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Contingency Recruiting

Definition: Contingency recruiting is a service where a recruitment agency is paid only if they successfully fill an open position. The payment, often a percentage of the hired candidate’s first-year salary, is contingent upon the recruiter finding a candidate who is hired and stays at the company for a predetermined period.

How does contingency recruiting work?

Contingency recruiting operates on a risk-free model for the hiring company, where payment is only made upon the successful placement of a candidate.

Here is a more detailed look at how the process usually unfolds:

1. Understanding client needs: The contingency recruiter begins by understanding the hiring needs of the client. This involves understanding the job requirements, the skills and experience needed, the company culture, and other specifics of the role.

2. Candidate sourcing: The recruiter then uses their network, databases, and other resources to identify potential candidates. This could involve tapping into their existing talent pool, posting job ads, or active sourcing through platforms like LinkedIn.

3. Screening and interviewing: Once potential candidates have been identified, the recruiter screens these individuals to determine their suitability for the role. This could involve reviewing their resumes, conducting preliminary interviews, and assessing their skills and fit for the role and the company.

4. Shortlisting: After the initial screening, the recruiter shortlists the most suitable candidates and presents them to the client.

5. Interview coordination: The recruiter often also takes charge of coordinating the interview process between the client and the candidates. They manage the scheduling and any necessary follow-ups.

6. Job offer and placement: If the client decides to hire one of the candidates presented by the recruiter, the recruiter usually assists with job offer negotiations and the final placement.

7. Payment: Once the candidate has accepted the job offer and started in the role, the client pays the recruiter a fee. This fee is typically a percentage of the candidate’s first-year salary and is contingent upon the successful placement and retention of the candidate for a certain period.

It’s important to note that in contingency recruiting, multiple recruiters might be working on the same role for the client, and only the one whose candidate gets hired receives the fee. This can create a highly competitive environment where speed often takes precedence.

Pros and cons of contingency recruiting

Pros:

  • No Risk: Employers only pay when a successful hire is made.
  • Speed: Contingency recruiters are typically motivated to fill the role quickly.
  • Access to Talent: Recruiters have extensive networks and access to potential candidates that employers might not have on their own.

Cons:

  • Quality of Candidates: The rush to fill the position may result in a lack of thorough vetting.
  • Lack of Exclusivity: Since the recruiter’s payment is at risk, they might present the same candidates to multiple clients, leading to potential competition for the same candidate.

Contingency recruiters vs retained recruiters

Contingency Recruiters

  • Payment structure: Contingency recruiters are only paid if they successfully fill a job opening. The payment is typically a percentage of the hired candidate’s first-year salary. If no successful placement is made, the employer owes nothing.
  • Risk level: Employers face low financial risk with this type of arrangement, as they do not need to pay unless a successful hire is made.
  • Speed: Given the payment structure, contingency recruiters often work quickly to fill positions. They may be competing against other recruiters, so speed can be of the essence.
  • Level of engagement: Contingency recruiters may not spend as much time on in-depth candidate sourcing and vetting, as their payment is not guaranteed.
  • Best suited for: This model is often ideal for roles where the talent pool is large, the positions are not highly specialized or senior, and the hiring needs are immediate.

Retained Recruiters

  • Payment structure: Retained recruiters are paid a retainer fee up-front to conduct a search, regardless of the outcome. The fee is typically part of the total fee agreed upon, which is often a percentage of the expected first-year compensation of the hired candidate.
  • Risk level: The risk level for the employer is higher, as they must pay regardless of whether a hire is made. However, the retained recruiter is usually committed to the search until a successful placement is made.
  • Process: Retained recruiters generally conduct a comprehensive, thorough search and vetting process. They are dedicated to the search and will typically provide a shortlist of highly qualified and vetted candidates.
  • Level of engagement: Retained recruiters usually have a deeper level of engagement with both the client and the candidates. They typically take time to understand the client’s needs and culture and to vet potential candidates thoroughly.
  • Best suited for: This model is typically ideal for senior, executive, or highly specialized roles where the talent pool is small or hard to reach. It is also used when the position needs a comprehensive, targeted search, and discretion is required.

FAQ

What does contingent mean in recruitment?

Contingent in recruitment means the recruiter’s payment is contingent, or dependent, on successfully placing a candidate in a role.

How do I choose the right contingency recruiter?

Choosing the right contingency recruiter involves considering their industry expertise, track record, network, understanding of your business, and the terms of their services.

What types of roles are best suited for contingency recruiting?

Contingency recruiting is often suitable for roles where the talent pool is large, the role is not highly specialized or senior, and speed is more important than a comprehensive search.