Hiring Managers: what does your Recruiter’s contract look like?
Let’s talk about Recruiter contracts and what they are telling you. I’ve spoken with leaders who have shared a plethora of examples that they’ve been presented with and it seems as though their complaints about those Recruiters could have been predicted.
Contracts come in many different shapes and sizes, especially considering the various relationships that can occur between companies and consultants. For our purposes we’re looking at contracts pertaining to a company hiring a Recruiter to find candidates for a specific position. Each position to be recruited for is a called a ‘Req,” short for requisition. There are two basic types of contracts: Retained and Contingent. Retained contracts require some level of upfront payment prior to the work commencing. Contingent contracts specify payment only if a candidate is hired. Some Retained specify 33% at kick off, at candidate submission, and at hire. Other require 25% at kick off with the remaining 75% paid after the candidate starts. Others still require 100% up front or at candidate submission. While other subtle variations exist, I think you get the gist of it.
My client who complained of not making a single hire after 3 different Reqs had signed a contract requiring 100% of invoice paid at candidate submission. This means the contract and services were not based on hiring candidates, just simply providing candidates. The company whose contract required 33% at kick off, submission, and at hire didn’t provide a single candidate for one Req, and on a second Req, they presented candidates from their client’s customers. They were specifically told not to do this, but their priority is first to get a Req and second to present candidates, hiring isn’t much of a motivation if two reqs can provide a total invoice without the client actually having to hire.
On the Contingent side, these contracts are put in place in order with the idea that you don’t have any skin in the game so why not work with me? I offer the same, my standard contract is Retained, but for the first hire I always offer a Contingent contract to demonstrate my value as a Recruiter. Why would anyone pay for a Retained contract when they can just wait and pay at the end of the race? The Contingent contracts are typically with firms who work with as many clients as they can get their hands on. It doesn’t matter the position or industry, they will pull candidates from everyone, even their clients, because the only commitment comes at the point of hire.
Another component of a contract is Exclusivity and a Guarantee. Exclusivity pertains to a period of time where the Recruiter will be the only person who can work on the Req. Guarantees can vary wildly but are typically for 3 months, 6 months, or 1 year. This means that if the candidate is fired or quits within a year, unless it is due to a major change in the organization (layoffs, new management), the Recruiter will find another candidate for free. Many Recruiters do not include either of these components in their contracts anymore.
Taking a quick glimpse at this information gives insight into how we put together our contract. We are Retained because we work with a small group of clients and each Req is a high-priority that we will fill. In the six years of Mier Talent Consulting, there has been one position that we did not successfully fill. We include a guarantee because we will not pull from our clients and we stand by our candidates. In the last years we’ve had only a situations where a guarantee period was not met and we filled all three positions again. We invest time into our candidates and we put them through a rigorous interview process, we are confident that both our clients and our candidates will be happy. We also include an exclusivity period of 60 days because that indicates when we will have this position filled by at the latest. Read through your Recruiters contract and see what it is telling you.