The Right Contingency Recruiting Fee is Still 20%...
March 13, 2015
You know the dance when it comes to negotiating contingency recruiting fees:
Recruiter: "We're a retained search firm, and our normal fee is 25 to 30%."
Company: "We can't pay a dime over 15%. And I need you to take it on contingency".
Recruiter: "Wow. I can't do 15%. Let me check on what I can do and get back to you."
<a day of silence>
Recruiter: "I pushed for an exception. Can you do 20% contingency?"
Company: "Done. 20% it is."
I've been on the record for more than 8 years saying that this consistent dance of negotiation in the recruiting world proves the right fee is 20%. I've observed that as a VP of HR, and now as a leader at a recruiting firm (Kinetix). If you get more as a recruiter, congrats. If you paid more as a company, I hope you got great value.
The 20% sweet spot was recently confirmed by Bounty Jobs, who conducts an analysis of all the searches that go through their ecosystem (more than $60 million in headhunter fees). More from Bounty Jobs:
Record agency results were driven by strong fees, and even stronger salaries, in 2014. The average dollar agency fee collected in 2014 was $22,113, 6.3% higher than the average fee in 2013 ($20,793) and 29% higher than average fees during the depth of the recession in 2008. Agency fees as a percentage, however, stayed relatively flat at 21.2% of first year salary, as compared to 21.0% in 2013. After a brief stumble in 2008 (when fees declined from 20.2% in 2007 to 19.7%), fees as a percentage have steadily risen every year. Fees as a dollar amount, however, surged in 2013 and 2014, reflecting the strength in salaries offered.
21%. Of course, you don't negotiate in single percentages, so my conversation outline above holds true. You do 20% and occasionally give in and do something larger for that "special position".
Good luck with the negotiation!
If you have an exclusive contigency assignment, the probability of success is only 50% at best. The probability of making a straight contingency deal is 10% and diminishes with each additional firm that a company uses. When you add in website posting, job board posting and social media, the statistcal chances decrease even more. Statistically, the average recruiter invests between $9000-$12000 of their time and money in what amounts to a race to see which resume gets into the company first. Because speed is the issue,quality suffers. Over the past several years, 80% of the people that were hired failed to meet the goals and expectations laid out in the interviewing process contributing to turnover costs of $5 Trillion. A 20% fee probably amounts to a database search and a job posting, not search in the true sense of the word. If you are seeking to put warm buts in cold chairs, you may accomplish that with a 20% contingency search, but if you are seeking someone to knock the skin off the ball, you are probably not going to find that individual using a contingency approach moving forward.
Posted by: Edward Woycenko | March 14, 2015 at 07:01 PM
If average fee is $22,113 and 21.2% "reflecting the strength of salaries offered" at $104,306. Contingency is comfortable in the six-figure jobs.
Posted by: Mike | October 03, 2015 at 04:33 PM
We never accept less than 25% and abhor those who do. I beg actual search professionals to do the same. The problem is any bonehead with a laptop can call themselves recruiters when they should be greeters at Walmart.
Our average fee was just north of $61k last year and 4 of my people billed in the top 1/2 of 1% in the industry. It can be done and those who "accept" 20% as reasonable do the space a huge disservice.
The hiring process in Corporate America is dysfunctional and broken and is only getting worse. Hiring talent should be the largest priority at any company but it has become an after thought, generally, now Corporate recruiter seems like the last stop before someone is given walking papers.
Why do my people average $61K? Because they know their value and stand their ground.
65 million companies in America....plenty of good ones smart enough to understand that you get what you pay for and paying for great talent is never a poor investment.
Posted by: David Ross | March 09, 2016 at 02:41 PM
If you have a great pipeline and great talent you should never budge on your fee. It is what it is and, if your "product" is worth it, they will pay. Think of it this way, you are a peddler of people and each one is the ONLY one on the planet. If they are great, a company would be foolish to pass....but most will because they will obsess on the fee, not the reward....most companies don't want the best talent, they want the best talent they can get from "free". The proverbial butt in a seat.....(not a good job description btw but it DOES get it "off your plate")
If you just downloaded a resume (the 85% of recruiters who should be greeters at a Big Box Retailer and stop mucking up the world of actual Talent Professionals because companies paint us with the same brush of incompetence you delivered) from Indeed, you deserve 5%
Actually, you deserve a link to job change away from providing talent for anyone.
Posted by: David Ross | September 18, 2017 at 02:48 PM