Many job markets are facing a labor shortage in the aftermath of quarantine due to the Covid-19 pandemic. CNN reported that there are 9.3 million job openings in the US and it has become increasingly difficult for businesses to find and secure talent.
With such a saturated job market, many potential candidates get lost in the quest for new hires as the employment competition is rising. This has caused many companies to partner with recruiting professionals to take the pressure off of their HR departments and diversify their pool of quality talent to choose from.
If your company is planning to outsource your hiring process and enlist a staffing agency to recruit talent, then you have two types of searches to choose from: a contingent search or a retained search. Both of these recruiting styles have pros and cons depending on your organization's industry, the position you're filling, your budget, timeline, and overall recruitment goals.
In this article, we'll break down the difference between a contingent and a retained recruiting agency so that you can choose the right strategy for your hiring needs.
A retained search for suitable candidates works on a retainer which is where the name comes from. A retainer is money is paid upfront for the recruiters' work. This means that a company looking to fill vacant positions will pay a staffing agency a flat fee in advance of the actual search for talent.
Most staffing firms that work on retainer will charge an initial fee of about one-third of the total cost of their work. The company must then pay the second third of the cost of recruitment services about a third of the way into the process and finally, the remaining full payment is made upon successful new hire placement. This total fee is based on a percentage (usually between 30-35%) of the hired candidate's first-year salary. Retainer firms generally offer a 12-month replacement guarantee to ensure satisfaction and they will make weekly or monthly check-ins to see how the hired talent is performing.
Recruitment agencies that use a retainer strategy are hired by companies as the sole team to recruit talent for that individual company. This means that your organization is outsourcing your entire hiring process to one firm of professionals, rather than multiple.
Companies who chose to work with a recruitment firm with a contingent search strategy have a much less exclusive and costly relationship with their staffing partners. A contingent search is similarly defined by its name with the working fees being contingent upon a successful hire. This means that your organization will only have to pay a one-time fee when a successful placement is made.
With this contingent fee, companies are free to enlist the work of multiple recruiting firms to find quality candidates. The contingency recruiter fees may also vary from agency to agency but usually land on about 20-25% of the new hire's first-year salary. This fee may also be refunded if the candidate proves to be a poor fit or if they move on from the position within the first year of employment.
Which Recruitment Strategy is Right For You?
Determining which recruitment strategy is right for your company begins with choosing a recruiting firm that is aligned with your industry. Pick a firm that specializes in recruiting talent from your field and contemplate your budget and the position you are looking to fill.
The retainer search style is generally used by an executive recruiting firm. This means that if you are looking to hire in higher executive-level positions and senior roles, then a retainer recruiting process is better suited for your needs. The retainer fees are also more expensive on average, so if your organization has a thicker budget then a retainer-based executive recruiter will be an easy pick.
However, if your hiring budget is tight, then a contingent recruiting strategy may be more appropriate. Contingent searches are more cost-effective and offer less financial risk. Contingency firms are also more commonly used for filling entry to mid-level positions and junior roles.
Beyond just the type of position you are looking to fill and your company's hiring budget, exclusivity, timeline, and the size of your candidate pool are more factors to consider. With a retainer-based recruiting agency, you are outsourcing your entire search to one hiring partner on an exclusive basis, while with a contingency search there are often multiple recruiters working competitively to fill your vacant position.
If you partner with multiple contingent search firms, then your pool of prospective candidates can double or triple in comparison to a retainer-based firm with only one pool of talent. A contingency model is also prone to placing qualified candidates faster as the competition to place top talent is higher with the race to procure the search fee.
A retainer model may move significantly slower as the stakes to fill a position aren't as high and there is merely one team of recruiters working on finding ideal candidates. However, a staffing agency with a retainer method makes for only one team to communicate with versus multiple independent recruiters to respond to as with a contingency search.
Ultimately, in the challenging times of today's saturated job market, the contingency search model may offer more of a chance for success. As companies struggle to find top talent that sticks around, putting all of your hiring eggs in one basket may not be effective enough. A contingent recruiter often has a larger pool of connections and with multiple recruiters working at once, your chances of finding a perfect candidate naturally increase.
The value of contingent recruiting comes with the motivating element of competition. On your quest to attract top talent, casting a wider net is key, especially in the post-pandemic job market.
For more on why recruiting is the most important business strategy and other hiring tips, check out our blog and recruitment services. Contact us today to partner with one of our seasoned recruiters in a contingent search for top talent placements.