Recruiting firms have two primary ways of functioning: on a contingency basis or on a retainer basis. Which one is best for your needs? Let’s take a look at the pros and cons of each.
In a retainer situation, the hiring company pays the recruiter an initial fee before recruiting begins. Once the initial retainer has been paid and the recruiting agreement is signed, the recruiter begins work. Usually, the retainer is paid in three installments, with the second and third retainer payments tied to specific performance outcomes or timelines. The recruiter may be working on that particular assignment exclusively, and their responsibility is to provide qualified candidates for the open position for the client (the hiring company).
When a company establishes a retainer relationship with a recruiter, it's on more of a trusted partner basis. The recruiter is being hired and paid as an outside extension of a client’s internal team. With this type of arrangement, recruiters ise a dedicated search process to find the right candidate. The focus is on quality and appropriateness for the position.
With a retained search, recruiters are protected from competition from other recruiters because they usually have an exclusive working relationship with their clients.
In a contingency search arrangement, the recruiter only receives payment if they fill the position. And it 's not unheard of for the same assignment to be farmed out to a number of recruiters.
Contingency search can be non-exclusive or exclusive. In a non-exclusive contingency search, there is no mutual commitment, and candidates can be presented to multiple clients. This approach is frequently used on low-priority positions. An exclusive contingency is a signed exclusive agreement between the client and recruiter, and typically includes a specific timeline, commonly 30 to 90 days, in which the recruiter must deliver results.
A contingency arrangement is more of a client-vendor relationship. A client may have several recruiters that are attempting to fill a position. While a client may assume that having multiple recruiters to find a candidate is advantageous– and it can be – there are definitely some drawbacks.
When recruiters know they're competing with others on a search, there's a tendency to rush the process and be the first one to present a good candidate.
Some recruiters in a contingency situation may have the attitude: “Well, it’s not a perfect fit, but I'll submit this candidate to see what the client thinks.” In this scenario, the recruiter may think a candidate is a long shot—and now that long shot has to be examined and vetted by the client.
In addition, contingency searches involving more recruiters can mean more work for the client. There tends to be more people to interview with this approach. If they're the right people, that’s wonderful. But if multiple candidates miss the mark, the contingency process can take up valuable time that many clients don't have.
So which route should you go? It depends. Contingent recruiter relationships might be best in the following circumstances:
- There are many high-quality candidates available.
- The need is less mission-critical and less urgent.
- You have more time to interview and vet candidates that might not seem like the best fit.
Retainer recruiter relationships might be the best if:
- The need is urgent and critical to the company’s mission.
- You're looking for a recruiter who is accountable to you and will provide extensive documentation to recommend a candidate.
- You're willing to pay an expert recruiter for their time and expertise to seek out the best candidates.
The decision of the best approach should reflect the priority of the client in filling the position. The client and recruiter should discuss the appropriate priority in filling each opening. Once that's established, the recruiter and client can decide whether a contingency or retainer would achieve the best results.