Dave has been the president of the NPAworldwide Recruitment Network for over 15 years. He has led this 65-year-old member-owned cooperative to a position of one of the largest and most successful organizations in its industry.
Regardless of the type of recruitment service you are providing to clients, it is wise to have a signed agreement in place. I have recently learned of an outstanding resource and sample recruitment agreement or recruitment agreement template. ASA and NAPS jointly created the document and its many variations free for recruiters to access. Jump to Agreement Template
Contingency and Retained Search Agreements for Recruiters
Before looking at the agreement, let’s review the different styles of recruitment services possible. The recruitment method will determine which agreement type is most appropriate for your business.
Contingency-based recruitment is a common search method used by employers and provided by independent recruiters. Contingent search can be NON-EXCLUSIVE or EXCLUSIVE. Some exclusive searches are also incentivized with an ENGAGEMENT FEE, sometimes referred to as ENGAGED contingent search.
Non-exclusive contingent recruitment offers the least incentive and a limited level of commitment on either the part of the employer or the recruitment agency. The agency is not paid unless and until a candidate is hired by the employer. Hence the moniker “contingent” where the fee is paid upon the company hiring their candidate. The recruiter or firm owner will decide the time, energy, and resources to invest in each contingent recruitment assignment. The employer is likely to offer the job opening to other recruitment firms. There is little guarantee that specific work will be done and no promise of success for any of the parties to these non-exclusive searches.
Exclusive contingent search is when a client company/employer agrees to use a single recruitment service provider. This allows the identified recruitment firm to do the search for candidates in a non-competitive marketplace. This offers incentive to the contingent recruiter, still paid only when a hire is made of that recruiter’s candidate. The exclusivity may have a time limit but increases the probability of time and effort invested by the recruiter into the search as there is a significantly greater probability of success and a fee being collected.
Engaged contingent search is a precursor to a retained search. It is an exclusive search where the recruiter is provided a fee in advance to cover and compensate for some portion of the work being done to search for appropriate candidates for the client’s job opening. The amount varies but can often be between 25% to 33% of the anticipated fee for placing a candidate. The firm will receive the remainder of the fee if and when a candidate is placed. Some recruitment companies will use a smaller up-front flat fee rather than a percentage just to ensure client buy-in to their process. This payment is non-refundable even if the client cancels or fails to make a hiring decision. Under certain market conditions, this is the only way to ensure effort from very busy contingent recruitment firms.
Recruitment done on retainer can be structured in many ways. Some arrangements involve three payments. The first installment is when the client signs the executive search retainer agreement. The second is paid at an agreed upon or set milestone in the recruitment process. The final payment when a candidate has accepted an offer, started work , or some other time-based milestone. Frequently the hiring of a candidate is not a requirement of a fee being collected. It is the intent but now a requirement. So in the retained model, recruiters are being paid for the work done regardless of the outcome controlled and executed by the employer.
Other retained search agreements are annual and based on a monthly fee for services. The employer may have multiple openings or ongoing recruitment needs that make per search fees impractical.
The options for structuring recruitment fees is nearly unlimited. What is important is that both parties (recruiter/employer) have agreed to the terms. There are many influencers and decision-makers that enter into the process of hiring a new employee. Unless the terms are confirmed upfront, some of these players could make collection of a fee a complicated process. For example, they feel they recruited the best candidate and the recruitment firm had little to do with the identification and selection of the candidate.
Below is the template created by ASA and NAPS. Consider your options. Not every situation or every client needs to be treated the same. Existing customers can have one form of agreement while new customers have a different agreement. Quick easy searches can be done as a contingent search while complex and lengthy searches might be better as retained or with an engagement fee. Hope this information is helpful and makes you more successful and better compensated for the work you do!