The $1 Billion Problem in the Staffing Industry

Every recruiter knows it's bound to happen. At some point, one of your clients will hire one of your candidates without paying you. It's an age old problem in the staffing industry and many recruiters just consider it a cost of doing business.

But you may not realize just how big this problem really is. In case the title didn't give it away, these unidentified hires account for $1 billion dollars in missed placement fees every year.

missed_placement_fees

How much of that money is owed to you?

Research has shown that 1 out of every 500 candidates submissions you make is hired without your knowledge. So estimate how many candidate submissions you've made in the past year, multiply that by .002, and multiply that by your average placement fee. That's how much money is owed to you.

For instance, if your agency works on 200 job openings per year, submits an average of 15 candidates per opening, and collects an average of $25,000 in fees per placement, you could be missing out on $150,000 in placement fees. The more candidates you submit, or the more you charge per placement, the higher your missed revenue becomes.

How can I find and collect what is owed to me?

To catch all your missed placements, it's important to have a system in place to check for them. Some agencies have an admin search LinkedIn and Google regularly, while others use candidate tracking software like Fee Catcher to automate the process.

Either way, it's crucial to find your missed placements as quickly as possible - 78% of missed placement fees identified within a year are collected. That's because, in the majority of cases, the client simply forgot to notify you of the hire and is happy to pay when you bring the oversight to their attention.

Comment by Nick Lang on September 16, 2014 at 9:22am: Happy to pay? I would say that is optimistic. I remember getting a call a couple of years ago from a candidate that I have known for a long time. His first words were "Red Alert, red alert." After I made sure all the windows and doors were secure, he went on to tell me that his company had hired a West Coast GM that he knew I had presented to the company nearly a year before. I ended up cutting an invoice and sending it directly to the CFO that I had worked with arranging interviews the year before. He called with a half baked story of how they had just really not given any thought to where the candidate had originally come from. I sent the guy who gave me the heads up a nice gift certificate for dinner for two. Nice to see some people have your back.......

Comment by Tim Davis on September 16, 2014 at 11:51am: I am on a split with another recruiter and we just fell victim to this. They claim that, because the candidate interviewed for a different titled position that we are not owed the fee. The real problem is that the HR Talent Acquisition Specialist paid out an Employee Referral fee to a VP at the company and now does not want to get in trouble. So head been stonewalling us on getting to the right person to ask for the fee.

ARRRGGGGHHH!

Comment by Linda Ferrante on September 19, 2014 at 8:46am: Submitting an average of 15 candidates per job?! No way. I'd say there's a (or several) recruiters who aren't doing their job if they are submitting 15 candidates per job! I get that's not the point of the article, but you lost me at that.

Comment by Jen Dewar on October 6, 2014 at 7:04pm: Oops - I somehow missed the notifications for the comments!

@Nick - glad to hear your success story with collecting. I guess "happy to pay" isn't exactly the situation, but the point is that most companies will pay you if you bring the oversight to their attention - they know they owe it to you.

@Tim - I've heard that excuse before, but the fact of the matter is that they couldn't have hired that person if it weren't for you and the other recruiter. Many recruiters will add a clause in their contract that a fee is owed if the person is hired "in any capacity" for this exact reason. Let me know if this ever gets resolved and how. You may have to bring in the big guns with a collection agency or attorney.

@Linda - thanks for your feedback.