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July 28, 2017

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Retained Search vs. Contingency Search

December 27, 2016

Here's a simple comparison of Retained search vs. Contingency search, including the pros & cons of each.

 

When most people think of recruiting, they typically think of agency recruiters.

 

You know...the ones who are always emailing you, leaving you voice mails or dropping off marketing slicks, candy or random tchotchkes at your office in an effort to get on your company's recruiting vendor list.

 

However, there are actually two main types of recruiters and I’ll quickly summarize the differences for you below...

Contingency recruiters or “agency recruiters” will recruit on your jobs for “free.” However, when you choose to hire a candidate presented by that agency, you now owe them a fee which is typically 20% to 30% of the candidate’s first annual base salary.

Retained recruiters charge a negotiated upfront fee to initiate their search and upon the successful hiring of a presented candidate, the client can be expected to pay the recruiter/firm a fee up to 50% of the candidate’s first annual base salary. Retained recruiters typically work for large or boutique firms.

 

CONTINGENCY RECRUITMENT

PROS:

  • The biggest pro for the contingency model is that it’s pay for performance

  • The second pro is that the contingency model can deliver a wide variety of candidates quickly, especially if you’re using several agencies

  • Although it’s still pretty expensive, contingency search is typically less expensive than the retained model (i.e. 20% to 30% of a candidate’s annual salary vs up to 50% of the annual salary for retained recruiting)

 

CONS:

  • The contingency search process is focused on presenting candidates in high volume as quickly as possible. This sounds great on the surface, however it’s a bit of a house of cards

  • The contingency recruiter has to compete and deliver faster than your HR or internal recruitment team, including any job ads your company has online and of course, any other recruitment companies on your vendor list that have approval to work on the requisition

  • If the candidate pool for your job opening is small, then it’s likely the various agencies you’re using are going to be focused on the same candidates. The agencies will typically scramble to get the candidate(s) to sign an exclusivity agreement of some sort with their firm, which then gives the candidate leverage to choose which agency can promise the most to them

  • So in essence, the true unspoken goal of contingency recruiters isn't to adhere to a rigorous recruiting process, but to present resumes faster than any other competing channels. At the end of the day, speed to present makes an agency money, not a comprehensive internal process

  • Contingency recruiters usually work on a large number of concurrent job openings and compete against other recruiters in their own office to “close” as many jobs as possible. Therefore, if your requisition is harder to fill than someone else’s, a recruiter will typically focus most of their attention on jobs where they can get easier wins. Since contingency recruiters have no assurance that they’re going to be paid for their work, it makes sense for them to work on the jobs that will likely yield them the most financial success. Basically, it’s a total numbers game

  • Contingency recruiters also tend to submit candidates in volume in the hope that someone will “stick”

  • The candidate can become a bargaining chip of sorts in that the more money the agency can get you to pay their candidate, the more money they will make on the direct hire fee​

 

RETAINED SEARCH

PROS:

  • Retained search is a higher end solution that closely resembles a business partnership. These recruiters will work closely with the hiring manager or HR contact and will adjust to your methodology or internal process. They will work on your position until they fill it

  • Retained recruiters usually only work on 3 to 5 requisitions at a time, while your internal recruiter may be working on 15+ and who knows how many the contingency search firm is working on

  • Retained recruiters will typically make more of an effort to learn and appreciate your company culture and exactly how the position impacts and fulfills the needs of your team & company

  • Retained recruiters can allocate more time and energy into recruiting passive candidates and manage more complex search campaigns in an effort to lure the best candidates (vs. seeking the best available candidate on a job board or in a database, which contingency recruiters generally prefer to do)

  • With the retained recruitment model, you’re likely to get regular recruitment activity updates, market data & metrics that you can readily share with your direct manager or business partners

  • Retained recruiters are generally more thorough and take the time to get things right, since they know they’re going to get paid for their efforts

  • Retained search candidates generally have more success in the roles they’re hired for and stay with the company longer

CONS:

  • Retained search is really expensive (except at Half Price Recruiting of course)

  • When it comes to resumes, if you value quantity over quality, retained search might not be the best fit for you

  • The retained recruitment model can be challenging sell to your hiring manager, corporate recruiter, or whomever controls your hiring budget, especially since you’re asking them to cut a check for recruiting fees before they’ve delivered any candidates (Use this blog article to help you sell them on the benefits of retained search)

  • Again, the candidate can become a bargaining chip of sorts in that the more money the typical retained search firm can get you to pay their candidate, the more money they will make on the direct hire fee

*Hiring on a budget? HalfPriceRecruiting.com has the lowest retained search fees in the industry. Come give us a try today!

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