How Do Direct Placement Recruiters Get Their Commission

egrizzly

For the recruiting agencies that find you direct hire/full time cybersecurity roles how do they get their commission?

Do they try to pay you as low as possible so they can get more off the top, or do they try to get you as high a salary as possible so they can get a higher commission?

e.g. If it's a position that pays $100K would a recruiter try to get you an $80K salary so they can pocket the $20K, or would they try to get you the $100K or more so they can max out on the commission?

DatabaseHead

I was explained this one time and this was a few years ago.   Generally speaking for the length of the contract the mark up of the agency is ~63%.  So yes it's more advantagous for them to get you in at a lower rate so they can get a large margin.  With that said there are some problematic positions and even companies where they will take the hit just to fill the role because it's a pain.  EG we want the sun moon stars and they have to be born on feb 29th......    They will usually pass those through at a very low margin just to keep good will with the company and to get the req filled.  

Recently I had a recruiter flat out admit he was going to make practically nothing on a position I applied for.  He had submitted ~50 resumes and they rejected them all.  I passed the screening and they wanted to interview me.  He said before I took another offer follow back up and he could probably match........    

HTH

egrizzly

DatabaseHead said:

I was explained this one time and this was a few years ago.   Generally speaking for the length of the contract the mark up of the agency is ~63%.  So yes it's more advantagous for them to get you in at a lower rate so they can get a large margin.  With that said there are some problematic positions and even companies where they will take the hit just to fill the role because it's a pain.  EG we want the sun moon stars and they have to be born on feb 29th......    They will usually pass those through at a very low margin just to keep good will with the company and to get the req filled.  

Recently I had a recruiter flat out admit he was going to make practically nothing on a position I applied for.  He had submitted ~50 resumes and they rejected them all.  I passed the screening and they wanted to interview me.  He said before I took another offer follow back up and he could probably match........    

HTH

Thanks for replying DatabaseHead however I'm not referring to a contract role. What I'm inquiring about is a permanent-fulltime role placement with no contracts.

EANx

Those are typically either a flat fee, a percentage of the salary or a combination of the two. Most of what I've seen has been a flat fee to start with the percentage added on success.

DatabaseHead

No contract just direct hire, flat fee......  This is small percentage, most are at least 3 month right to hire with some 6 or even more.  Most agencies ignore these types of placements unless it's a favor for a big account or a small mom and pop shop aka bottom feeder.  

Danielm7

I just hired a security person this way a month ago. The recruiter charged us a 20% fee of the employee's first year salary, the employee pays nothing, the recruiter had zero reason to try to lowball. If anything my HR team was trying to get the FTE at a lower rate so they didn't have to pay the recruiter as much. 

Jon_Cisco

I have very little experience with this but I have seen flat fee for several salesmen we hired over the years.

paul78

@egrizzly - I work with recruiters and there are 2 general ways that recruiters work - (1) Contingency and (2) Retained.

With Contingency recruitment - the recruitment agreement is non-exclusive which means that I would be working with multiple recruiters to fill a particular role. The fee is a percentage of the first year's basic compensation and doesn't include bonuses or other non-cash incentives. The percentage is typically around 15% to 25%. Contingent recruiters are incentivized to fill as many positions at the highest salary that they can get for a candidate. But bear in mind that recruiters are working for the employer and not the employee. Many contingency agreements also include a claw-back provision so if the hired candidate doesn't work out - after 45, 90, 180 days, there a refund of fee. For example 100% if candidate separates after 45 days, 50% refund after 90 days, etc.

Retained recruitment is typically used in executive searches - usually c-level roles. In this arrangement, a flat fee is pre-negotiated on an exclusive basis with a recruiting company. I am not aware if retained searches on a non-exclusive basis is common since I've only ever encountered retained searches being conducted on an exclusive basis. In this scenario - the fee can be much higher as there's a time-frame commitment and candidate pool commitment that the search firm must fulfill. Also, in some cases, the fee is paid to the search firm regardless of whether the hired candidate sourced the candidate. For example, in a previous job, my employer was obligated to pay the search firm the fee of $80K even though I was referred to the company through a friend vs the recruiter.

SteveLavoie

We are using a recruiting firm to help us, and they charge us 20% of the salary for the first year. So they have advantage that you offer a good salary, so they get a higher commission. Usually, they have the tendancies to send too experienced applicant vs what the position is requiring. 

thomas_

I’ve heard the money that they pay recruiters comes out of a different pot of money.  Is this true?

paul78

thomas_ said:

I’ve heard the money that they pay recruiters comes out of a different pot of money.  Is this true?

It depends on the company. But generally speaking, headcount and talent acquisition expenses are different line items in a budget.

DatabaseHead

@thomas_  Generally speaking yes it is......