Tag Archives: contingency recruiters

How Much Does A Headhunter Cost?

In today’s blog we will cover the way headhunters are paid, how much they cost, and the different fee models in which you can hire a recruiter.

Particularly, contingency or retained headhunters.

The costs for various recruiters are similar and there will only be minor differences depending on which company you work with.

It’s important to keep in mind that the fee models for permanent placement candidates versus contract, freelance or staffing can be different.

Staffing recruiters are typically never referred to as headhunters.

When looking to hire a headhunter you’re typically looking for someone who’s going to find a long-term full-time employee.

A headhunter is someone who is hunting high-level, typically director level or above, talent for an organization.

FEE MODEL FOR CONTINGENCY & RETAINED RECRUITING

A headhunter fee is always based off of the candidate’s first year salary as negotiated in an offer letter.

Depending on the headhunter, that first year’s salary can include a sign on bonus or any other compensation that happens in that first year.

The first year’s compensation typically would not include sales commissions or bonuses.

The only bonus that is usually included in a first year salary when calculating the recruiter’s fee is a sign on bonus.

Relocation expenses and anything else of that nature would not be included in the calculation.

RECRUITING FEE RANGES

Whatever the headhunter’s fee is would be multiplied by the first year’s starting salary.

For example, if a Director of Marketing is offered a position at $100,000 and recruiter’s fee is 20%, that would be a $20,000 fee paid to the recruiter.

In terms of the range of fees, these can vary greatly depending on which firm you work with and what type of position you’re working.

Fees can be as low as 15% and as high as 40% or even 50%.

The industry standard is typically between 20 to 25%.

One thing to keep in mind when hiring a headhunter, as with anything, is that you always get what you pay for.

There are a lot more firms out there nowadays doing extremely low fees like 15% while some other firms are up to 30-40-50%.

That doesn’t necessarily mean that you’re going to get a much better service than you might at the 25% range.

FOCUS ON WHAT’S IMPORTANT

As a note, I’ve written other blogs about tips for hiring headhunters covering more important factors than the fees alone.

You should be focused on hiring the right headhunter for your business than trying to get the best deal.

At the end of the day, if you hire a headhunter who is extremely cheap, but not going to get you the results you need, then you’re at a loss.

RETAINED RECRUITING

Retained recruiting can work in a couple of different ways, but is similar to retaining a lawyer.

Although when you’re retaining a lawyer you’re typically making a monthly payment to have them working for you.

This isn’t typically the way that retaining a recruiter works, although you can retain recruiters this way if you have substantial recruiting needs.

Typically a retained headhunter is going to work on one or a handful of positions.

When retaining a recruiter you’re typically going to pay an upfront fee, also sometimes known as an engagement fee.

You’re paying that recruiter for working a search for you and typically that recruiter will have exclusivity working that role.

Any money that you pay upfront to a retained recruiter will come out of your final invoice.

RETAINER FEES

A typical retainer is a third of the estimated fee.

Again, if you’re hiring a retained headhunter to work a position with an estimated salary of $100,000, that’s a $20,000 fee.

If the retainer is 1/3 of the $20,000 fee, you’ll pay roughly $6666, which would then be deducted from your final invoice.

Many retained firms ask for 1/3 of the fee up front, another 1/3 if the placement hasn’t been done at 60 days and the final 1/3 once the placement is complete.

Many companies stray away from retained search firms because any of the money that you pay up front is at risk.

If for some reason they don’t fill the role, you put it on hold or you find someone on your own, you’ve lost that money.

Aldebaran has a very unique retainer model that is extremely low risk, but still gets all the benefit.

If you’re interested in learning more about how we work you should reach out to us!

Although retained recruiting is slightly more risky, it is highly more effective than contingency recruiting.

CONTINGENCY RECRUITING

Contingency recruiting tends to be a favorite for a lot of companies filling lower-level positions.

Retained recruiting tends to be reserved for more high-level roles that require special attention.

The fee that you pay in contingency recruiting is contingent on the recruiter finding the right candidate and you hiring them.

With the contingency search you only pay a fee if and when you hire someone from that headhunter.

From a financial perspective it’s less risk because you aren’t paying any money upfront to secure having the headhunter work for you.

Again we can’t stress enough that you get what you pay for!

RECRUITERS PRIORITIES

Recruiters are always going to prioritize their search internally, and this makes sense.

If someone has paid us a retainer fee we are going to have the work go toward that job, it’s only fair.

Most recruiting firms will only be able to budget a certain amount of time for any contingency search.

For retained searches, recruiters will typically work a job until the job is done.

That’s why retained searches tend to be 30-40% and even sometimes 50% more effective than contingency recruiting.

QUALITY OVER QUANTITY

I talk with a lot of clients with tough roles to fill and they complain that contingency recruiters aren’t showing them good candidates.

This isn’t too much of a surprise.

If you have a tough role you’re looking to fill, a contingency firm is going to give it a shot maybe for a few weeks.

If they don’t come up with somebody it’s going to be less profitable or sometimes even negatively profitable for them to continue working the role.

Contingency firms simply cannot dedicate unlimited resources to contingency searches.

When you’ve got a tricky role or something that requires special attention you really want to go the retainer route.

The retained route is way more effective and if you have a good recruiting firm that you trust, this shouldn’t be an issue as it’s just an upfront payment.

If you’re confident they’re going to find you somebody then that’s the way to go.

CONCLUSION

So this is a basic rundown of how recruiting firms and headhunters are paid.

At the end of the day you want to find a recruiting company that is a good match for you, your company and your industry.

You need someone you can trust who’s going to find you quality candidates.

This should be your primary concern and cost should be your secondary concern.

You do get what you pay for and it is worth it to pay a little bit more for a good recruiter. 


How do you find a great recruiter anyway? Go here for more: https://bit.ly/2EJyIrE


Have questions or want to find out about working with us? Let’s chat! https://aldebaranrecruiting.com/looking-for-talent/

How To Hire A Headhunter

It is certainly important to follow a process when hiring a headhunter because there aren’t as many good headhunters as there are mediocre ones.

The recruiting industry is littered with a massive variety of different types of recruiters and different types of people.

Recruiting is an unregulated industry which means you don’t have to have a license or any sort of certification to call yourself a recruiter.

Therefore anybody can put that they’re a recruiter on their LinkedIn profile without having any experience or qualifications.

There are a lot of inexperienced, unethical, ineffective, etc. types of headhunters and recruiters out there.

It’s critical that you are smart about how you hire a headhunter or a recruiter.

LESS IS MORE

It’s also really important that you don’t make the mistake that some companies make by thinking more is better.

It is never a good idea to hire three, four or even five different headhunting companies to work on your open positions.

You’ll end up managing too many relationships which takes up too much time and the market can get oversaturated with your position.

Candidates will have three or four people reaching out to them about the same role and this will make your company look desperate in the market.

This is not a good initial impression to make with potential candidates.

At most you want to be working with two headhunting firms at a time and ideally really only one.

The goal should be to find one good recruiting firm that can help you with certain roles.

HIRING MORE THAN ONE RECRUITER

You may need to work with multiple recruiting firms depending on their specialties and which roles you’re trying to fill.

For example, you might need one headhunting firm to focus on sales and marketing and another to focus on technology roles like developers and software engineers.

Splitting it up this way can be very effective as different recruiting companies will be working different roles. 

This will also prevent companies from stepping over each other and you will have less relationships to manage.

SEEKING REFERRALS FOR A HEADHUNTER

How you go through the process of hiring a headhunter is important because the goal is to only have one or two at your disposal.

You want to start your search in the usual places such as Google and Yelp, although keep in mind Yelp tends to be more localized.

You may want to think about some business colleagues that you could check in with about a referral and get some insight from them.

It’s likely that some of your colleagues, some of your competitors, or some of your other partners have worked with recruiters in the past.

A referral is always going to be great because you already know that this person has some sort of track record.

You might also want to think about if you’ve ever been recruited before.

The company you’re at may have also used previous recruiters and that could be a good place to start as well.

At the end of the day, we recommend doing some online research on companies pages, websites, social media and LinkedIn.

INTERVIEWING POTENTIAL RECRUITERS

You can then narrow it down to a handful or five or less companies that you want to interview.

This gives you a chance to see who’s going to be best to work on the particular role or roles that you need.

It’s very critical that you interview the headhunters to find out who’s going to be the best for your company.

You want to find out what their industry specialty is, what types of professionals, and what types verticals and companies they work with.

You certainly want to hire a recruiter that has experience working with your type of company.

FOCUS ON INDUSTRY AND VERTICAL 

Focus on industry is more important than focus on a particular type of role.

Sometimes hiring managers and HR people will get too bogged down on a certain title or type of position.

Types of positions are extremely narrow and a good headhunter’s reach is going to go beyond just certain types of positions.

A good recruiter will focus on a specific industry or vertical and will be able to work most positions within that industry or vertical.

For example, we focus working with a lot of advertising, marketing, and PR agencies and we can fill 99% of roles within those industries.

This is because we are so focused on that vertical, that we understand those types of companies and have deep networks there.

CHECKING OFF THE BOXES

Ask about their process, how in-depth they are, and if they’re focus is more on quality or quantity.

You want to be sure you’re working with a recruiter who is more quality focused.

Ask them on average how many resumes do they send to a client to get a job filled.

This will give you some insight into the kind of quality they are sending.

Ask them how they are going to figure out how to hire for your culture.

Hiring for culture is critical and this is something that you want to be really interested in.

How is this potential recruiter or headhunter going to be able to represent your company accurately?

Once you’ve interviewed a handful of headhunters, take a look and see what boxes they check off and who will be the best fit.

It’s important that you have an understanding of how they work and how they’re going to work on your behalf.

You have to be sure you can trust this person to represent you, your team and your company.

Does this potential headhunter have a strong grasp of the position you’re hiring them to fill?

Do they understand my company and my industry?

You can see how interviewing headhunters is very important as it is a major time investment.

RETAINED VS. CONTINGENCY RECRUITING

You’ll also need to decide if you’re going to go the retained recruiting or contingency recruiting route.

Contingency recruiting tends to be the most common where you will not pay a fee unless the recruiter finds you someone that you hire.

Retained recruiting is where you pay an upfront engagement fee.

Like anything, you get what you pay for and retained recruiting is wildly more effective than contingency recruiting.

Many people complain that their contingency recruiter didn’t produce the results they wanted. 

What they don’t understand is that contingency recruiters can only put in so much work since there has been no fees paid up front.

Contingency recruiters are shouldering all the risk, so your role is likely not top priority.

This is why here at Aldebaran our retained fill rate is above 95% and our contingency fill rate is around 70%.

That is a 30% gap in effectiveness on retained verse contingency – a huge gap!

So again, you really do get what you pay for!

Although it can be risky to pay a retainer up front, it’s going to get you way better results.

If you think you can trust a recruiting firm and they seem like the right fit, you should consider paying an engagement fee.

Especially if you’re serious about getting your position filled.

OTHER THINGS TO CONSIDER

Don’t let your fear of a recruiter not getting the job done get in the way of getting really positive results.

Something else to keep in mind is hiring your headhunter based on location.

Some companies think they need to have their recruiter be local to whatever city they’re in, but this is not the case.

Hiring your recruiter based on location can actually limit you greatly to the types of great headhunters that are out there.

For example, we work in every major market around the country.

Although we’re based in San Diego, our largest candidate and client pools are in New York and San Francisco.

So you can see that location doesn’t limit us or you as a hiring manager at all.

This may be the case with many headhunters so you certainly want to be open to recruiters that are in other markets and not just your local market.

Again, the focus should be on industry, vertical and candidate expertise.

These things are much more important then location.

CONCLUSION

At the end of the day there are some very important criteria that you want to take into consideration when it comes to hiring a headhunter.

If you find a good one be sure to hang onto them.

By the way, we are one of those so feel free to give us a call!


Want more guidance on hiring the right recruiter or headhunter? Go here: https://bit.ly/2CdWv5m


Have questions or want to find out about working with us? Let’s chat! https://aldebaranrecruiting.com/looking-for-talent/