What Is Contingency Recruiting? How Does It Work?
December 4, 2023
Finding top talent is critical for any organization's success. However, recruiting qualified candidates can be time-consuming and expensive. Contingency recruiting offers an agile solution by partnering with external experts to fill open positions. In this comprehensive guide, we’ll explain what contingency recruiting is, how the process works, payment models, and the key advantages and disadvantages of this approach.
The word “contingent” refers to something that depends on uncertain future events. In the context of recruitment, a contingency search relies on external recruiters being compensated only if they successfully fill a position. Exploring how this process works, and its fee structure provides key insights for companies considering this approach.
What is contingency recruiting?
Contingency recruiting is a service provided by a recruitment firm to find candidates for an open position. The recruitment agency or contractor only gets paid if the organization hires a candidate they find.
With contingency search, the recruiter’s payment is contingent on successfully placing a candidate. This differs from retained search, where an employer pays an agreed amount regardless of the outcome. With contingency search, the recruiter earns their fee by delivering results, not just search efforts. This provides a strong incentive for the agency to understand the company’s needs and recruit effectively.
For the hiring company, it provides access to experienced recruiting professionals without high fixed costs. You expand your reach and only pay when you make an offer.
Contingency recruitment payment structure
Contingency recruiters are paid on a success-only basis. Their fee is typically 15-30% of the candidate’s first-year salary if hired. Unlike retained search, there are no upfront costs for the hiring company. The organization only pays the contingency fee upon making a placement. This transfers the risk from the employer to the recruiting firm.
The candidate never pays the contingency fee – this is covered by the hiring organization. For the employer, contingency search offers access to specialized recruiters without high fixed costs. When managed strategically alongside other hiring approaches, it provides important workforce flexibility.
How contingency search works
The contingency search process requires close collaboration between the hiring organization and the recruiting firm. Here is an in-depth look at how it typically unfolds:
The company provides a detailed job description
The process starts with an introductory needs analysis consultation. The recruiter seeks to deeply understand the company’s culture, ideal candidate profile, must-have technical and soft skills, compensation range, and other requirements. This meeting establishes alignment on the target role.
Company and recruiter negotiate terms
Next, the recruiter works with the hiring manager to develop a comprehensive position profile. This detailed overview captures the essence of the open role for sourcing purposes. The profile may include
- Job title, department, reporting structure
- Overview of day-to-day responsibilities
- Technical qualifications and expertise
- Soft skills and cultural fit factors
- Salary band and benefits offering
- Growth opportunities beyond the immediate role
Recruiter sources qualified candidates
With a firm grasp of the position, the recruiter researches the talent landscape. They identify companies likely to harbor candidates with the desired background. The recruiter also explores up-and-coming talent hubs and networking events to source passive candidates.
The recruiter screens candidates and sends a shortlist
As interest develops, the recruiter qualifies candidates through introductory calls and screens resumes. They evaluate technical skills, cultural alignment, salary expectations, and more. The most promising candidates are presented in a shortlist with the recruiter’s insights.
Company interviews candidates
Finally, the company interviews shortlisted candidates and decides on their preferred hire. The recruiter earns their contingent fee after the selected candidate accepts the offer.
This phased approach allows companies to benefit from recruiters’ expertise and networks on an on-demand basis. The alignment of incentives drives an efficient, high-quality search.
Advantages and disadvantages of contingency recruiting
While contingency recruiting can expand candidate pipelines, the model also has some potential advantage depending on your needs:
- Only pay if a candidate is hired (lower risk)
- Faster hiring process compared to internal recruiting
- Access to experienced recruiters and a larger candidate pool
- Reduces workload for the internal HR team
- Flexible solution to meet hiring needs
Contingency recruiting offers notable benefits, but it’s important to carefully evaluate possible limitations and risks. Here are key potential drawbacks to be aware of:
- Higher overall cost per hire compared to staff recruiters
- Less control over candidate sourcing and screening
- Potential for misalignment in role requirements
- Recruiters may prioritize their commissions over company needs
Contingency recruiting service can enable companies to hire quality candidates quickly while reducing HR costs. It allows organizations to leverage outside expertise and networks to augment internal recruiting capabilities in a flexible way. However, the model does have some potential downsides to weigh. It is important to carefully assess contingency searches against other options based on specific hiring needs and budgets. With the right approach, contingent recruiters can become strategic partners in sourcing top talent.