The Diminishing Practice Of Contingency Recruiting

Vantage Points Header Joel Elveson

Contingency Recruiting in its purest form is when the recruiter/staffing firm engages in searches for talent on behalf of their client without collecting any upfront fee. They rely on making the placement in order to get paid. More and more staffing firms are shying away from this practice due to choking competition, diluted talent pools (qualified candidates) in addition to the often lengthy waiting time the recruiter has to wait in order to collect their hard-earned fee.

While the big multi-divisional firms are to a large extent continuing to practice contingency recruiting due to the heavy monthly billing they achieve in addition to the large volume of placements they do every month. Despite the high profit they show that offsets the expense and drawbacks that is incurred with a contingency firm many have taken to the practice of collecting an upfront deposit from their client in advance of any recruiting work being performed.

The thought process behind this practice is that by collecting a deposit upfront it offers a guarantee of sorts that the client is serious about filling the open position and that they are not using multiple firms for the same opening. This practice also shows the recruiting firm that their client is real and has every intention of paying the balance of the fee owed when the placement is made.

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In its heyday contingency recruiting was very popular on the part of the client (hiring organization) and the recruiter as it made sense to both parties. As time has gone on firms that collect a retainer fee from their client (retainer fee is money paid up front that is usually equal to the amount of the fee) is becoming the norm instead of the exception. Those firms collecting a deposit (not a retainer fee but a deposit that is agreed to by both parties involved in the transaction) are increasing in numbers as well at a rapid rate.

From the standpoint of the client there is usually a huge hesitancy to part with any money upfront as they worry about losing out if the firm does not perform. The correct argument the recruiter has to put forth is to compare the deposit to putting an attorney on retainer. The attorney collects his fee that he needs to cover his expenses defending his client but once again assures the attorney his client is serious about utilizing his service. The retainer fee does not guarantee the attorney will win your case. It does force the attorney to work harder on your behalf even though these fees are (for attorneys, recruiters along with other professions) are non-refundable.

The fee factor aside on of the other reasons pure contingency recruiting is being practiced less and less these days (it was never a good practice to begin with in my estimation) is that clients will often play one recruiter vs another or hire multiple firms to fill the same job vacancy. In many instances you have a situation where the same candidate applies to the same job opening with two different recruiting firms leading to the question which firm owns the candidate. Working exclusively with one recruiting firm to assist you in filling your human capital needs is the most practical and cost-effective way to go about the hiring process.

Many clients will try to sway the recruiter away from collecting a fee or deposit upfront is toc confront the recruiter by challenging them to show how good they are by sending in candidates. If any are hired they will tell the recruiter they will work out a fee with them. For those companies that have never engaged the services of a staffing firm (aka recruiters) a fee agreement is always worked out in advance of any recruiting work being performed and is signed by both the staffing firm and the client. It is at that time that the necessary upfront money is paid to the staffing firm.

Certainly there are dishonest staffing firms who try to collect a fee from a client and disappear. Any smart recruiter will tell you the way to make a lot of money in this business is to work hard while adhering to the highest degree of ethics. Recruiting is a tough industry to choose to work in due to the long sales cycle (months can go by before you get paid as you first have to make the placement and wait for the trial period to expire before a check is cut to you. It is precisely for this reason that undertaking a recruiting assignment without the benefit of being paid at least a deposit is impractical.

If you are a job seeker this article does not pertain to you. Any staffing firm you should entrust your job search to should not be asking you for any money. As you are reading all costs relating to getting you hired is paid for by either by the staffing firm or in the overwhelming vast number of instances all fees are paid by the employer to the staffing firm.

What is being presented for is my argument on behalf of my fellow recruiters that although ours is pay for performance service that does not mean putting in exhaustive hours, incurring expenses, etc. should be our burden alone to carry. In business you pay for the goods and services you use that originate from business. This is correct way for things to be done whereby both parties benefit from the transaction.

Contingency based recruiting is still being practiced but is rapidly becoming a stain on the industry due the aforementioned problems of getting paid. As stated above our economy is not operated in a manner that allows you to use a service and not pay for it until a later date or deny payment after delivery of service or product has been made.

The internet has forever changed the way business is being done in addition to the speed in which it is now conducted. The internet has positively impacted the staffing and recruiting industry although increasing the cost of the services the staffing firm must utilize. That being case is even more critical that staffing firm (If they are not pure retained search) secure a deposit from their client (preferably via electronic payment to avoid having to deal with bad checks or those checks that take longer to clear because of the amount of or because they are drawn on a bank from another country) so that the recruiting process can be started with the recruiter having some security to bank on.

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