How do recruiter work?

Most recruiters work under three models: Contingency, Retainer, and time and materials.

For individual contributors, the vast majority of recruiters work under a contingency model - they get paid when they place a candidate with you. They typically charge a fee equal to 20-25% of the first year base salary of the new hire. This may seem like a lot of money, and you may be tempted to fly solo and do DIY hiring. Some companies make it a matter of policy not to use recruiters - Amazon is famous for this. However, great recruiters who can send you highly qualified candidates  more than earn their fee, because they continually do research on candidates and maintain a big database of potential candidates where they can do targeted searches to find candidates that fit your criteria. 

When you are hiring an executive level leader, such as a VP of Marketing or COO or some such, you will typically be working with a recruiter under the retainer model. In this model, the recruiter is paid up front for conducting a search. They allocate significant time and work more as a trusted partner. This type of arrangement typically involves regular update calls in which the recruiter presents candidates and fine tunes on their search criteria on behalf of the client. It is rare for startups to start here, as most of the time leaders at this level are either cofounders or people identified via the immediate network of the cofounders.

There is a last model, which is time and materials. In this case, you basically hire an in-house recruiter on a contract basis. The recruiter will then conduct searches as if they are a staff person, charging you by the hour. This model works best when you have a lot of hires to fill in a short time but do not anticipate having enough ongoing recruiting and HR activity to place a full time HR hire in the company.

One last thing, recruiters under the retainer model and sometimes contingency model may insist on an exclusive relationship with you. What that means is that once you sign them on to do a search for you, you agree not to use any other recruiter. If you should come across any candidates, you will agree to pass the candidate on to the recruiter for vetting and then they will manage the interview process, and if you hire that candidate that came in via your own network, you still have to pay them their 20-25% fee. You may or may not feel that this is what you need - so if you engage a recruiter, make sure you read the contract cover to cover. That way you will not be surprised halfway down the process. 

Recruiting is a relationship business, and if you find a great recruiter, and invest in building a great relationship with them, they can help you build great teams for years to come. So if you work with a recruiter, invest in the relationship - it will pay off quickly.


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