How to Reduce Search Costs with the Engagement Fee

In addition to the flat fee, which I discussed in my previous blog post, companies can also reduce search fees by using the engagement fee or deposit fee.

One reason contingent placement fees are so high is because there’s usually incredible risk involved on the part of the recruiter.  These risks include the following:

  • The company having multiple recruiters working on the search
  • The job could be cut or de-funded
  • The job specs can change mid-stream
  • An internal candidate could surface
  • The “perfect candidate” might stumble in the front door looking for a job

So how do you reduce your search cost?  By reducing the recruiter’s risk with an engagement fee.  What follows is an example:

Instead of a 30% contingent fee for a 100,000 position, select who you consider to be the best recruiter for the search and offer a $5,000 deposit and a 25% fee.  This produces a $5,000 savings to the company, and the recruiter is fully engaged, knowing that the employer has a vested interest in their success.

The recruiter’s sense of urgency is still high, as the big payoff is still in the future.  In this example, your savings was 16%, and the recruiter’s probability of earning a fee is greatly enhanced.

In my next blog post, I’ll explore discounts for multiple hires of the same job description as another way to reduce search costs.

(For more information about maximizing the benefits of working with a recruiter, download a copy of Dan Simmons’s e-Book, Hunting the Headhunter: Your Guide to Debunking Myths, Cutting Costs, and Changing the Way You Play the Recruitment Game.)

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