What is Contingency Recruiting?
Contingency recruiting is a type of hiring practice in which outside companies screen and evaluate the best candidates for a certain position. This type of recruiting may be done by a firm of one or two persons only, or it may be performed by large firms with many employees analyzing prospective candidates for jobs. Unlike a contract recruiter who receives a flat fee for services, contingency recruiting firms are paid upon the successful hiring of a proposed job applicant.
Recruiting services usually include research into a potential employee’s personality type, full background checks, and verification of references, experience, as well as claimed and appropriate education. Depending upon the firm, this type of recruiting may offer elaborate personality testing, lie detector testing, drug testing, or other research methods to try to find the best employee for a prospective company.
Those signing up with a contingency recruiting service who are job searching do not usually pay a fee to the recruiter. Instead, the company hiring the employee pays a fee, if and only if the firm provides an appropriate candidate. Usually, contingency recruiters have contracts with companies looking for employees, and the fee for services upon hire is agreed upon prior to the contingency recruiter doing any work.
Since this type of recruiting works on contingency basis, fees for it tend to be higher than flat fees charged by contract recruiters. Business experts suggest that this method may be the best way to hire a single employee, but may become very expensive if multiple employees need to be hired.
Often, the fee associated with the successful hiring of a candidate is between 15-30% of an employee’s first year’s salary. So a contingency recruiting firm might receive $30,000 US dollars (USD) for facilitating the hiring of an employee who will make $100,000 USD. Unlike the contract recruiter, however, recruiting on contingency involves a higher element of risk, so most feel their higher prices are justified.
Contingency recruiting firms often maintain databases of prospective employees, which helps make selecting candidates for jobs easier. One can seek out recruiting firms if one is looking for work. Many looking for jobs feel that working with a firm is slightly more successful, since the firm must be highly motivated to get people hired or they make no money.
I'm pretty sure this is what is also known as 'head hunting', at least it seems to have the same characteristics. I think it makes a lot of sense to know what kind of person you want to employ, and then send someone out to find exactly that.
I agree with CaithnessCC that it's more for executive job recruiters, especially positions where there are rigid expectations regarding qualifications and experience.
@B707 - I understand where you are coming from but contingency recruiting is expensive for a reason. All those background checks and personality tests take time and money.
I doubt many regular recruitment companies would bother, as their clients tend to be working with several competitors at the same time. It's too much of an investment for no reward.
Having worked in human resources for a while I know that this approach is more for top executive search firms, rather than looking to hire John Doe for the assembly line.
After reading this article, I kind of think that the screening of potential hires by a contingency recruiting company is really not the best way for firms to find the best employees. And the cost is so high. I think collecting information about education, background check, references, and drug testing are useful tasks for a recruiting company.
But elaborate personality tests and analyzing the personalities of the applicants isn't very useful. To really understand if a potential hire will be a good fit for the job takes a number of interviews and personal contacts with several people in the company.
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