It is certainly important to understand the types of service charge options, but it is equally important to understand the “why” behind your professional recommendations.  In this section, we will help you understand what is in the best interest of both the client and the recruiter in each suggested approach.

Contingent

In a Contingent Search, no fee is charged until you have filled the position.  This creates a very low-risk environment for the client, and a very high-risk environment for the recruiter.  Because of this, recruiters might adjust some of the variables in the agreement to reflect the risk they are taking on a Contingent basis.  Most recruiters will charge a higher fee percentage, offer a shorter guarantee period (or none at all), or ask for an Exclusive Contingency to adjust for taking this risk.

Why would a client want to use us on a Contingent basis?

• There is no risk to them, as no fee is paid until the recruiter has performed successfully and a hire is made.]
• They do not have an urgent and critical need, but would like to keep their options open to see candidates from us.
• They are interested in speaking with our MPC Candidate, but do not need a fully executed search.
• They already have viable candidates in process and need to sign a low-risk agreement in order to view any additional candidates we would like to submit for consideration.
• They would like to ‘try before they buy’ and test our capabilities before committing to a financial obligation.
• They have an exorbitantly high volume of hires needed in a short timeframe and it is unrealistic for one firm to fill them all.

Why would we recommend a Contingent approach?

• Since there is no risk, this is usually an easier agreement to get signed.  If you are taking a MPC to market and are looking to get an interview with as little red tape as possible, this might be the best approach.
• You might want to ‘try before you buy’ this client just like they might want to do you; if you are concerned with their process, viability of offers, or any other red flags this is a good trial approach before committing to a dedicated agreement.
• Since we take more risk with the Contingent approach, we might charge a higher fee or have a shorter guarantee period.
• This might be a scope outside of our niche or area, but we’d still like to keep the door open to send viable candidates if we do find them.
• We might not be sure that the candidate this client is looking for truly exists!  Perhaps their parameters are very narrow, or their salary expectations unrealistic, or their relocation expectations are impractical – this will avoid us being on the hook to find someone who doesn’t exist in the marketplace.

In a basic contingency relationship, no fee is charged to the client until a candidate has been placed.  Sometimes, this type of relationship is in the client’s best interest; sometimes, this type of relationship is in your best interest!  Jeff Kaye gives an overview of the contingent arrangement in this video clip.

Retained Search (No Placement Commitment)

In a true Retained Search, there is an upfront payment to initiate a search, and one or several payments paid upon milestones that are based on a timeframe – not a performance.  This is different than the Financially Committed Search Process that we are describing below, where additional payments are made upon parameters like presentation of candidates, or acceptance of an offer by a candidate.  In a true Retained Search, a payment would be made to initiate the search, and a second or third installment of the estimated fee would be made after an agreed upon number of days have passed.  The final payment would be received if the actual compensation offered to the candidate is higher than what was estimated when the search began.

Most recruiters have a hard time with this approach, and will agree on a compromise that resembles the Financially Committed Search Process below.  However, this true Retained Relationship cements a truly consultative association between you and your client.

Why would a client want to use us on a Retained basis?

• Their need is urgent and critical and they need to be able to ensure that someone is held accountable to fully covering the marketplace on their behalf.
• They need tremendous amounts of documentation provided as it pertains to the search, or they want market research performed in addition to the placement of a candidate.
• They want to ensure that you truly act as a consultant on their behalf, and are not tied to the placement simply because of a fee attached to that individual.

Why would we recommend a Retained approach?

• This client is fully committed to partnering with you to solve their problems – not just view you as a vendor.  They have some skin in the game – so they will be more responsive with calls, emails, and interview feedback.
• This gives us the opportunity to completely research and cover the market, knowing that we are the only firm accountable to getting this position filled.
• With a Retained approach, we will negotiate for Exclusivity on the search, which will help with market saturation and avoid any issues of candidate ownership.
• The chances of a Retained Client turning into a Repeat Retained Client are extremely high.

In a truly retained process, payments are made on milestones that do not involve the placement of a candidate.  In this clip, Jeff Kaye explains the parameters in which a retained relationship could work best for both you and for your client.

Financially Committed Search

The Financially Committed, or Dedicated, Search Approach is truly a stepping stone to moving a Contingent Client to a Retained Client.  Usually, Financially Committed Search is the fall-back option for recruiters who try to sell a Retainer (with no placement commitment) but are unsuccessful.  In a Financially Committed Search, there is an upfront payment to initiate the search, and one or several payments following that are paid on milestones based on performance.  Performance milestones could be interviewing an agreed upon number of candidates, acceptance of an offer, or the date the candidate begins employment.  The initial payment is typical non-refundable, which is a risk that the client is taking (and therefore usually getting a reward like a lower fee percentage or a longer guarantee period).

Why would a client want to use us on a Financially Committed basis?

• Their need is urgent and critical and they need to be able to ensure that someone is held accountable to fully covering the marketplace on their behalf.
• They have been burned by recruiters in the past, and putting performance milestones in place will help them feel more comfortable that you are invested in this process.
• They are sharing some risk – which typically results in a lower fee percentage (than contingent) or a longer guarantee period.
• This commitment, and exclusivity, allows us to feel comfortable using their name in the marketplace when we are telling their story.  This results in some extraordinary ‘free press’ that they will be able to feel – whether it’s by an overall ‘buzz’ created in the market, or unsolicited resumes coming in the door, or the announcement of new products, branches, or divisions.
• They would like weekly or monthly summaries of who was talked with, what the feedback was, and how to best continue to execute this search.

Why would we recommend a Financially Committed approach?

• This client is fully committed to partnering with you to solve their problems – not just view you as a vendor.  They have some skin in the game – so they will be more responsive with calls, emails, and interview feedback.
• This gives us the opportunity to completely research and cover the market, knowing that we are the only firm accountable to getting this position filled.
• With a Retained approach, we will negotiate for Exclusivity on the search, which will help with market saturation and avoid any issues of candidate ownership.
• The chances of a Retained Client turning into a Repeat Retained Client are extremely high.

There is a clear difference between Financially Committed Search and Retained Search.  In this clip, Jeff Kaye explains the one fundamental distinction that separates the two types of relationships.Consultant SearchWith a Consulting Agreement, this could help you maneuver through those clients who are truly not authorized to ever pay a fee to a recruiter.  However, they need to have information like competitive salary data, or employee retention suggestions, or new business development ideas.  Instead of paying a Consulting Firm who is merely an expert in Consulting, why not pay you (an expert in their space), who talks with 100 people a week with their own competitors!   Typically, the recruiter will commit to speaking with a certain number of candidates each week or month and summarizing the relevant information that the client requested.  For this, the client will pay a monthly fee.  At any time, the client can cancel – but the recruiter will continue to provide this information until the client ceases the agreement.  If, as a byproduct of this service, the client hires a candidate that came from this service, the recruiter might credit some of the monies already paid to the overall fee for this person.  The terms of these types of arrangements can vary depending on the needs of both the client and the recruiter. Why would a client want to use us on a Consulting basis?

• There are unauthorized to pay a “recruiting fee”, but can pay a “consulting fee”.
• They are struggling in the marketplace and need intelligent insights from competitors to stay viable.
• This can be just as effective as an advertising campaign, where instead you are reaching 100 passive individuals in your industry who otherwise would not hear your story.

Why would we recommend a Consulting approach?

• This is a great way to provide value to a client who is not yet able to hire.
• This can help us get around those clients who cannot pay a “recruiting fee”.
• This is a phenomenal way to essentially get paid to cover the marketplace.  If you have several Consulting Agreements in place, you are being paid to make calls into your marketplace, which will in turn surface additional marketing and recruiting leads.
• The chances of a Consulting Client ultimately using you when they do have a need to hire are extremely high.

In this marketplace, sometimes you find those clients who just aren’t in a place to pay for candidates – this doesn’t this is the end of your professional relationship!  This is a concise summary by Jeff Kaye as to how best position you as a true consultant.Annualized AgreementsWelcome to the ultimate goal!  Annualized Agreements can provide you with consistent revenue, great client relationships, and a solid business model for growth.  In an Annual Agreement, there is a monthly fixed cost paid to the recruiter.  On (for example) a quarterly basis, the client and recruiter evaluate the results to date.  If the total amount paid in Quarter 1 is lower than the total amount owed for candidates placed in Quarter 1, an additional payment will be due.  If the total amount is greater than the amount owed for placed candidates, perhaps the monthly payments in Quarter 2 will be adjusted.  There can be a settle-up each quarter, twice a year, or other terms as agreed upon by the client and recruiter.  In exchange for the client partnering in this way, the recruiter might offer an even lower percentage fee or a longer guarantee period or sliding scale. Why would a client want to use us on an Annualized basis?

• They have multiple needs for the same position.
• They want a consistent way of paying that only requires re-evaluation a few times each year.
• They do not have a specific need, but want you proactively covering the market on their behalf and presenting all viable candidates.
• The client would like additional services above and beyond placement – things like market information, retention seminars provided for their team, or coaching for their leadership on how to interview and attract top talent.
• The client knows that they will be hiring a high volume of people throughout the year, and would like a lower percentage fee than even a Retained or Financially Committed Agreement would yield.

Why would we recommend an Annualized approach?

• In addition to all of the benefits of Retained or Financially Committed Search, this is a great source of consistent monthly income that keeps you on the hook to continue to perform!

The ultimate goal for most recruiters is to secure at least a few clients who will operate from the structure of an Annualized Agreement.  Jeff Kaye gives an overview of how to open the door to set up an Annualized Agreement partnership.