Recruitment pricing - Are we all doing it wrong?
It's that time of year with the run up to Christmas where every recruiter is trying to squeeze in those last few deals to get them over the line and hit their annual target. When reviewing some data from this year and last year I noticed a few interesting things that led me to ask - Are we pricing recruitment all wrong?
The large majority of agency recruitment is "Contingency". E.I. you pay upon successful placement of a candidate, typically around 20% of the salary. This model has proved so popular as it's effectively a "no win, no fee" approach. If an agency can't find you the right person there's nothing to pay, amazing right? perhaps not ...
The inherent problem with this model is that an agency/recruiter commits to all the work with no guarantee of payoff. They could invest hours and hours finding & screening candidates for the client to decide not to hire or another agency to fill the role. It's a huge risk! Therefore every agency will "hedge their bets". A typical agency recruiter has 10-15 jobs on at a time, spreading their time across various clients and roles knowing that only a % of them will be filled and lead to a fee.
Agency recruiters are heavily targeted and have to bill a certain amount. For example a typical senior recruiter will be targeted ￡200,000 per annum or just under ￡1000 per day when accounting for annual leave, bank holidays & weekends. If a recruiter spends 2, 3, 4+ days working your role and they don't fill the vacancy it's incredibly costly to them.
So what if we structured this differently?
For example: If you had a senior JavaScript developer role paying ￡60,000 - ￡80,000, you would typically pay a fee of ￡12,000 - ￡16,000 for this candidate (+VAT). I don't think however I've ever spent a full 12-16 days on a vacancy. Typically you'd get 20-30 mins or so a day spent on it alongside the other 10-15 vacancies, admin and business development activities. Recruiters are spinning a lot of plates.
领英推荐
If you paid upfront ￡1000 per day to an experienced recruiter they could source the market. Research what's available and present back some feedback and data along with the best 3-5 candidates currently available and interested. If they worked exclusively on your role, I imagine they could probably do this in 3-5 days, or for ￡3000 - ￡5000.
Obviously this model means more risk for the client as there's no guarantee that they fill the role for the money & it comes with a lot of trust that the recruiter will do a good job in their research.
However
Is contingency really worth the additional premium you are paying? I'd argue it's a lesser service and at 300-400% of the cost. Especially at a time when it seems everyone is looking to save some pennies.
I'd be curious to know your thoughts.