Fee Question? Do you get paid for performance?

Have you ever run into a client that struggles with the RISK of paying an entire fee when they hire someone? We find this is a common concern of senior level managers and is a key consideration preventing them from wanting to partner with recruiters. I am wondering if others offer payment terms to their clients?

The “pay for performance” model works well with private practice environments who are hiring Physicians. We believe this model can work across the board and can be applied to any client situation. Would you consider working with clients under a pay over time as the candidate produces results basis? Do you think this would be a game changer for you?

How are these types of agreements structured?

Contingency Fee 25% - 30 % of first year annual salary.

The difference is in the payment terms….

50 % fee at start date

25% fee at 90 days

25% fee at 6 months

It is important to note that our model has you closing on a full fee of 25%-30% if you are willing to stand behind your recruiting work you should get paid a full fee. Do you agree?

I would love to hear back from others on how you are structuring fees with your clients.

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Replies to This Discussion

Permalink Reply by Charlotte Byndas on April 15, 2011 at 10:24am

@ Jerry Yes this is so true! But...... I have talked to so many senior level managers that do not get that very fact! I brought this topic up because I have seen quite a few accounts open up using this strategy with those types of clients, and it has lead to a very productive/lucrative relationship with those clients.

I framed this question with the "pay for performance" thought not because I think that is what I am doing, but rather because that is what the client thinks they are getting. I am never confused about what value it is that a recruiter is bringing to the table, and nothing makes me happier then when results are produced for a client and then they see it too!

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Permalink Reply by Charlotte Byndas on April 15, 2011 at 10:27am

@ Michael Thanks for the comment. Sorry I am not familiar with Rec2Rec but it sounds like you worked with a client under these terms and they ended up not paying you. That is the the RISK I think every recruiter would be taking if they worked with clients this way.

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Permalink Reply by Edwin Ostrand on April 15, 2011 at 10:29am

I have this in my agreements, and have yet to have to replace anyone in well over a decade.

As always, I stand behind my work and guarantee the successful placement of the executive introduced and hired by [FIRM NAME] for twelve months from his/hers initial date of hire. This means that I will conduct the search to replace the individual at no additional fee, charging expenses only. Conditions under which the guarantee will not be applicable include position or responsibility modification due to reorganization, or change resulting from acquisition, merger, ownership transfer, or change in the business direction.

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Permalink Reply by Josh Slimmer on April 17, 2011 at 4:35pm

How about clients that won't pay at all? Has anyone ever used a collection agency for a client that won't pay? If so, who would you refer?

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Permalink Reply by C. B. Stalling!! on April 18, 2011 at 9:37am

@jerry I agree

I always like to replace, not refund

Most of my clients pay within 10, 15 or 30 days. But I must add - I'm not working with small companies. I would be concerned if my client base were the companies where my fee became a big concern.

I'd guess that some recruiters work with clients where the check needs to come directly from the owners bank account - or at least feel that way. I don't work with those situations.

On the overall topic - I can't really "guarantee" the success of someone I recruit. They know who they're looking for at a far greater level than I do. I simply make the connections. I am not involved in anything beyond that point - so don't really see how I can or should be held accountable. My performance is done the day they start.