Understanding Contingency vs Retained Recruitment: Key Differences

An Agency Central survey found that more than 50% of applicants prefer to use a staffing agency when looking for a job. The recruitment agency offers a service that makes the process easier. So, are you planning to fill vacancies in your company? Then you may have already thought about outsourcing your recruitment. Maybe you have questions like:

How do I hire external recruiters?

What is the difference between temporary staffing and temporary staffing?

Which agency is best for me?

Which agency offers the best candidates for the company?

Then in this article you will find all the important information you need to know about outsourcing recruitment services. This article sees the core task of every company as finding the right person for the right job at the right time. Maybe you've thought about outsourcing the recruiting process to fill a new position within your company and add value to your team.

So, let's get started!

Contingent recruitment

Contingent recruiting occurs when a company engages a recruiting agency or contract recruiter to fill a lower to mid-level vacancy. The staffing agency or contractor is only paid when a candidate is hired. Recruitment fees average 20% of the compensation for the position.

In the context of recruiting, the term "contingent" means that the money the recruiter receives depends on whether or not a vacant position in your company is filled by a candidate.

How does quota recruitment work?

Under the contingent recruiting model, recruiters who work as independent contractors for their client companies are only paid when they successfully place a candidate in a position advertised by their client.

Although there are some differences in how they work, most temp agencies follow the same five steps when hiring:

First, the client (your company) sends a job description to the recruiting agency.
The agency and your company negotiate a fee that the company pays to the agency if the agency successfully finds a candidate for the open position.
Third, the company sets out to find the best possible person.
After the agency has found qualified applicants, it places them with the customer.

If one of these people is hired by the client, the agency receives the agreed amount. It's worth noting that recruitment agencies are not always the only ones looking for qualified applicants. These agencies often compete with your company's recruiting specialists (if you have any) as well as candidates who apply directly to your job postings. You may also choose to use multiple external recruiters to increase your chances of finding a candidate in a shorter period of time, meaning the agencies can compete with each other.

Advantages and disadvantages of contingency recruiting

Although the benefits of commission-based staffing can be significant, there are some potential advantages and disadvantages.

Advantages

Contingency recruiting can be a beneficial recruiting strategy for the following reasons:

The fees are reduced. The recruiters work on a success basis, they only get paid if you hire one of the people they refer.
Quick implementation. If your company needs to fill a position quickly, recruiters who work on a contingency basis are incentivized to work within the allotted time frame if they are hired.
Avoid in-house recruiters. When you outsource your recruiting efforts, you don't have to expand your office space to accommodate recruiting professionals.
You don't make long-term commitments. Recruitment companies work on a project basis, if you don't like the approach, you don't have to commit to it.

Disadvantages

It may be tempting to hire a third party to find qualified applicants, but doing so carries certain risks.

It is possible that you will lose time. There is no guarantee that the recruiter or contractor will find a suitable candidate.
There is no quality guarantee. Recruiters are incentivized to find large numbers of applicants because they are paid on a "no hire, no pay" basis.
This can be inefficient. Temporary recruiting does not mean outsourcing the entire hiring process. Companies still need to perform time-consuming tasks such as reviewing resumes, deciding on applicant selection, and conducting interviews.

What is temporary staffing?

Retained recruitment is a form of recruiting in which a company pays a recruiter a fee for access to the company's candidates. The firm then works with the company to find the best candidates for the open positions. Retained recruitment is a form of professional recruitment where a company pays a fee to a recruitment company in order to secure its exclusive services.

Statistical models for contract recruitment

When recruiting on a fee basis, companies pay the recruiter a monthly fee for the search, interview and pre-selection of applicants. The Retainer Project pricing model:

20% upon signing the contract and accepting the order
20% upon submission of a list of shortlisted applicants
20% upon acceptance of the offer and
40% at the end of the first month

Advantages of retained recruitment

Mutual commitment

Recruitment goes far beyond a normal profit-sharing arrangement. The industry average shows that you will receive five times the number of hours spent on your vacancy compared to a standard commission-based search. During this time, the recruiter can cover the entire market and interview a large number of qualified applicants. To justify such an effort, we need the dedicated support of a customer.

Quality and quantity of results

A recruitment program gives us the time to find the best available candidates on the market, rather than placing the first qualified person we come across. This way you get the best value for money and the person who best suits your offer.

Are you looking for candidates for multiple roles? With multiple recruitment companies, it can be difficult to keep track of candidates. With a targeted search, you have a single contact person for recruiting. You will be notified at every stage so you can track activity and stay in control. You no longer have to deal with different applicants from different sources.

Cost efficiency

Most of our clients are surprised to learn that contract searches typically cost no more than fee-based searches - even when costs are taken into account. The reason for this is improved cost efficiency for us. To date, our completion rate is over 95%, compared to an industry average of 10% for profit sharing.

The benefits employers receive when recruiting for permanent positions

Access to passive candidates not otherwise available on the market.
Faster recruiting process through additional resources for the position
A customer-oriented process that is individually tailored to the customer
Engaged response to advertising is a “first option” for the duration of the campaign.
Achieving the company profile Permanent project managers process a lower volume of orders than contingent employees in order to secure their results.

Difference between contingent and retained recruitment

Methods of payment

When comparing temporary staffing and fee-based staffing, keep in mind that, as a hiring manager, you trust the agency and invest in it financially before you receive a shortlist.

Furthermore, the difference between the two methods is very simple. For a permanent position, the recruiter receives an advance payment or a fixed fee and works on an exclusive basis, he is exclusively concerned with the search.

Success-based recruitment, on the other hand, works on the principle of “no win, no fee” or “success fee”. Multiple recruiters may be asked to search for qualified applicants when working on a contingency basis. Someone is compensated for finding and placing a candidate. If not, he will not receive any compensation.

Relationship with an organization

When a company conducts a recruitment agency, it means that it is building a long-term relationship with the agency. The recruitment agency takes the time to get to know the company, the industry and the hiring requirements better in order to find the best candidates.

Contingent agencies, on the other hand, typically work briefly with a company to determine the need for the open position before beginning to search for potential applicants. Therefore, the agency does not need to develop a close relationship.

Recruitment expenses

Permanent staffing is more expensive up front, but can often cost the same in the long run. Essentially, the client pays a portion of the fee upfront to the staffing agency to identify the best talent, demonstrating their commitment to hiring, and they work closely together during the placement. Working on a contingency basis may be cheaper at this point, but there is no upfront payment, so the risk is lower as you only pay if the recruiter is successful.

Quality versus quantity

The recruitment agency focuses on finding a few quality candidates for senior and managerial positions. Therefore, it takes a lot of time to determine the company's needs, identify suitable talent and prepare applicants for the selection interviews.

This is not the case with contingency hiring as it focuses more on finding and hiring a candidate at scale within the company. However, it does not provide any certainty about the quality of the newly hired employees.

Conclusion

You are probably now thinking about what type of recruiting will be most beneficial for your company. Well, there are many criteria that determine whether a company should take advantage of permanent employment or profit-sharing. Research suggests that profit-sharing is suitable for junior positions, while permanent employment is great for higher positions and hard-to-find skills.

Consider how much time your team has available to hire, company finances, and the type of candidates you're looking for. While contingency hires are cheaper, it can take longer to find the right candidate.

Choosing between contingent and retained recruitment depends on your hiring needs. Explore options with IceHrm for streamlined processes.