Recruitment Agency Fees

[USHRRep]

Hello,
I'm new here and was very excited to find this forum. I am in the challenging position of being based in the US but supporting a small Australian sales office for our business.

We have an opening that we will be looking to fill and have already come across Seek, and other frequently mentioned job boards, as sites for us to advertise our openings. I'd like to research recruitment agencies so that we can utilize them as a back-up option if needed.

Can anyone tell me what the average or typical fee is (as % of salary) for a mid-level professional position? Also, are there both contingency agencies vs. retained-search agencies as well?

Thanks!

[Moz]

Hi USHRRep,

Welcome! I think you will find the Australian recruitment firms very similar to the US firms. Most agencies will take on a recruitment assignment on either contingent or retained-search basis. Fees will vary from about 15% to 22% depending upon the salary level for position. A retained search usually involves an initial fee (retainer) of one third of the projected fee and some recruitment companies may offer to agree on a fixed total fee up front to make budgeting easier.

There are of course a wide variety of generalist and specialist search firms, large and small. As with most service sectors some do a fantastic job, some are woeful and others are somewhere in between

As for advertising yourself, Seek is by far our largest job board but there are a growing number of specialist employment advertising products which may be used in conjunction with Seek. There's a paper on this site in the documents section here which gives a reasonable run down on the advertising options (The War for Talent).

What type of position are you looking to fill ?

Moz

[USHRRep]

Thank you for your response, Moz. I appreciate your help. I've looked over the document, and was able to get a rough sense of other avenues to research for advertising our position.

The opening is for a Marketing Manager/Marketing Coordinator. It's not a true management level position, but a functional manager. Because the person will be the only Marketing resource in the office, s/he will need to run the entire function in house, including developing programs, and then executing them as well. I believe the manager just re-posted this as a Coordinator, because the first advertisement attracted candidates too senior for what we need. Because this is a 5 person office, with HQ in the US (including the direct hiring manager), we need someone mature, independent and with strong initiative.

Do you know of any firms that specialize in Marketing talent?

[Moz]

Originally Posted by USHRRep

Do you know of any firms that specialize in Marketing talent?

Hi USHRep,

The only firm I know of that specialises in Marketing recruitment is Aquent, although I'm sure there will be others. This isn't a recommendation - I just saw them advertising in an Australian marketing magazine . That in itself is a good thing because at least they are trying to reach passive candidates, (which you won't do with Seek).

[USHRRep]

Thanks. I didn't realize they are in Australia. They're actually a US firm, based out of my home town here in Boston.

[aCE talentNET]

Post deleted by kevinh.

[Lynette]

Hi USHRRep,

If you are looking to reach passive candidates there are established Search methodologies available. I know that Chandler Macleod have a dedicated Marketing team and they also have this capability. Hope this helps.

Lynette

[USHRRep]

Thanks for the recommendation. I've actually been in HR for nearly 12 years, and have recruited for a good 8-9 years of that. In my ideal world, I would be able to reach out to passive candidates myself, but the reality is the 13 hour time difference poses a huge logistics challenge and so having someone on the ground there to help with the filtering and screening is a true benefit.

[Moz]

Originally Posted by USHRRep

.....the 13 hour time difference poses a huge logistics challenge and so having someone on the ground there to help with the filtering and screening is a true benefit.

USHRRep, I might be telling you how to suck eggs here, but I feel like writing so here goes 

The challenge of course is finding a good recruiter. Like almost any other category of service provider it often comes down to the individual you deal with. When it comes to recruitment services it also depends on their business model and what the drivers are for the consultants.

Some firms have a hierarchical structure where you deal with an ‘account manager’ and never actually meet the people doing the recruitment work. Personally I prefer to work with a single recruiter, usually in a smaller firm, who is involved in the whole recruitment cycle.

Another factor is how the recruiter is rewarded for performance and how that performance is measured. Many larger firms have KPIs which drive bad behaviour. For example recruiters (’consultants’) are measured on the number of cold calls they make per week, how many client visits they make, how many CVs they send out and how many interviews they book. The idea being that it is purely a numbers game and the more CVs you throw out there, the more likely you are to make a placement.

On the reward side, many recruiters are paid commission according to the dollar value of their individual placements, this can drive some behaviour behind the scenes which is not in the client’s best interests. For example if a recruiter interviews a high caliber candidate but they don’t have the right job for them at that time, do they make that candidate available to other recruiters in the firm? What’s in it for them if they pass the candidate over to their colleague who’s handling your requirement ? I’m sure you can imagine what happens if there isn’t any incentive!

Some recruitment firms have ways to deal with this, such as ‘candidate ownership’. Then Recruiter A gets credited with a share of the fee if Recruiter B places one of their candidates. But even then the share has to be worthwhile – in the current market a min of 50%. Other firms, particularly smaller ones have a reward system that works either partially or completely on a team basis which usually overcomes these issues.

Back to the original thread topic - fees. The fees you pay can also influence the behaviour of the recruiter, particularly in a candidate driven market, which is what we have in Australia right now. So many employers negotiate reduced fees with their recruiters without a moment’s thought for the behaviour this influences. Say a recruiter has a really good candidate who would be of interest to two clients with open requirements – client A who is happy to pay their standard fee, say 18%, and client B who has negotiated 13% - chances are that the client B will never even get to know about the good candidate.

On occasions where we’re recruiting for a particularly ‘difficult to fill’ role, and I know the recruiter probably has half a dozen clients looking for the same people, I have offered the recruiter an additional incentive to find the right person for me. Particularly where their fees are on the low side, say 15%, I have said I would pay 18%. I’m sure many HR people would be horrified at this, but at the end of the day we need the right people for the business and a few % on a placement fee is nothing in the grand scheme of things.

[USHRRep]

I prefer smaller agencies myself where I know that my rep/account manager has met with and screened the candidate directly. While this doesn't preclude good recruiters from being at large firms, I agree that they can be harder to find. Most agenices will randomly assign you to Account Manager A, so I take it as due diligence on my part to question what this Account Manager would do for me to earn my dollars and set my expectations for what I want this Account Manager to do.

I don't expect recruitment agencies not to act as salespeople, as they truly are, but they should understand that their good service and looking out for me would yield to lucrative results for them (e.g., more like to use them in the future). I have yet to promise a greater fee, though I think individual companies need to make decisions that make sense for them - how badly do they need that talent and what are they willing to do?

I am at a disadvantage here because our sales offices are quite small, so I cannot incentivize on the promise of volume. I think it's a matter of making sure that the agencies know how to pitch our opportunity to the right audience.

[Moz]

Originally Posted by USHRRep

I am at a disadvantage here because our sales offices are quite small, so I cannot incentivize on the promise of volume. I think it's a matter of making sure that the agencies know how to pitch our opportunity to the right audience.

I think smaller agencies, and particularly those who's consultants take a longer term view, are more likely to value your business.

Simple exclusivity is valued by recruiters - I mean who wants to work on a job knowing that half a dozen of your competitors also have the same job. It means you have a 1 in 6 chance of filling it and getting paid for your work.

Of course you could also go down the retained route. A retainer is an even greater incentive. It means that if the client pull the job for some reason at least you get paid something for your efforts.

[RogerB]

Recruitment agencies currently have 2 problems, they can not get applicants and they are in a bargining war to get assignments. In Melbourne I have been offered rates that range from 8 to 20%, from Major Recruitment companies. The average is 12%.

I was told the other day by a recruitment agency that the average turnover rate for agencies is 49% and one major agency had a 82% turn over in staff last year. Would you go to a medical centre that had this turn over in staff?

[Moz]

Originally Posted by RogerB

Recruitment agencies currently have 2 problems, they can not get applicants and they are in a bargining war to get assignments. In Melbourne I have been offered rates that range from 8 to 20%, from Major Recruitment companies. The average is 12%.

This doesn't make sense does it, if you're working in an area where demand exceeds supply. Why spend your time getting new business when you should be focussing on finding candidates for your existing clients/jobs?

I'll tell you why this happens, it's because of the stupid, outdated metrics or KPIs used by a lot of recruitment companies to manage their business.

Many recruiters are measured on the number of cold calls they make and the number of new job orders they gain, (among other things). It's part of an outdated performance model still used by many of the larger transactional recruitment firms, to whom recruitment is just a 'numbers game'. It's a recipe which ensures they will disappoint many of their clients. Not everyone operates this way, but plenty still do.