Contingency vs Retained
Definitions
Contingent search firms are paid only upon the successful completion of a search—typically when the candidate accepts the position. The fee is typically a percentage of what the employee’s first-year salary will be. The search firm engages with the client from search launch to candidate acceptance. Clients may typically engage with 6-10 search firms for each role, no hire, no fee, the risk is on the search firm to deliver, the additional risk on the employer to get the role filled. This is a scattergun approach, that may do more harm than good to your brand.
Retained recruitment is a type of recruitment performed for a company by a recruitment agency on a retained, an ongoing basis. Retained recruitment is considered to be a more secure form of recruitment for the recruitment agency involved. The client pays a retainer fee up front to engage the services. This retainer fee is typically a percentage of what the employee’s first-year salary will be. The client will pay two or three more times during the search process to the agreed amount and payment terms, spreading the cost. This is typically on (a) engagement, on (b) short-list of candidates and on (c) acceptance by the candidate or start of the hire.
Across the IT industry the typical fees paid are equivalent to 20% of the hired persons first years’ salary, in other industries these can be a low as (15%-18%) or in others as high as (22% – 40%) dependent largely on the scarcity or level of the people across the different industries and they often raise & fall over time.
The time it takes
Glassdoor (a leading Recruitment platform company), conducted research to find out how long it takes the average UK employer to hire a new employee, this was established at 27.5 days. However, this again is highly dependent on the role you are looking to fill and the industry.
They found the job with the slowest interview process today is a professor, (at 60.3 days) — a two-month academic interview process that’s more than twice the average for most roles. That is followed by business systems analyst (44.8 days) would you believe, interestingly, communications specialist ranks 5th at 42.5 days. One of today’s most in-demand tech roles is that of software development engineer ranks 6th at 40.8 days, typically for a Regional Sales Manager (39.7 days) it ranks 8th.
Another recent survey published in part by the Global HR Research firm (ghrr.com) for more senior roles, put the average time to hire a C-level employee at 71 days. The report found that it takes even longer to hire for positions with ‘director’ or ‘vice president’ in the title – 76 days. Both numbers are significantly higher than the average across all industries.
Best practice
The process is often the most important element in the hiring of new staff. It’s about the amount of rigour that is put into the process, it’s not just about the time it takes to find the ideal candidate but are they actually right for you, the company and the team? Getting a glowing CV or Resume is one thing but it’s just a piece of paper at the end of the day, someone else could have created it for them. Doing screenings online or phone is one thing, screening face to face, watching & reading body language responses, asking hard questions, digging deep on the what and the why’s, is much better.
Having candidates do an in-depth, psychrometric behavioural assessments goes a long way to understanding how they work and is it in line with the team and company? Establishing a standard format and questioning regime applied equally to each candidate, enables you to evaluate their answers, providing a ‘level playing field’ for all candidates and helps greatly to benchmarking them against each other.
Time, to smell the roses
We’ve given you a lot of metrics above to consider, but it’s as much about what is right for you and your company, how you want to work, your own processes, how much manpower you have to spare or engage into recruitment verses working smart. The costs between contingency and retained is practically the same, 20% – 25% of the first year’s salary for each hire.
For contingency it’s about, have you got the manpower to manage a large amount of agency relationships and contracts, 1000’s of CV’s flying around without any remedy or recourse in actually filling the roles? You are in effect doubling up on all the work your recruitment companies are doing for you, which simply doesn’t make sense. Spend more time selecting high value recruitment partners, a select few, with the right knowledge, process’s and commitment to you and they will save time and money.
The result
Contingency is dead, redundant and far too labour intensive with very little benefit. Start moving towards a retained model and get the extra benefits, (technology, guarantees, time & money saved).
However, for the harder to fill and more senior roles, it’s even more important to protect your brand, fill the role quickly & with the right person. So, finding a good retained agency is even more important. Finding a partner, you can trust, that offers more. This can be with specific knowledge about the roles or level, industry or function. Or it can be about the level of rigour they put in, so you don’t have to. All of this saves you time and money, when they deliver.
Sometimes if you’re lucky enough you can find a company that uses technology to best effect, even better, or an agency that will guarantee its work, perfect, William Howard Associates Limited is one such company.
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