MaRS Library Hiring headhunters or recruitment agencies: What to know
Good recruitment agencies or headhunters can provide a valuable service. They source job candidates on your behalf, leveraging their connections and expertise to save you time and find a strong pool of candidates. These firms can be costly so ensure they have good track records, and be sure to get references.
Why hire headhunters?
Companies often turn to professional headhunters or recruitment agencies because:
- They lack the bandwidth, expertise or networks needed to recruit effectively on their own
- Recruitment agencies can supply candidates for just about any job, but are often contracted to search for executives and senior-level technical people
- When a company grows larger, headhunters are also effective for large volume hires for low-skill positions (e.g., assembly workers) with arrangements for permanent positions or temporary contracts, depending on the business needs
Evaluating the cost of recruitment agencies
Hiring headhunters can be expensive, so you will need to evaluate the cost. In deciding whether to use recruitment agencies, keep the following in mind:
- Competent recruitment agencies offer recruitment and selection experience and industry knowledge. They provide value to startups with little experience hiring for a specific type of role
- Good headhunters have strong networks in niche markets
- Good recruitment agencies will present the top candidates from their candidate pools, matched to your specific needs. They will assess which candidates are the best potential fit, weeding out the under- and over-qualified. Done well, this process saves you time and money in the long run
- Fees generally range from 15% to 30% of the new hire’s first year expected total cash compensation
- Some search agreements call for a non-refundable retainer (generally for higher-level positions). Other agreements may be structured so that fees are paid contingent upon the placement of a candidate (usually the case for mid- to lower-level jobs).
In deciding which fee structure is right for you, consider the type of role, the labour market conditions, your budget and your level of confidence that you will receive the attention and service you need to fill the role quickly.
Ensure that agreements contain a replacement guarantee. This requires the firm to replace any new hire who leaves the company during the probationary period
- Recruitment agencies will essentially be pitching candidates to you. While they will attempt to present you with qualified people, they have a vested interest in placing “someone.” Be thorough in your internal assessment of candidates they provide
Hiring a recruitment agency: Tips
- Before hiring headhunters, ensure you have a clear job description. Recruitment agencies are expensive. Their understanding of your business needs and expectations is critical to finding the right candidate efficiently
- Where possible, negotiate to pay fees contingent on results. This is generally more advantageous to you, the customer. Give careful attention when considering retainers that you get value for the upfront cost
- Make sure the contract specifies how results will be measured, including what constitutes fulfilment of the contract terms. Define clear objectives and insist on language describing how success will be measured—for example, “delivering six qualified candidates for interview” or “producing one candidate that is hired”
- Most search agreements have provisions to address any confusion about whether a candidate qualifies for the search fee should the resume be received through other channels, such as an employee referral from their network, or social media. Read these terms carefully to understand your contract obligations
Some organizations choose to work with a more full-service human resources (HR) company to guide recruitment efforts as well as other aspects of HR.
Such agencies usually work on a fee-for-service structure, based on time and effort. This model offers the opportunity for the employer to own all the resumes acquired through the search for use in future hires.
This differs from headhunters, which provide only the top short-listed candidates for the search, with additional fees for new positions.