Pricing and fees—it’s a love hate relationship. Is pricing negotiable? Short answer: yes, it is, but there are some variables to consider.
Yes or No, Is Pricing Negotiable?
Yes!! Pricing is negotiable, but that doesn’t mean either side is open to negotiating. Some recruiting firms put their foot down when it comes to fees and the same is true for client salary offers…but more often than not, you can negotiate.
How Are Fees Set/Determined?
Average contingency recruiting fees range from 20-25% of the first-year salary of a candidate. The rate set by recruiting firm may include any and all of the following:
- Experience/track record of recruiter or agency – if a firm has proven themselves adept at finding and placing a certain type of candidate, they can charge a higher fee and their clients are often happy to pay it.
- Time finding candidates – if a company’s search process tends to require a greater expenditure of time on the recruiter’s part, there is less likelihood of a discount. Time kills all deals, and if the client’s expectations are unreasonable (see purple squirrel), or they are slow to make a decision or provide feedback, then the recruiter’s “time risk” of taking on the search is higher.
- Track record of company – on the flip side of the prior reason, the ability of the company to make it easier on the recruiter can often earn them a discount. If there is an amiable partner-like relationship where the client is proven to be fully engaged by providing timely feedback and moving the process forward with a sense of urgency, the time risk to the recruiter is lower.
- Volume – if the recruiter feels there is a good chance to make multiple placements at a company throughout the year, they may flex on their fee.
- Sole proprietor - if a recruiter has no employees and works from a home office, he/she has much lower operating costs and can afford to give a much deeper discount.
If your potential recruiting agency is working off of a contingent fee, that means that only the winner gets paid, there is no prize for coming in second. Since time is the only commodity a recruiter has, pricing is heavily weighted on factors that are perceived to increase or reduce their time expenditure and therefore the probability of winning.
Companies also need to keep in mind some important factors when negotiating for a lower fee:
- Time – What is the cost of having your position stay open for months on end? Would you pay a little more to be able to get your position filled sooner so you can focus on your real job? There is sometimes a reason that a firm is quick to offer a lower fee and many times it is because they are just not that good and have to offer discounts to get more searches to reach their revenue goals. Larger firms have access to larger pools of qualified candidates than a one-man shop does, and can often identify candidates much quicker.
- Quality – Basic economics sometimes weighs in regarding a recruiter’s compensation model, which is heavily commission based. If they stand to earn 20% more (that’s the difference between a 20% and a 25% fee), which search do you think they might spend more time on and send their best candidates to?
While agreeing to a higher fee does not guarantee better results, these are very real issues to consider when hiring/negotiating with a recruiter. If a search firm has been successful finding people for you in the past, it is probably a good idea to continue on with them until they prove otherwise. Switching to another firm just because they offer a lower fee can end up costing you more in the long run.
If you have read this to the end and have gone through the suggestions to no avail, please give us a call at 713-357-9565. We want to give unbiased answers to your questions, whether you choose to engage our help or not.