When it comes to securing the very best leadership talent for your property business, there are two primary recruitment methods to consider – Retained Search and Contingent Recruitment.
Understanding how much recruitment firms charge and the factors that dictate their fees, will help you decide which option is best for you.
Whilst a previous insight compares and contrasts the key elements of Contingent Recruitment Vs Retained Search, this article will help you understand the financial implications of each approach and the fees you can typically expect to pay.
Retained Search: Breaking down the costs
Some Executive Search firms may charge a flat fee for their services, which can vary based on the complexity and level of the search.
In this case, the fee is agreed upfront and is not dependent on the candidate’s salary.
However, most Executive Search firms working on a retained basis, typically charge a fee that is calculated as a percentage of the successful candidate’s total gross annual compensation package in their first year of employment.
Benefits such as a car allowance, for example, will also be included as part of the compensation.
The overall fee is impacted by seniority, location and more critical or challenging hires.
For executive or C-level roles, the fee generally falls within the range of 30-35%.
The higher rate would apply to more unique locations and more challenging hires, where candidates are difficult to find, attract or retain.
This could be due to a range of reasons, including property businesses that require:
- niche or highly specialised skills, with fewer qualified candidates available
- candidates to be in a specific geography, especially if there’s a limited talent pool of local or diverse talent, or the location is perceived to be less attractive or desirable
- candidates from an underrepresented demographic
- a rapid hiring approach without compromising on the quality of candidates
To attract talent at a non-executive level, property businesses can expect to pay 25 – 30% for a retained search assignment.
For instance, if you’re seeking a property executive to fill a senior leadership position with gross annual compensation package of £200,000, you can expect to pay a retained search firm anywhere from £60,000 to £70,000 for their services.
Retained Search: The Structure of the Fees
When it comes to payment, an Executive Search firm’s total fee is typically divided in to three stages.
1. The initial retainer: due at the outset of the search assignment. This fee covers the dedicated time and resources the firm will invest in your Search process, including comprehensive market mapping, candidate sourcing, initial interviewing, and promoting your Employer Brand.
2. Progress or stage payment: payable after a specific time period or once an agreed milestone has been reached, quite often at the submission of the shortlist.
3. Completion fee: once the successful candidate has been found and selected.
Reduced pricing for multiple hires
Executive Search firms may offer fee reductions for multiple roles.
If you’re looking to fill several positions for your property business, the Executive Search firm may provide a discount on their standard fees as an incentive for the larger volume of business.
Specific discounts will of course vary depending on the firm and the number of roles being filled.
An Executive Search firm charging a percentage of the candidate’s gross first-year compensation, might lower the percentage for multiple hires.
For example, a rapidly expanding property business looking to attract to two C-level property leaders, might benefit from a 5% fee reduction on each search assignment.
Other executive search firms may offer a package deal to a client where they bundle multiple searches together at a reduced rate.
The terms of any potential discounts and fee reductions will of course need to be negotiated and agreed at the outset.
Multiple hires and the benefits for both sides
Committing to multiple property search assignments can help you manage costs while still securing top talent for your property business.
But on top of cost efficiencies and reducing the overall cost per hire, multiple search assignments offer a wider range of advantages to both parties.
1. Helps the Search firm develop a detailed understanding of your culture
2. Creates a streamlined process, making the recruitment cycle more efficient and reducing time-to-hire.
3. Brings a consistent quality and approach to recruitment, to maintain high standards across all hiring
4. Gives rise to a collaborative, long-term partnership with better communication
5. Offers valuable market insights and trends to inform hiring strategies
6. Develops a broader talent pool, ensuring a healthy supply of qualified candidates
7. Provides a consistent representation of your brand and employee value proposition
Contingent Recruitment: Breaking down the costs
Contingent Property Recruiters also typically base their fees on the successful candidate’s first-year gross compensation.
The fee can range from 15% – 30%, depending on the seniority of the position, with higher level, more complex positions towards the higher end of the scale.
The key difference, however, lies in the payment structure. Unlike a Retained Search, Contingent Recruiters do not charge an upfront or stage payment fee.
The whole fee is only due once the successful candidate has been found and selected. In other words, the recruitment firm is only rewarded for their performance and finding the right candidate.
This can often lead to a Contingent Recruiter prioritising easier to fill roles, or moving Retained Searches to the top of their ‘To-Do’ list.
Some contingent recruiters may offer a fixed fee for specific positions, especially if the salary range is pre-defined.
Comparing Costs: Retained Search vs Contingent Recruitment
At first glance, working with a recruitment firm on a Contingent basis may seem like better value for money.
However, it’s worth considering that the true cost of finding the very best property talent goes beyond the fee itself.
You will need to weigh up the value you receive for your investment in the job role you’re seeking to fill and the potential costs associated with a mis-hire or a long, drawn-out search process.
Considering Value for Money and your ROI is key
A Retained Search firm, will use your initial fee to provide a comprehensive service, exclusive to you.
They will be working solely for you and not passing candidates to competitors within the property sector, who may also be actively seeking similar leadership talent.
If you commit to partnering with a Retained Search consultant, you can be assured that they’ll present you with the very best candidates available in the market, and not simply the easiest ones to find.
Due to their payment structure, Contingent Recruitment firms on the other hand, will be unable to invest the same level of resources into your Search.
And they are likely to be sourcing candidates for a range of property businesses.
It is worth highlighting, that the total fee for a Retained Search can be the same as Contingent. There is however a greater risk with a Contingent Search, that the role goes unfilled.
In essence, you can ‘buy’ a reduction of that risk by investing in a Retained Search.
Other Costs to Consider when comparing Retained Search and Contingent Recruitment
- The Cost of a Bad Hire: Mis-hires can be extremely disruptive and costly and are more likely if a thorough Search hasn’t taken place. Outside of the financial impact, there will be lost productivity and potential reputational damage to your insurance business.
- The Cost of a Prolonged Search: a prolonged search for the ideal candidate can also be a significant financial burden.
Every day a position remains unfilled, impacts a property business’ productivity.
Current employees being required to take on additional responsibilities to compensate for the vacancy, can lead to stress, burnout and decreased morale within the team.
It’s important to note though, that the speed of any Search can be affected by a range of factors, including the attractiveness of the position and the hiring company’s employer brand or the current state of the property and job market.
Making the Right Choice for Your Property Business
When comparing the financial implications of Retained Search and Contingent Recruitment, it’s about more than simply considering the fee.
Hiring businesses must also review value for money in terms of the quality of service received, as well as the potential costs of a mis-hire or a long, drawn-out Search process.
Ultimately, choosing between a Retained Search and Contingent Recruitment method is a decision that should be defined by the role in question, current market conditions, and the strategic needs of the business.
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