The recruitment fee structures explained...

Nov 13, 2018
Ever wondered how the financial side of recruitment works? Well, here’s the plain, unvarnished truth.

In the past, the fee element of the recruitment process has been shrouded in mystery. The truth is, it’s a relatively simple fee structure that isn’t a million miles from other service industries. But that’s the critical point that often gets missed; when people engage a recruitment firm, some think they’re buying a product but in truth, it’s a service.

When you engage a recruiter, you are buying their time and their expertise. The cost structure for this time and expertise is differentiated based on whether the hire is permanent, fixed-term or temporary. Permanent assignments typically command a fee of 20% of base salary; fixed-term assignments command a pro rata fee of roughly 30% of base salary; and temporary assignments generally command a higher fee again as the recruitment firm payrolls the person, seconds them on-site and assumes much of the administration and risk involved with hiring temporary staff.

This is all relatively clear cut, but the process can become confusing when the issue of rebates arise. A rebate is a partial refund and is generally discussed when a recruiter fills a position for a client, but the new hire doesn’t work out. Where the recruiter has made a strong recommendation or the new hire has conducted themselves unprofessionally, then there is certainly a case for a rebate if the new hire failed to meet the basic and stated expectations of the hiring manager, as outlined in the job specification.

Where the candidate was driven out of the firm by an aggressive corporate culture or by being put on reception, for example, the responsibility for the new hire’s exit lies with the company as opposed to the recruitment firm who recommended him or her. In such cases, the hiring manager must assume responsibility for the departure - not the recruiter, as there was nothing wrong with the service provided.

The best person for the job?
Hiring managers also need to understand the link between the nature of the role and the talent available. Making a permanent hire is like buying a car – you can build it to any specification you like. If you’re renting, on the other hand, your options are limited to whatever is in the carpark. It’s a crass analogy, but the reality is simple – when hiring for a fixed-term or temporary vacancy, hiring managers should understand that they will get the best available person, not the best person.