How Do Retained Recruiters Get Paid?

31 Jan How Do Retained Recruiters Get Paid?

Gaining a solid understanding of how retained executive search recruiters get paid empowers you to make an informed decision for your organization while demystifying the executive search process.

In this blog, we’ll break down the key differences between contingency-based and retained executive recruiters, discuss how retained recruiters get paid, and outline “ballpark” expenses organizations should expect when partnering with a retained executive recruiter. 

What Is a Retained Executive Search Firm?

Retained executive search firms operate more like business consultants than typical recruiters. 

Retained executive search specialists integrate into their clients’ organizations, analyzing and observing crucial variables like organizational structure, workflow, company values and culture, and effective leadership styles to help inform and direct the executive search process. 

This strategic discovery process is one of the secrets to retained search firms’ success – the insights and data gathered during this stage empower retained search specialists to create a more refined and effective search, selection, and evaluation criteria, leading to smaller but more qualified pools of talented candidates. 

Instead of charging per-project upfront fees, retained search firms integrate into your organization for a period of 30, 60, or 90 days and receive regular payments based on performance milestones or an agreed-upon timeline.

What Are Retained Recruiters?

Retained recruiters are recruiters who charge clients an upfront fee to conduct a candidate search. This fee ensures that retained recruiters are operating on an exclusive basis. In other words, the retained recruiter is the only one working on filling the position. A retained recruiters goal is to find the perfect fit for each client, vs trying to fill as many roles for multiple clients in as short amount of time as possible.

How Does A Retained Executive Search Firm Differ From A Contingency Firm?

What is a retained executive search firm and how are retained firms different from contingency firms? Retained executive search firms differ from contingency-based firms in a few key ways: client exclusivity, organizational goals, and search and selection strategies. 

Exclusivity

Contingency-based executive search firms compete for non-exclusive contracts, meaning the organizations they partner with often entertain potential candidates from multiple search firms. This means that any candidate you’re interviewing could also be talking to different companies as well. Additionally, this also presents the risk of the firm dropping your search if it proves too time-consuming or difficult, since they are paid only after a placement is made.

Retained executive search firms partner with a small number of clients and exclusively devote their time, energy, and resources toward generating world-class placements for their clients’ vacancies. This includes going after “passive candidates” who are currently employed. Clients of retained recruiting

firms are not competing for candidates and always have “first dibs” on exciting candidates their search partners discover. 

Goals

Contingency-based search firms only get paid when they’ve successfully completed a placement. This often leads contingency recruiters to prioritize making placements above all else. 

This prioritization of speed can work in organizations’ favor if they’re in desperate need of an immediate hire. However, it can also lead to trouble for organizations seeking candidates with unique, niche, or highly-valuable skill sets, experience, and performance backgrounds. 

If you’re competing for candidates against multiple organizations in your industry or niche, you could miss out on your favorite candidate by simply making an offer a day too late. 

Retained executive search firms prioritize generating stellar placements within their clientele to secure referrals and recurring partnerships. This “slow and steady” business model lends itself well to organizations that want to ensure their executive search process (and the subsequent hire produced) aligns with their short and long-term business goals, corporate mission, and cultural vision. 

Strategies and Processes

Contingency-based executive search firms often use “wide net” strategies to generate large amounts of activity surrounding their clients’ vacancies. 

Their reliance on quickly and efficiently identifying, qualifying, and presenting candidates to their clients often requires more hands-on input from their partners and exposes their organizations to an array of professionals with varying qualifications and experience levels.

Retained executive search firms use their custom executive search strategies to create highly refined short lists of candidates that check all boxes for their client’s organizations. 

While retained search specialists often produce lower amounts of candidate activity than their contingent counterparts, their commitment to providing bespoke executive search experiences allows them to generate pools of talent that represent exceptional performance, leadership, and cultural fits. 

How Do Retained Executive Recruiters Get Paid?

Like almost all professional recruiters, retained executive search recruiters are paid a set fee by their clients, which is calculated using the first-year salary or total compensation package of the role in question. 

Unlike contingency basis executive recruiters, who only receive payment after making a placement, retained executive recruiters receive periodic payments from their clients throughout the executive search process. The exact timeline and details of the payment structure vary between search firms, but the agreement to regular, scheduled payments is the foundation of all retained executive search agreements. 

How Much Do Retained Executive Search Firms Get Paid?

Despite providing premium, refined, and comprehensive search services, retained executive search firm fees are only marginally higher than generalist recruiting or staffing costs (+5-10%) and align with the rates provided by their contingency-based counterparts. 

Most retained executive search firms charge between 25-35% of the role’s first-year salary or compensation package. Assuming an average executive or specialist wage of roughly $115,000, organizations should expect to pay their retained executive search partner approximately $30-40,000. 

Pick the Right Retained Recruiters To Help In Your Candidate Search

Medallion Partners is a premier retained executive search firm that specializes in finding world-class candidates for hard-to-fill senior level executive and specialist roles. 

Whether your organization is in the market for an innovative and transformative addition to your C-suite or access to experts in high demand, we have the tools, access, and reputation necessary to generate the perfect placement. There is a reason over 98% of our placements are still in their roles two years after we fill the position. We have the right recruitment processes for all of our different types of clients. Contact us today if you’re ready to find the perfect fit for your company.