I’ve been in this crazy recruiting industry for years and through the ups and downs, staffing companies still made placements and still made money. The landscape has changed over the last 10 years. Recruiting is a global business. It’s also become more technology centric. Combine those two and life should be easier for recruiting, right? Wrong. More problems, more obstacles, and a lot longer hiring process has plagued staffing companies than you can shake a stick at and waaaaay to many to discuss in this article. But, what you will discover, my little readers, is what to charge (or pay) for today’s current placement fee for a full time employee.
Here is how I look at it….
Small Staffing Companies: The bigger the company, the more challenge it is for smaller staffing companies. It just is. It’s always been that way. Big staffing companies have tons of recruiters and a larger wine and dine budget than small staffing agencies. So, if you’re an independent, or a small staffing company YOUR fee should be LESS than what a large global staffing company charges. If you disagree with what I’m saying, then by all means keep doing what you’re doing and see where it gets you in the long run. Also, if you’re a small staffing company stay in the niche skill set. Don’t try to be EVERYwhere within certain industries like Technology. Stay Niche. Now…what to charge. Okay, let me say this first. You’re going to be a little pissed. You should be charging a flat rate of no more than $10k. Yep. In fact, anywhere between $6k and $10K. I’ll explain in a little bit, but hang tight.
Small Company (Business) You need a good web developer for a perm role. Again, you shouldn’t sign up with a mammoth staffing company that has a huge overhead with tons of recruiters and sales people that all collect a commission. Seek out a small staffing company. They will take the time time deliver good candidates. And, you should be paying anywhere from $6k-$8k for salaries under $85K and $10K for anything above that.
The flat rate for small businesses works when the agency has less than 20 employees. The ideal situation is that everyone in the small staffing company pulls their own weight and they reap the benefits of their work. So if a recruiter can make 30 placements per year at $10K per fee, then they should get at least HALF (if not more) of their placement. Basically, a good recruiter should pulling in about $150K. and IF you’re an owner, don’t be greedy. Don’t take take more than you should. Compensate your recruiters and you’ll have them for long term.
Big Staffing Companies: Stay away from small businesses. Why bother? You’re wasting time and money. Sure, the small business might move faster but the effort in doing business with small companies is a huge drag on recruiting teams and everyone in the “pit” is measured the same. So if Fred is working with small companies and Sally is working with AT&T, then guess who’ll get more placements and could possibly generate more revenue over the long haul? Sally and AT&T. So what do you charge for perm placements? Again, you’ll be a little pissed to read this. You should charge 15% for anything under $100K and 18% for anything above. The idea is to get quantity and besides with number of recruiters at your disposal, you can create more candidates and the better chances of getting a placement! Having said all this, take a look around. Notice the bazillion staffing companies that crop up every year and from all over the world. A lot of these companies are coming in and undercutting you out on the placement fee. I”VE SEEN THEM AS LOW AS 3% !!!! But if you stay firm at %25 firm, you’re going to lose business. You will. I promise. I’m on the inside and it’s discussed every day. If you’re hell bent on 20%, then you’re going to lose business (over a 2% difference) if you don’t change.
Big Companies. What should you pay for a perm placement fee. Good news. You’ve got a budget. Bad news. You got a budget. So, very simple. Don’t pay for something just because a staffing company tells you it’s their lowest fee. Shop it around. Chances are bigger staffing companies are chock-full of junior recruiters fresh out of college and will be looking to make a career change anyways. Most of the big staffing companies make it difficult for recruiters coming in to climb the ladder and make boat loads in commissions. They do a great job dangling the golden carrot in front of the recruiters but they always find a way to stagger the payments and if the recruiter leaves they leave without collecting what they are truly owed. It’s the sales guy or the account manager that really collects the most commissions. So, bottom line here is to negotiate and get them down to 15% but don’t pay more than 18%. And besides, most of your corporate recruiters have tons of reqs they would love to offload and focus on things that can actually fill within 90 days. Keep that in mind!
So there you have it. This is the truth and the way for every staffing company and business that has to charge (or pay) for a perm placement fee. I’ll close with this real quick. Agencies, If you’re getting 30%, 25% or 20% perm placement fee then that is great. Don’t need to change right now, but keep in mind, other staffing companies will approach your client with lesser rates, eventually you might have to consider dropping your client or lower your rate.
BOLD PREDICTION: mid way through 2016 the rates for perm placement fee will drop significantly. They always do in election year.