Contingency vs. Retained Recruitment: Which is Better?
If you're looking for new staff for your business, then there's a question that may well be on your mind. What is the difference between contingency recruitment and retained recruitment, and which is better for you? The answer is surprisingly simple - so let us explain.To someone who isn't from a recruitment background, the terms 'contingency' and 'retained' probably mean very little. Today, we're going to cut through the jargon and explain not only what they mean, but also the pros and cons that would make you choose one over the other, depending on your situation. But first, let's have a look at why you would want to use an agency over all the other methods available:
Why use a recruitment agency in the first place?Recently, we published an article that looked at the methods used by candidates to find employment - and to say that the results were illuminating would be an understatement. Our results indicated that over 50% of candidates used a recruitment agency as their preferred method. We also found that agency usage was on the rise - up 10% since 2013 - whilst job board use appeared to drop by 27% in the same period. Clearly, candidates are discovering what a quality recruitment agency can do for them.
The main benefit of using a recruitment agency (from the employer's perspective) is that the bulk of the heavy lifting will be done for you. No more paper avalanches as that stack of CVs you've been trying to get chance to read through for the past week slowly slides down the back of your desk. No more getting excited over a seemingly great candidate who then goes off the radar for no apparent reason. The list goes on - someone else handles it all for you.
When you do decide to take a candidate to interview, you'll be fully briefed by someone who's probably going to have spoken to the candidate in person already - so there'll be no nasty surprises.
Then there's the fact that for many smaller companies, dedicated HR personnel are simply out of reach. Not only does this mean that someone will have to be taken away from their normal work whilst a candidate is sought, but also that you're going to be reliant on whatever people-skills they might have acquired in life to select that person. This is a hit-and-miss approach - as few people have the experience to tell a bad candidate from a good one.
Using a recruitment agency will mean that not only do you suddenly have an extra pair of hands to sift through all those applications, but also that those hands belong to someone who's done it all before. When you do decide to take a candidate to interview, you'll be fully briefed by someone who's generally going to have spoken to the candidate in person already - so there'll be no nasty surprises. Recruitment agencies aren't for everyone, but if you like the idea of saving time and effort, all whilst having candidates professionally matched to your business's culture, an agency is well worth a shot.
What is contingency recruitment?Everyone should have a contingency plan - but that's not what we're discussing here. The contingency here is that the recruiter doesn't get paid by you unless you choose to employ a candidate that they put forward. The power here is very much in the hand of the employer - and it's fairly normal practice to see multiple recruitment agencies trying to fill a role all at once. This might even involve competing against an employer's internal HR department, who are also searching for a candidate. As you can imagine, this can all get very competitive, very quickly.
If by any chance a recruitment agency operating on contingency should send you candidates you don't feel are suitable, you simply don't have to pay their fee.
Generally speaking, contingency recruitment tends to be the more mass-market of the two approaches. The role you'd be filling could be anything - Cleaner, Manager, Candlestick Maker the list goes on. It's not limited to generic positions either - and you'll often find specialised roles in industries such as IT and Engineering being filled in this way. There are even recruitment agencies that specialise in certain industries - and this is something that you may want to consider if you operate in such an area.
Benefits of contingency recruitmentThe benefits of this 'no win, no fee' method for the employer are fairly obvious. Firstly, you're getting all the benefits that we mention above - but secondly, you're in charge of the whole process. If by any chance a recruitment agency operating on contingency should send you candidates you don't feel are suitable, you simply don't have to interview them. This means that it's in the agency's interest to send you the best candidates they can find - and as quickly as possible.
Contingency recruitment is an excellent choice when a candidate is required quickly - or if you have multiple positions to fill. The candidates an agency puts forward will fit the bill, and be capable of doing the job in question to a high standard. Many agencies also offer services such as candidate matching, or psychometric testing - which can help to ensure that a candidate will fit in with the particular culture of your organisation.
Downsides of contingency recruitmentAs for the potential downsides of contingency recruitment - well just think about the benefits and then put yourself in the recruiter's shoes. If you know, or get an inkling that there are multiple firms working on a job, or that you're up against internal HR, are you really going to expend your considerable resources on that project?
Unless you're not very busy (meaning that you're probably not very good either), then of course you aren't going to. Your effort will instead go into sourcing a top-quality candidate for a job that you know you will get paid for. This means that it often pays to limit the number of recruiters working on a contingency job - and to make the fact that you have done this clear to them. This way, you get less people on the job, but they are working far more effectively.
Pricing structure of contingency recruitmentAs we mention above, the pricing structure of the contingency recruitment process is a basic concept. If the recruiter does not supply the 'winning' candidate - the candidate who gets the job - then they simply do not get paid. Apart from a few exceptions, in most cases in the UK, it is illegal for a recruitment agency to charge a fee to a candidate (under the Employment Agencies Act 1973 and the Conduct of Employment Agencies and Employment Businesses Regulations 2003) - which means that the agency makes nothing whatsoever from the process of contingency recruitment if they are unsuccessful.
The actual price you pay to a contingency recruiter will reflect a percentage of the candidate's starting yearly salary, and varies by agency. This fee is typically anything between 15-30% of the salary (although it can vary) - and should reflect factors including the recruiter's experience level and reputation.
What is retained recruitment?Retained recruitment is really the opposite of contingency recruitment. Here, you are paying to 'retain' a recruiter to your cause - guaranteeing them exclusivity and an income from the job once they find a suitable candidate. Whilst you will be giving up some control over the process here, that's not necessarily a bad thing.
This is a boutique approach, and suits the top-end of the recruitment market.
Retained recruitment jobs tend to take place almost exclusively at the top-end of the market - where salaries are high, and suitable candidates are scarce. Retained recruitment is often also known as headhunting, search and selection, or executive search - and is associated with hard-to-fill job roles like Art Director, Head Chef, Chief Engineer, or even Chief Executive.
Benefits of retained recruitmentAs we saw above, exclusivity generally gets you a recruiter who will work much harder for your cause. They are motivated to do this because they know there is definitely something in it for them - and who could blame them?
Because retained recruitment guarantees exclusivity, you know that the agent carrying it out is going to exercise consideration and due diligence in sourcing you candidates. This is a boutique approach, and suits the top-end of the recruitment market, where potential candidates are often not actively seeking new employment.
When you're looking for a recruitment agency to deal with, it can be difficult - especially if you are trying to fill a niche role. This is exactly the problem that Agency Central was set up to solve.
In this rarefied environment of large salaries, excellent benefits, and high degrees of responsibility, tact is essential - and headhunters will go out of their way to ensure that confidentiality is maintained. This type of recruiter will maintain a large, informal network in order to go about their business - and it is this which can make a headhunter invaluable to a business.
A retained recruiter will generally provide their client with dossiers on four or five candidates who have been thoroughly researched and approached on their behalf. All that is left is for the client to select the one they like the best.
Downsides of retained recruitmentThe main downside of the retained recruitment process when compared to a contingency approach, is that the client concerned is placing much more trust and investment of resources in the recruiter. As you will see below, the cost structure of a retained assignment is, by definition, different to the contingency method described previously - and means that a recruiter will be paid a percentage of the final fee before a candidate has been presented.
Whilst retained recruitment is generally a much slower process than using a contingency recruiter would be, the reason for doing it is that the candidates put forward will be expected to be perfectly suited (or as near as possible) for the assignment in question. It is important to use a headhunter who knows what they are doing, and who has a proven track record of delivering results.
Pricing structure of retained recruitmentAs we mention above, retained recruitment has a very different pricing structure to the contingency method. Utilising this method means that a recruiter can always be sure that they will make at least a minimal fee for their efforts. At what point this fee is paid varies between the different companies offering search and selection - but it will often include an 'up-front' charge in order to begin the process. Sometimes a firm will require a second installment to be paid upon receipt of a shortlist of candidates (although this is not universal), and there will be a final installment to pay once a candidate has been employed.
The final cost of using a recruitment agency on a retained basis is a percentage of the starting salary the candidate can expect (as with contingency recruitment) - and once again this percentage is variable - up to around 50% in this case. The percentage price tends to be slightly higher in the retained context - and can vary dramatically depending on the role and agency concerned.
Which method should you choose - contingency or retained?Now we've explained the difference between contingency and retained recruitment, which one is right for your vacancy? Well the answer at the top and bottom of the salary spectrum is fairly simple - for lower-paid job roles, contingency will be best - whereas for the highest paid jobs, a retained recruiter will deliver superior results.
The rationale behind this has more to do with supply and demand than anything else - because where contingency recruitment will tend towards good results within a crowded labour market, a retained approach would be overkill. But try using contingency recruitment at the top end of the market, where qualified people are scarce, and you may begin to run into problems - especially if you are planning on assigning the task to more than one firm.
Specialist recruiters come in many shapes and sizes - with some firms dedicating themselves entirely to a market sector such as education or engineering.
When you are recruiting towards the middle of the salary spectrum however, the difference is not so clear-cut. Whilst some roles at this level are relatively easy to fill - requiring skills that are widespread, others are not, and require a candidate with specialist experience.
At this point, there are a number of options available to you as an employer. You could continue with the standard contingency approach - which is likely to fill the role quickly, although perhaps not to the highest standard. You could go with a retained approach - which takes longer and is potentially more expensive, but should return a great candidate. Or, you could choose to go with a specialist in that particular sector/job role.
Specialist recruiters come in many shapes and sizes - with some firms dedicating themselves entirely to a market sector such as education or engineering. Often you will find that a large recruitment agency has an arm which deals solely with a certain specialism - and finally there are smaller firms with multiple specialisms. Which type of firm you select for this task is up to you, but in the UK, Agency Central is one way to find them.
How to find recruitment agencies using Agency Central's free online directoryAs the market for their services is much larger, you will find that the majority of recruitment agencies in the UK tend to operate on a contingency basis. As we have discussed here, the market for retained recruiters is much more specialised, and vacancies appear less often - so recruiters offering headhunting services are less common.
When you're looking for a recruitment agency to deal with, it can be difficult - especially if you are trying to fill a niche role. This is exactly the problem that Agency Central was set up to solve. We exist to help our users find an agency that's perfect for their needs - whether that's because they're close to their location, a specialist in their area, or fit the bill in some other way.
It's safe to say that in the recruitment world, there really is something for everyone.
Finding contingency recruitment agencies
So, say that you were looking for recruitment agencies in London - you'd could go to our homepage, fill in the details of what you're looking for, and get taken to the London recruitment agencies page. From there, you would see how many agencies on our site fit the bill, and get a list of them - sorted by the factor you had chosen on the homepage.
Finding retained recruitment agencies/headhunters
If you were looking to fill a senior vacancy, and wanted to deal with a recruiter in a retained capacity, then the process would be very similar. This time however, when you went to our homepage, you'd need to select 'Headhunting' under the 'Industry' category. Once you did this, you would be able to select the industry sub-sector you were interested in recruiting in. This is available for most industries. Once you had filled in these details, you would simply fill out the other fields, and our system would take you to a page listing all companies offering headhunting in your industry and area.
Summing upSo, now you hopefully have a much better idea of the difference between contingency and retained recruitment - as well as what that means for you. We've seen the benefits and limitations of both, as well as the different pricing structures that tend to be used. It's safe to say that in the recruitment world, there really is something for everyone.
When you consider all this, it really is amazing that so many businesses, in so many different industries, expend such a lot of time and resources on searching for the 'right' person. With the job market being what it is at the moment (packed to the rafters with eager job-seekers), why would you waste so much time and effort on CV-sifting? Our recommendation is to get a pro on the case. They'll do it quicker, they'll do it better, and most importantly, they'll end up costing less money in the long run than doing it yourself would.