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Recruiting
September 21, 2022

What is recruitment fee and how it works

Written by
Vasco

Are you running a business or about starting a new startup? Are you involved in recruiting? Or are you wondering how it works? I guess it is time to talk about how recruiting services are paid.

Why is it reasonable to address recruiting agencies?

What is included in the cost of recruitment services?

What are the most common recruitment agency fee models?

Hourly Billed Recruiting

Retained Search

Salary Percentage

Fixed Fee Recruitment

The OnHires payment model

The Conclusion

Why is it reasonable to address recruiting agencies?

If it were so easy to hire a specialist in time and with all the needed skills and qualifications, companies would cope with this task on their own. But recruiting is not simple and not easy.

Any business rests on people, and its success depends on the quality of its staff, what they can do professionally and how they get along with the team.

 

Recruiters perform titanic work for their clients, looking for candidates, selecting them, interviewing, and screening out in search of the only one most suitable for the position. They often have to deal with passive candidates, failed interviews, and colossal effort and time-consuming.

 

So, recruitment services, like any other services, not only cost decent pay but also justify and recoup their cost.

 

All these nuances should be understood by the clients of recruitment agencies who turn to them for services and want to know what the fee recruiting agencies ask includes.

What is included in the cost of recruitment services?

Each client’s order to a recruitment agency is individual. And as each company needs different employees with different parameters and quantities, the recruitment fee for each recruitment project will differ.

 

However, there is usually a certain standard cost framework applied in almost every exclusive agreement.

Such a framework usually consists of the following points:

  • A detailed explanation of the hiring project’s stages.
  • A detailed explanation of how the recruitment agency will save the client’s money.
  • A detailed explanation of how the agency will save the client’s time.

What are the most common recruitment agency fee models?

In general, recruitment agencies use one of the four pay-for-hiring models:

Hourly Billed Recruiting

With this pay calculation model, the recruitment fee is not tied to the type or level of the vacancy. It is based on the total number of working hours spent by the recruiting team working on this hiring project.

 

At the same time, advertising, candidates’ test evaluation, etc., are estimated separately. As a rule, under this model, the guarantee of the candidate’s replacement is not provided and is not included in the payment.

Retained Search

Using this payment model, the recruiting agency charges a percentage of the successful candidate’s annual salary as their placement fee. The payment is performed in three stages, in three installments, while the first two payments are not refundable and make up two-thirds of the total fixed fee.

 

Inclusion in the payment of advertising costs, candidates’ testing, etc., is negotiated separately.

 

Salary Percentage

The recruitment agency charges a percentage of the candidate's salary per year as their placement fee. Plus, this percentage is added to the superannuation component. The average percentage in the IT area is 20-30%.

 

By this model, the recruitment fee may sometimes include advertising costs, candidates’ testing, etc., and a ninety-day placement guarantee.

Flat Fee or Fixed Fee Recruitment

Following this payment model, the client and the contractor agree on a fixed fee. In this case, the fee is usually less than the one tied to the candidate’s annual salary.

 

When using this model, it usually goes about an exclusive agreement. Besides, advertising costs, candidates’ testing, etc., can be estimated separately.

The OnHires payment model

OnHires provides its clients with pay-per-hire recruiting based on the Salary Percentage model. With this model, the agency receives a percentage of the candidate’s annual salary. The amount of share depends on the position and its level.

Besides, OnHires offers subscription-based full-cycle recruiting based on the Fixed Fee Recruitment model. The fee depends on a quantity of positions to fill in during an agreed period as well as the number of the personal recruiters who will work on your project all the time. It’s the cost-efficient solution for big companies and companies that need to hire at a large scale. 

 

According to the inclusive agreement, our agency can also supply the client with a wide range of services, including closing positions, leading a team of recruiters, or running a full-scale recruitment department in your company. Additionally, there is an opportunity to integrate special HR software, set up recruiting processes, and staff onboarding and offboarding. Providing such additional services, we have a few fixed tariff plans.

The Conclusion

There are various payment methods, and each company chooses the one that suits them best. I would recommend that you familiarize yourself with the model OnHires uses, which has proven itself very well.

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