How Expensive Are Recruitment Agency Fees?

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Recruitment Agency Prices Explained

Hiring the right people is vital for any organisation, whether it’s due to growth, a new position being created, or needing to replace someone. Whatever the reason, you want people who can not only fit in, but thrive in their role at the organisation. Finding the right candidates isn’t always easy, and the more niche the role, the tougher it gets. Working with a specialist recruiter can eliminate this difficulty, but this white-glove service comes with a price tag.

This article explains how much a recruiter will typically charge, what is included in these fees, whether it’s worth it, and how you can get better recruiters at more attractive rates.

How Much Should I Pay for a Recruiter?

The average recruitment fee will range between $5,000 and $20,000 depending on the role, seniority, industry and recruiter’s terms and whether the role is exclusive or not.

A recruitment fee will also include a replacement guarantee between three and six months so that if for any reason the candidate doesn’t work out within a certain pre-agreed time frame, they will be replaced free of charge. There are 3 main ways that the recruitment fee is usually calculated: 

Percentage of Salary

The first, and most common recruitment fee comes as a percentage of the final candidate’s annual salary (base plus superannuation). For example, if you hire a candidate on a $100,000 salary with a recruiter charging 15%, you pay $15,000 to the recruiter. 

The actual percentage can depend on many factors, including the recruiter’s flexible or rigid pricing, the agency they work for, the role itself, the current market, and what has already been tried to fill the role. If an employer has already tried Seek, LinkedIn, used three recruitment agencies for the last five months, interviewed 30 people and decided none of them are suitable, then its likely that if they engaged a new recruitment agency, they would charge a lot more compared to an employer that is asking a recruiter to be the first one to reach out to the candidate market on their behalf.

Recruiters prefer to work exclusively where they are the only consultant working on a role, as this reduces the chance of you hiring a candidate they didn’t put forward, and rendering all of their work so far invalid. 

On TalentVine, many recruiters will offer a lower fee to work with them exclusively. The average exclusive rate on TalentVIne was around 12% in 2021, while the average non-exclusive fee was 14%. Out in the wild, you can expect fees to generally range between 20% to 25% on average

Generally, recruiters are willing to offer lower rates on TalentVine due to the competitive nature of the marketplace, among other reasons. Every employer can rate their recruiter after working with them, successful placement or not, so recruiters are always incentivised to overdeliver.

Fixed Recruitment Fee

Though not the most common option, the fixed fee pay structure has been rising in popularity over the last few years. This model is very simple, you agree on a fee and pay it, either once a candidate is hired, or sometimes immediately, depending on the recruiter’s terms. If you’re using TalentVine, our standard payment terms are 7 days after the new hire’s first day. 

It doesn’t matter if you’re able to negotiate a salary lower than budgeted, or are stunned with the candidate and offer a higher salary to secure them. The fee you pay the recruiter will be the same. 

This is a great option for employers on a strict budget, allowing you to know and plan for the exact recruitment fee from the beginning, regardless of who you end up hiring. 

Retained Assignment

Retaining is a useful and effective pricing strategy when using recruiters for a senior executive role or niche position where headhunting is required. In this arrangement, you work exclusively with one recruiter, who is paid in increments. If you’re engaging a recruiter on a retained basis through TalentVine’s standard terms, one third is payable upfront, one third when the candidate shortlist is received, and one third upon successful hire. This is the standard arrangement in the industry, although some agencies may offer slightly different terms. 

The benefit to retaining a recruiter is that it helps you to build the trust needed to form a successful partnership. A lot of the work that recruiters do ends up going unpaid if the employer finds their own successful candidate, receives them from a different recruiter, or backflips on the decision to hire altogether. It’s good for the recruiters to know that you’re committed to working with them on this assignment, and they will typically work much closer with you in order to find the candidate you need, unafraid of putting in the hard yards as they know the work will pay off.

Is It Worth It To Pay For An External Recruiter?

While the answer will generally depend on the needs of your organisation, you will find that most of the time, the answer is yes. 

While you could try to side-step recruiter fees by undertaking the entire hiring process yourself, there are also costs associated with this. Juggling the candidate hunt, CV reviews, interviews, and reference checks with other day-to-day tasks can lead to a longer time to hire. A longer recruitment process can cost you just as much, if not more, when considering the unearned potential revenue that position could be generating, as well as the resources spent covering the empty position.

There’s often a misconception that a recruiter is paid to simply send you a few candidates. Behind the scenes, there is actually a lot more work that goes into the process, building networks over the months and years. Recruiters may be speaking to the north of 50 candidates per role, refining the selection based on the criteria provided until they have a shortlist ready for you. Access to their preexisting networks, in-depth market knowledge, paid software subscriptions and screening skills are just some of the benefits. 

Conclusion

Generally, you can expect to spend between $5000 to $20000 for a recruiter, though the actual amount depends on the role, the recruiter, and the salary. Full payment upon placement is the most common arrangement, either as a percentage of the candidate’s first year salary or a fixed amount agreed upon beforehand. The other option is to take the recruiter upon retainer, paying portions of the fee at different stages of the recruitment process. This can be a better option if you’re looking to form a strong partnership with the recruiter, and are willing to trust in their expertise. 

 

How do you find recruiters you can trust? TalentVine has a free-to-use recruitment marketplace that displays the peer-reviewed profiles of the top recruiters across APAC, on a per-role basis. You’ll be presented with the custom bids of recruiters that specialise in the role you’re hiring for. Compare ratings, past roles, fees, and performance metrics to make that perfect hire through TalentVine!

Get the best when working with recruitersKillian O'Sullivan - April 2022

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