How is a recruiter paid

What does a recruitment agency / recruiter cost?

What does a recruitment agency / recruiter cost?

We are currently working with recruitment agencies to find suitable programmers for our vacancies. Here we describe the cooperation and what such HR support costs.

Personnel placement versus personnel consulting

First of all, we have to distinguish between these two types of HR support.

Recruiters mostly rely on job advertisements and unemployed applicants to fill the vacant position. The remuneration is mostly based on success. Since payment is only made if the position has been successfully filled, several agencies can be called in to help with the search for personnel.

Personnel consulting is a bit higher quality. The consultant will try to get an exclusive “search right” for the position. That means, only this one agency gets the right to fill the position. At the same time, a personnel consultant is usually looking for hard-to-fill, high-paying or management positions. This consultant also differs in terms of remuneration. He will demand an amount at the start of the collaboration. Mostly a third of the hiring fee. One third when the candidate is introduced and the last third when the candidate starts working with the customer. In addition, invoices are issued for online, newspaper or other advertisements and must be paid by the client.

How does such HR support work?

Intermediaries take up the customer's request for the vacant position. This is done either by phone or in person at the customer's site.

The agency then searches for suitable candidates in its card index and via general job advertisements. Suitable applicants will be sent to the customer anonymously and job interviews will be arranged.

The personnel consultant works more through direct contact. He or she will find potential candidates through various channels, such as applicant databases, social media profiles and others. He will call them and try to convince them of the client's position. This is also called headhunting in New German.

What does the agency earn?

Here, too, the intermediaries differ from the personnel consultants.

The personnel consultant will already charge a fee for the search. Since further strategies can be determined with the help of the information from the search, which then ultimately lead to the filling of the vacancy. As already mentioned, job advertisements and other activities that occur with the job search are also billed. Which margin is included in this is up to the consultant himself.

The total costs are usually around 20 to 30 percent of the annual gross salary and the costs for job advertisements and other search costs. Since the personnel consultants only fill high-quality positions, and these candidates usually receive a salary of more than 60,000 euros, the fee here is between 15,000 to 25,000 euros (including all positions).

The intermediaries are a little cheaper here, as they only charge a placement fee if the position is successfully filled. This is one month's salary or up to 30 percent of the gross annual salary.

However, there are also agencies that specialize in the vouchers of the Federal Employment Agency. This also puts the usual agencies, which rely on the 30 percent of the annual gross, under pressure. The voucher is aimed at a maximum of 2000 euros, including sales tax.

For whom is a collaboration worthwhile?

There are many agencies that specialize in industries or professional groups. So it makes sense to approach such agencies if you need specialists from these areas. Sometimes the recruitment agencies are so focused that you “have to” rely on them in order to find suitable applicants.

An example could be a company that needs a technology expert in SAP. Here, a personnel consultancy can already be in contact with the right candidates.

However, recruitment agencies seem to be more interesting when looking for skilled workers with vocational training. In this area in particular, there are more free applicants than is the case, for example, in the area of ​​“Applicants with university education”. Here, in turn, personnel consulting makes more sense.

The search for managing directors and highly specialized experts is also not always easy. Most of these do not have applicant profiles online or are not even looking. These are best approached by a headhunter who knows how to talk to such managers and experts.

Which provider should you choose?

There are many small and large agencies on the market that are active in the field of recruitment and offer their services. There are also very many lone fighters who have specialized in certain occupational fields, management positions, technologies or salary levels.

It is therefore not always easy to find a suitable provider who offers the right profiles with the right quality of service.

We ourselves are here in the area of ​​“trial and error”. We currently have 3 recruiters on board. One of these makes a very good impression and delivers new and good profiles quickly and reliably. The other sent two profiles but didn't hear much from this agency afterwards. The third party forwarded us to a contact person in the agency, but we have not yet heard or read from him.

It is not so bad with mediation, as you can switch on several and then decide over time for the best. As a company, you only pay if you have successfully recruited the candidate.

It is then no longer so easy with consultations. Here you pay when the agency starts the search. Here you should then ask for references and take other measures to make sure that you are dealing with a professional headhunter / consultant.

Conclusion

The in-house HR department can reach its limits when looking for suitable candidates. Especially when it comes to specialists in their field or you need a lot of candidates. Then it can make sense to rely on an external agency to help with the search. Even if it can be a bit expensive. This is then certainly also a cost / benefit decision.

Interesting link:
Explanation of terms in the personnel agency sector

Images: Flickr.com/ North / Images Money


The author: Sascha Thattil works at YUHIRO and helps entrepreneurs and companies to easily set up programming teams in India. YUHIRO is a German-Indian company which provides IT companies, agencies and IT departments with software developers.

By Sascha Thattil on January 27, 2016 / Costs, Other / 1 Comment