
It’s an effective tool for the company because they are not investing in the effort to search for a new person to come to work for them.
Which means that the recruitment agency has to bear all the upfront costs of marketing, the role, candidate search by pre screening the person. Conducting a first and second interview before short listing that candidate, then present the applicant to the perspective employer, who takes on the applicant and that recruitment agency then wins a fee, which typically between 15 – 35% of the first years’ salary.
What are the benefits of the contingency model?
The biggest benefits of recruitment by the contingency model when it comes to recruitment for the hire manager’s company is that there is no upfront investment required. So, a company or organisation will tend to prefer this model especially if the recruitment agency is new or if they have never come across the recruitment agency before.
The Main Disadvantages of Contingency Recruitment for the agency
The recruitment agency will bear the majority of the upfront expenses and if a placement is not made then that cost does not get passed on to the client. The average recruitment consultant works on number of job opportunities in order to fulfil their KPI’s so, it is not uncommon for an agent or consultant to be working on many different roles, to land two or three from every ten jobs which result in a fee.
What is the benefit of retained recruitment model?
Retained recruitment is the complete opposite model to contingency recruitment. Using the retained fee model, the client is paying a fee upfront for the recruiter’s services when that person is conducting a search.
The client is putting himself in the position of guaranteeing that they work exclusively with the recruiter when it comes to finding that company a suitable candidate.
When a recruitment agency starts to use this business model to conduct searches a recruiter’s reputation and track record is everything.
The main benefit to the recruiter when using the retained model.
Is that upfront fee which can be a full fee paid upfront, sometimes a 50: 50 model is used when it comes to payment. Some agencies work to a monthly income fee which is retained fee split into several months to retain that agencies services.
The disadvantage of the retained service to the client.
The client is investing their money up front. This model was generally used for high level executive search services. However, over the past few years, there is a growing trend with some recruitment agencies, who have started to pitch the idea of a retained service for lower income roles, targeting those roles as low as £30K per annum.
As with everything in life, time will tell if this a good thing or not.
The good news is that a high per centage of potential candidates will retain the services of a recruitment agency to help them find a position.
So, each recruitment agency will have to make a choice retained recruitment vs the contingent recruitment model.