How Much Should You Pay When It Comes to Contingency Recruiting Fees?

Capitalist Note - I received 3 emails last week from HRC readers asking me about contingency recruiting fees, so I'm thowing you this rundown I did over at Fistful of Talent.  If you haven't found Fistful of Talent yet, check it out, then subscribe here.  It's a group of recruiters and HR/Talent pros talking about all things talent.  Additional Note - to my recruiting friends reading this post, if you demand more than 15%, just consider yourself one of the "special" recruiters.

I've been asked by some HR friends in the last month what the going rate is for a contingency search placement.  At the risk of being attacked by my FOT friends, I'm going to lay out the dance that I've seen performed countless times as I've been approached by high quality, low quality and medium quality recruiters who want a placement in our shop.

First up, don't think of it as the going rate.  If you do, you won't end up where you need to on the company side.  As with all things, you have to think about the reality of negotiating when opening your mouth for the first time.

Here's the reality regarding contingency search fees:

-Almost every recruiter is going to say their rate is 25-30% of the first year's salary.

-You have to have a position on what you are going to pay. 

-After negotiating, the 25-30% quoted initially can usually be whittled down to 20%.  If the recruiter is playing a volume game in terms of trying to be active in as many searches as possible, you can sometimes get 15%. 

So, the recruiter says 25%, you say 15%, and you usually agree to 20%.  Welcome to the wonderful world of negotiation, where the first number is rarely the real number.  It's like buying a house...

My experience is that 20% is a pretty real number that quality recruiters will work for and will feel fairly compensates them.  Even an expert like Harry Joiner talks about 20% being a common fee.  I also think you have to be careful being a bulldog and negotiating things down further than that, because all things being equal, who is the recruiter going to give the best candidate to?  You at 15%, or a similar search at 20%

OK, maybe the candidate will go to both searches - but you can bet a smart recruiter will have a greater sense of urgency to close the candidate with the 20% as opposed to the 15%.

Final note - develop a special relationship with a recruiter you value, and you'll find yourself either taking their fee to 25%, or providing them a 30-day exclusive at the 20% rate (that means you aren't giving it to other recruiters). 

As long as you're making that decision on past results, it's a good call.  Results matter, and a positive track record should bring a premium over time.

So, they say 25%, you say 15%, and you settle for 20%.  That's been the vibe with the last 20 recruiters I've interacted with.

Comments

[Costello]

Or instead of paying me 20-30%, HR can get off their lazy asses and stop surfing TMZ, and do their jobs. I certainly hope not.

[you get what you deserve]

Referring to your customers and potential customers as "lazy asses" busy "surfing TMZ"...is that your marketing plan? Good luck with that.

[Ryan]

I like the part about adding a 30 day exclusive. There are other tools you can use besides just a 5% blocks. Exclusives or having a scale system depending on title (15% for mid level positions, 20-25% for upper level positions and 30% for the one legged Gypsy with purple hair and a peg leg made out of cedar