To make money, you have to spend money. Nowhere is this truer than in business — when you want to expand your company or edge out the competition. But instead of considering the endeavor as an expense, treat it as an investment for your business. One area of investment that pays off is your workforce. What happens when you have limited resources to find the right people to fill open positions?
Talk to a staffing or hiring agency.
Hiring agencies act as intermediaries between employers seeking to fill job positions and individuals searching for employment opportunities. They streamline the hiring process by sourcing, screening, and presenting suitable candidates to companies. But how are staffing agencies paid and what type of fees are involved?
How Clients Pay Hiring Agencies
Agencies offer two types of fees: applicant-paid and employer-paid fee. Under the applicant-paid fee, the financial agreement is between the employee and the staffing agency. Jobs under this fee is generally contractual, and may be arranged with an agency hiring abroad.
Under the employer-paid fee, your company assumes all financial obligations. The potential employee doesn’t have to pay anything, so you’ll pay whatever percentage is indicated in your contract with the agency. Do hiring agencies take a cut from the employee’s pay? No, they don’t because the financial agreement is between you, the employer, and the agency. The agreement will be based on the fee model.
Contingency Fee Model
- In this model, the hiring agency is paid only upon successfully placing a candidate with the client company.
- The fee is typically calculated as a percentage of the candidate’s first-year salary (usually around 15-30%). For example, an applicant with an income of P400,000 annually, the agency’s fee would be P120,000 at 30%. For applicants seeking work abroad with a hiring agency, the placement fee should only equal to a month’s salary. Agencies licensed with the POEA may only ask that fee upon signing of the employment contract, and the applicant may choose to partially pay the placement fee.
- The payment is made by the client company once the candidate accepts the job offer and starts working.
Retained Search Model
- Under this arrangement, the client company pays a portion of the fee upfront to secure the services of the hiring agency at any time.
- The remainder of the fee is paid upon successful placement of the candidate.
- This model is often used for executive-level positions or specialized roles where finding the right candidate may be more challenging.
Exclusive or Priority Listings
- Some hiring agencies may offer exclusive or priority listings to clients who commit to working exclusively with them for a certain period.
- In such cases, the agency may reduce the fee percentage or offer other incentives to secure the client’s business.
The Typical Fees Involved
-
Placement Fee
The placement fee is the primary fee that hiring agencies charge and is based on a percentage of the candidate’s first-year salary. The exact percentage varies depending on factors, such as the industry, job level, and location.
-
Additional Services
Hiring agencies may offer additional services, such as background checks, skills assessments, or personality tests for an extra fee. These services can provide added value to the client by ensuring the suitability and quality of candidates.
How Hiring Agencies Work
-
Client Consultation
Hiring agencies start by consulting with the client to understand their hiring needs, company culture, and specific requirements for the job position.
-
Candidate Sourcing
Hiring agencies utilize various methods to source candidates, including online job boards, professional networks, social media platforms, and their own database of talent. They may also proactively reach out to passive candidates who are not actively seeking employment.
-
Screening and Evaluation
Once candidates are identified, hiring agencies conduct thorough screening and evaluation processes.
This may involve reviewing resumes, conducting interviews, verifying employment history, checking references, and assessing skills and qualifications.
-
Presentation to Client
After screening, the hiring agency presents the most qualified candidates to the client for consideration. They may provide detailed profiles or resumes along with their assessment of each candidate’s fit for the role.
-
Interview Coordination
Hiring agencies often assist in coordinating interviews between the client and candidates. They may also provide guidance and support to both parties throughout the interview process.
-
Offer Negotiation and Placement
Once a suitable candidate is selected, the hiring agency facilitates the offer negotiation process between the client and candidate. They help ensure that the terms of employment are agreeable to both parties and assist in finalizing the placement.
-
Follow-Up and Support
Even after the placement is made, hiring agencies may provide follow-up support to both the client and the candidate to ensure a smooth transition and successful integration into the new role.
Work with Hiring Agencies
The recruitment process is not always straightforward and easy, especially in a time when the employment landscape is shifting with technological and market trends. You can hire on your own or develop employees for promotion to hire internally. But sometimes, the cost-efficient way is to rely on an established agency that has the network to find talented people to fill key positions.
By understanding how clients pay hiring agencies, the typical fees involved, and the process by which hiring agencies operate, both employers and job seekers can leverage these services effectively to meet their respective needs in the job market.
John Clements is a formidable force in the field of recruitment. Inquire about our Professional Staffing services today.
