Understanding the Difference Between Retained and Contingent Recruitment

posted by Chris Valentine

When companies are in need of new external talent, most of them face a difficult decision. Some businesses will try to handle the process themselves using their own internet and print advertising. However, the better option for most is to go with a professional agency, whether that is a contingency recruiter or an executive retained search consultant.

Nonetheless, it pays to understand the difference between the two options.

Contingency and Retained Overview:

At first glance, the only difference between both hiring methods seems to be when the agent receives payment. Contingency recruiters earn a commission only when a successful hire is made, whereas retained search consultants are paid for the search itself, irrespective of whether or not they make a hire. You may be tempted by the high volume of applicants a contingency recruiter will provide, but in the end, your organization has to make sure the quality of candidates is up to par. For this reason, retained search consultants are generally better when looking for the best industry talent.

When Each Option is Appropriate:

The retained search process is known to deliver better-qualified people but is usually significantly more expensive. However, over time this expense can pay by itself through the value a high-performing hire brings. Use this method when you need the most skilled person for jobs making over $100,000 a year, and who must be a great fit in your company’s culture.

On the other hand, contingency search makes more sense for relatively lower salary positions. Jobs under the $100,000 a year mark are perfect for this process since there will be many qualified applicants to choose from, and the hiring agency will save you time by conducting their own screening, interviewing and negotiating with candidates.

Specific Differences in Approach:

A retained consultant will only work on the search, personally evaluating each candidate selected for the position. This means no two clients will be presented the same candidate at once, making the process more important for applicants. However, a contingency recruiter doesn’t use an exclusive contract. Instead, they aim at casting the widest net of candidates possible and present them to as many clients as they can. This can be great when many lower jobs need to be filled, but it may sacrifice talent for certain higher-up positions.

Retained search consultants are able to leverage original research and personal engagement to find the top people in any industry, whereas contingent recruiters often specialize in one industry or field. If you are looking for candidates outside of the company’s respective industry, retained employment will be the better option. Understanding these specifics in the recruitment approaches will be a great thing for your organization.

Price Differences:

For both services, expect to pay 30-35% of the first-year salary for the potential new hire. Retained recruiters will provide an initial estimate of their fee, only requesting partial payment for initial interviews, and then additional compensation when the candidate’s exact salary is specified. Some consultants will also work with an applicant’s estimated potential salary for their payment, thereby finalizing a fee from the beginning of the search.

Contingency recruiters receive their entire commission upon hiring. Also, they are motivated by their fee structure to market their top candidates to multiple clients simultaneously, leading to a potential conflict of interest between your company and the agency.

In conclusion, each service has its own purpose. Retained search consultants will prioritize your business over any others, providing the best possible candidates handpicked for the job. Contingency recruiters will give you exposure to a wide pool of potential hires, helping you to fill many vacancies. In the end, your company’s unique circumstances will decide which arrangement is suitable.

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