Retained and contingency assignments are terms frequently used in recruitment but not all employers – nor recruiters themselves – fully understand the difference. Here we outline the principles of each type of assignment.
A contingency assignment is an agreement between the recruitment agency and the employer to fill a specific vacancy on a ‘no placement, no fee’ basis. In other words, the recruitment consultant presents CVs of suitable candidates who they believe are a potential fit for the role with no obligation from the client that they will interview the applicant. Recruiters are only paid for their efforts if one of their candidates is selected for the position, accepts the offer and starts working for the employer.
There is no guarantee of payment in contingency recruitment. Generally, employers will place the same vacancy with a number of recruitment agencies and candidates may find themselves approached by several recruiters for the same vacancy. Additional competition comes from job seekers who approach the company directly and internal applicants.
An ability to work quickly is essential for the contingency recruiter who will often submit a large number of CVs for each role. Getting the agreement of candidates to their CV being put forward for a vacancy ahead of other agencies is vital.
Exclusive or Non-Exclusive? To minimise risk and increase the chances of securing a placement, a recruiter may persuade the client to agree to a period of exclusivity on a contingency assignment. This gives them an agreed time to source suitable candidates before the employer offers the vacancy to other recruiters.
Fees Paid : Fees are normally a percentage of the first year’s basic salary, ranging from 10-20%, for example, or employers may agree a fixed fee in advance. Rebates for hires that don’t work out are typically offered over the first twelve weeks on a sliding scale.
What are the benefits? The benefits to the employer of no up-front financial commitment are self-evident but contingency searches may be advantageous for the recruiter in industries where skills are scarce and they are not confidence of sourcing qualified candidates. A period of exclusivity for a recruiter experienced in their market will allow more time to identify better quality candidates.
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Retained searches are carried out by executive search recruiters, often referred to as ‘headhunters’, to fill senior level or hard-to-fill positions. Retained assignments are exclusive agreements with fees broken down into two or three stages for example:-
- One third of the fee paid to the recruiter on authority to proceed with the assignment.
- One third paid on production of a shortlist of, for example, three to five candidates.
- One third paid on the candidate’s acceptance of the job offer, or when the new employee starts work.
Sometimes it may be split into two stages, rather than three, depending on the executive recruiter and the client’s requirements, or employers may request a larger shortlist.
In theory, a retained search means the employer is working with a specialist recruiter within a specific industry niche so their hardest decision should be making the final candidate selection. The sourcing and selection process is thorough with recruiters approaching passive candidates who are not actively looking for jobs. It may take between 4-6 weeks to provide a shortlist as consultants search for the best available candidates to present to the employer.
Exclusivity : Retained searches are always exclusive assignments although employers can reserve the right to terminate the assignment if an acceptable shortlist is not produced.
Fees Paid : Fees vary, but as a guideline employers can expect to pay around 30% of the first year salary, split into three stages. Some executive search companies may include an element of benefits and bonuses in their fee. Others may charge a higher percentage rate or agree to a significant fixed fee. A rebate will generally only apply to the final third of the fee and cover a shorter period than a contingency assignment.
What are the benefits? A retained search is the goal for an established recruiter as it offers consultants the time to source a high quality shortlist. Employers may perceive the upfront payments to be a risk but will receive a much higher level of service and quality of candidates appropriate to the vacancy. To offset the perceived 'risk' to the employer, an experienced executive search firm may offer to refund the initial fee in full if they are unable to provide a suitable shortlist.
Advorto Marketplace offers both models of recruitment, allowing employers to compare fee rates, rebate periods and in the case of retained searches, the different payment stages.
If your company needs to recruit a candidate quickly or want to use recruitment agencies to subsidise your direct recruitment process, then contingency recruiters are the most suitable option. If, however, you want to hire an elusive, passive candidate a specialist retained search firm is your first choice.
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