Hello All,
I have joined a new organization as a Recruitment Manager and recently drafted a recruitment services agreement to tie up with recruiting agencies that was sent for the General Manager's approval. He came up with a question - why payment terms on the gross annual package? He feels that would be high, though we all know it's a market practice to pay candidate placement fees on the gross annual remuneration. But I still need to give him a professionally convincing answer. Please help, what should I write to him.
From Saudi Arabia, Riyadh
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I have joined a new organization as a Recruitment Manager and recently drafted a recruitment services agreement to tie up with recruiting agencies that was sent for the General Manager's approval. He came up with a question - why payment terms on the gross annual package? He feels that would be high, though we all know it's a market practice to pay candidate placement fees on the gross annual remuneration. But I still need to give him a professionally convincing answer. Please help, what should I write to him.
From Saudi Arabia, Riyadh
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Hi,
Your General Manager has a very valid question!
Yes, while you are right - historically it has been a market practice to pay a fee related to the annual package - there are some companies who are breaking away from the system. Given the globalization and technological advances, the subsequent intermediation has disrupted the best practices worldwide.
In fact, the advertising industry did away with the 15% fee almost a decade back - and it has some interesting spin-offs - with the emergence of several boutique firms specializing in media planning, creative firms - an interesting case study! Or even the IT services industry is moving from the time & material concept to 'outcome-based fee'!
Essentially, one pays fees in return for the value they get. In a contingent recruitment assignment, the fees are paid on a 'success basis' - and for outcomes, not for the effort. So higher fees essentially are a reflection of the 'uncertainty built-in'. Higher the risk, the higher the benefit, right?
The solution lies in the company policy/strategy. And the answer would lie in the question: why do you need an external agency in the first place?
There is also the need for more transparency at both ends. Would the recruitment agencies be a vendor or do you expect them to be partners? Commitment begets commitment. Most companies arbitrarily share a position with a dozen consultants to de-risk, and expect each consultant to show 100% commitment in contrast! It doesn't happen that way always!
I am positive your preferred partner would be able to arrive at a mutually agreed fee if taken into confidence.
Here are some pointers - if one were to dissect some of the variables that impact the fees are dependent:
- The rarity of the skill set you seek
- Will nationwide search and relocation be required?
- Seniority required
- Start-up company? or Major corporation?
- Number of positions to be staffed
- Complexity of the position to be filled
Wish you all the best!
Believe me, if you think the cost of the recruiter's fee is high, the cost of a bad hire is a multiple of that! People are not the most important assets of any organization. The RIGHT people are!
In my humble opinion, you must use external consultants only to find the talent you can't find for yourselves. Time to see the referral fees as a return on investment?
AK
From India, Hyderabad
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15Your General Manager has a very valid question!
Yes, while you are right - historically it has been a market practice to pay a fee related to the annual package - there are some companies who are breaking away from the system. Given the globalization and technological advances, the subsequent intermediation has disrupted the best practices worldwide.
In fact, the advertising industry did away with the 15% fee almost a decade back - and it has some interesting spin-offs - with the emergence of several boutique firms specializing in media planning, creative firms - an interesting case study! Or even the IT services industry is moving from the time & material concept to 'outcome-based fee'!
Essentially, one pays fees in return for the value they get. In a contingent recruitment assignment, the fees are paid on a 'success basis' - and for outcomes, not for the effort. So higher fees essentially are a reflection of the 'uncertainty built-in'. Higher the risk, the higher the benefit, right?
The solution lies in the company policy/strategy. And the answer would lie in the question: why do you need an external agency in the first place?
There is also the need for more transparency at both ends. Would the recruitment agencies be a vendor or do you expect them to be partners? Commitment begets commitment. Most companies arbitrarily share a position with a dozen consultants to de-risk, and expect each consultant to show 100% commitment in contrast! It doesn't happen that way always!
I am positive your preferred partner would be able to arrive at a mutually agreed fee if taken into confidence.
Here are some pointers - if one were to dissect some of the variables that impact the fees are dependent:
- The rarity of the skill set you seek
- Will nationwide search and relocation be required?
- Seniority required
- Start-up company? or Major corporation?
- Number of positions to be staffed
- Complexity of the position to be filled
Wish you all the best!
Believe me, if you think the cost of the recruiter's fee is high, the cost of a bad hire is a multiple of that! People are not the most important assets of any organization. The RIGHT people are!
In my humble opinion, you must use external consultants only to find the talent you can't find for yourselves. Time to see the referral fees as a return on investment?
AK
From India, Hyderabad
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