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Contingency vs Retained Recruitment: Which is better?

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Introduction

Recruiters will generally work on either a contingency or retained basis. But what do these terms actually mean? This article looks at the two recruitment methods and explores some of the pros and cons of each, giving you the confidence to make the right recruitment choices for your business.  

What is Contingency Recruitment?

When recruiters talk about working on a contingency basis, they are usually referring to an arrangement where the recruiter will only charge a fee once you have hired a candidate. In other words, their fee is contingent on you hiring their recommended candidate. Typically, contingency recruitment is used where the pool of potential candidates is large. Recruiters can utilize their existing databases of potential candidates and line up applicants for you to interview. Once you have hired your new employee, you will then pay the recruiter a fee based on a pre-agreed percentage of the new employee’s salary (often around 15-30% of the starting annual salary, but this varies based on industry and experience level). Put simply, you only pay the recruiter who puts forward the successful candidate.

This model can be seen as a low risk option for employers, as there is no up-front fee and therefore no financial commitment to any particular recruiter. It is in the recruiters’ interest to send you the most suitable candidates as quickly as possible in order to increase their chances of putting forward the successful candidate. With contingency recruitment it is common for multiple recruiters to be instructed to fill one role, and these recruiters may even be competing against your company’s own HR to find the right candidate. Contingency recruitment can therefore be perfect if you are looking hire someone quickly. 

The downside of the contingency model is that, with so many recruiters working to fill a role, you may end up with duplications in the candidate being suggested. In addition, recruiters will usually be aware that they are not the only ones looking  to fill this role, and as such your vacancy may be a lower priority, as recruiters may feel their chances of recommending the candidate that is ultimately successful are low. It can therefore be useful to limit the number of recruiters who are searching for candidates, and to make sure they are aware of this.

What is Retained Recruitment?

If you hire a recruiter on a retained basis, you pay them an upfront fee and ‘retain’ them to the job of finding your new candidate. By doing this, you are guaranteeing them exclusivity and up-front income, which is highly attractive to recruiters. Retained recruitment is a boutique method and is often used at the top-end of the market, where there may only be a small pool of highly qualified or specialized potential candidates.

Retained recruitment is therefore great if you are looking for dedicated resources, and a customized, quality-driven approach. A recruiter working on retainment will dedicate more of their time to your vacancy, and exercise professional discretion when headhunting the right candidate for you. Recruiters that work on a retainer will generally have a large, informal network that they can discretely utilize while maintaining confidentiality.

With retained recruitment, you are investing more in the recruiter and putting more trust in them to exercise their discretion when finding possible candidates. This can be great for everyone if you have a good relationship with the recruiter, but it can be daunting to make such an upfront investment if you have never worked with them before. The fees for retained recruiters will also vary depending on the industry and the role they are filling, but will generally be higher than contingency recruitment, often calculated as between 25 and 30% of the starting annual salary of the successful candidate.

Which is better?

Whether to used contingent or retained recruitment depends entirely on your circumstances and the type of vacancy you want to fill. If you are looking for multiple candidates, and believe there may be a large pool of potential people who would be suitable, then contingency recruitment could help you to fill those roles quickly. On the other hand, if you are looking for a bespoke service to help you fill a niche role, it may be better to retain a recruiter so you can be sure they are dedicating the right amount of resources to locate suitable candidates.

INS Global

INS Global exclusively work on a retained basis, which allows us to provide a boutique service to our clients. Our industry experts can dedicate their time and tailor their methodology to find the most suitable candidates for you. We take a hands-on approach and use our considerable resources to source top talent for your project in the Asia-Pacific region. We also offer post recruitment support, for example by assisting with employment contracts and administering payroll. Contact us to find out how we can support your recruitment needs.

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