Contingency and Retained Recruitment – What’s the Diff?! (And Which One’s Right for You)
“Contingency” and “retainment” probably won’t mean much to you if you’re not from a recruitment background, but they’re key concepts to understand when you’re looking for that next perfect hire.
In this piece, we’ll cut through the jargon to break both terms down and explain their pros and cons while we’re at it. By the time we’re done, you’ll have a much better idea of which road to take on your next hire.
Before we get down to business, though, let’s quickly cover why hiring an agency to source creative staff is the way to go generally.
Why Use a Recruitment and Search Agency in the First Place?
From a creative agency’s perspective, the simple answer is that most of the heavy lifting gets done for you. No more drowning in a sea of incoming CVs, no more time-wasting on interviews that go nowhere, or getting your hopes up about promising looking candidates who suddenly drop off the radar – all that day-to-day detail gets expertly taken care of by someone else.
This is a particularly big deal for smaller agencies without dedicated HR people in place. It avoids tying up your existing team’s time and having to rely on their judgment to make a critical call on who’s right for the role. As many small agency owners know to their cost, that can be a hit-and-miss approach at the best of times – few people have the knack of being able to ask the right questions, quickly spot a perfect cultural fit, and reliably tell a good candidate from a bad one.
Using a recruitment and search agency brings an extra pair of experienced hands on board to carefully sift and screen all applications before they even reach you. By hiring Beckon, you’ve got the security of knowing those hands belong to someone with deep agency experience – someone who’s filled countless similar roles and really gets how the agency world works.
Before sitting down to interview anyone, you’ll have been fully briefed by someone who’s already spoken to and qualified the candidate in person, and fully advocated your brand and opportunity. There’ll be no nasty surprises waiting for you, just a perfectly primed candidate who’s genuinely excited about your role.
Long story short, if you like the idea of saving time and effort while having candidates professionally matched to your agency’s values and culture, engaging a recruitment and search consultancy is an excellent investment.
Ok, let’s move on to breaking down some technical terms.
What Is Contingency Recruitment?
The contingency here is that you only pay the recruiter when you choose to take on a candidate they suggest. This puts the power very much in your hands as an employer, and you’ll often see multiple recruiters scrambling to fill the same role – often even competing against an agency’s internal HR department.
As you can imagine, this gets competitive pretty quickly. It also runs the risk of forcing your recruitment agencies to compete on speed rather than quality – a state of affairs which can damage your overall brand rep and irritate outstanding candidates who end up getting hounded by multiple agencies about the same role.
Key fact – if a recruitment agency operating on contingency sends you unsuitable candidates, you simply don’t have to pay their fee.
Ok, now that we know what it is, let’s move on to look at the benefits of contingency recruitment.
Benefits of Contingency Recruitment
Contingency recruitment is a great choice when you need to move quickly and there’s a lot of top-notch talent on the market, or when you’ve got multiple positions to fill. The benefits of a “no win, no fee” method are pretty obvious – you get your pick of the candidates and retain total control. If you’re not happy with the selections, you don’t need to interview them at all or pay anything.
Downsides of Contingency Recruitment
The major risk is simply that recruiters aren’t sufficiently motivated to put truly great candidates in front of you. Multiple recruiters working on a job means a lot of people chasing the same prize with relatively little chance of reward. You might get lucky and have the best candidates float to the top, or you might not.
To avoid this risk, we recommend agencies give their recruiters exclusivity for a set period to deliver a strong shortlist. This puts the focus back on quality rather than speed, and lets your recruiter do their best work.
Pricing Structure of Contingency Recruitment
The basic pricing rules are straightforward here – if your recruiter doesn’t supply a “winning” candidate, they don’t get paid. In the case of a successful search, the price you’ll pay will be a percentage of the candidate’s annual salary package – typically between 15–20% of salary + superannuation. The actual percentage varies by agency and usually reflects the recruiter’s track record and reputation.
What Is Retained Recruitment?
Retained recruitment is a performance-based process where you pay to exclusively “retain” a recruiter to advocate your brand and opportunity to the best talent on the market – both active and passive.
This is a boutique approach which is perfect for roles where specialist skills are required. It’s also a great fit for when suitable candidates are scarce or in high demand. You’ll hear retained recruitment referred to as “headhunting” and “search”.
Benefits of Retained Recruitment
Retained recruitment is where the benefits of exclusivity really shine. You get a highly motivated recruiter who’s exploring the full candidate pool, both active and passive, in depth. The ability to target passive candidates is particularly key – it’s often possible to get outstanding candidates to look at your role and nothing else as part of the process!
Exclusivity is also a two-way street. You’ll “own” all candidates throughout the process meaning that they won’t be made aware of other job opportunities or agencies your search consultant is working with. This helps enormously in keeping candidates committed.
These days it can be hard to find a recruitment partner who’ll help you compete for the best talent and really go out to bat for you.
With the proliferation of roles available to creative agency talent these days – cool tech, content, social and media companies are all chasing the same people – it can be difficult to attract the best, especially if you’re trying to fill a niche or in-demand role. This is exactly the problem that Beckon was set up to solve. – Justine Fenyes
Against this type of backdrop, tact is essential. Headhunters go out of their way to ensure your brand and opportunity are properly and consistently represented, and that candidate confidentiality and candidate experience remain high. In a candidate-driven market where top talent is hard to find, reputation is everything.
The type of large, informal network that headhunters nurture and use is invaluable to independent agencies – especially in the current market where the bigger global players, content and tech, media and social agencies, and brands are all vying for the same talent.
A retained recruiter will generally provide their client with a strong shortlist of 2–4 candidates who have been thoroughly researched and approached on your behalf. All that’s left for you to do is select the one you like the best.
Downsides of Retained Recruitment
The main potential downside is that you’re placing much more trust and upfront investment of resources in your recruiter. The flip-side to this is that the retained recruiter now “owns” the problem during the search and your agency is free to concentrate on what it does best.
It’s also worth pointing out that you’ll have to pay a retainer fee in advance (usually a third of the final estimated fee), and that searches typically take a little longer than the contingency approach. You’re paying for quality and precision here, and a final shortlist of candidates who are guaranteed to be perfectly suited to your role.
As you can see from the points above, it’s absolutely essential that you use a search consultant/headhunter who knows exactly what they’re doing and who has a proven track record when considering retained recruitment.
Pricing Structure of Retained Recruitment
The pricing structure of retained recruitment is different from that of contingency. An upfront fee (usually a third of overall fee) locks in your recruiter on an exclusive basis and frees them up to deliver their best work. A final instalment payable once the candidate has formally accepted the role keeps everyone actively motivated to find the best possible fit for your agency.
The service fee percentage also tends to be slightly higher with retained search. This reflects the additional time, effort, and resources needed to engage passive candidates, and hand-hold them all the way to the hiring table. It’s a journey that requires time, skill, and diligence to manage. Often, candidates found via search are counter-offered to stay at their current agency, requiring additional time and effort from the headhunter to get them over the line.
Which Method Should You Choose – Contingency or Retained?
Rather than the salary package, this really comes down supply and demand, and the role in question. For example, given the lack of talent in the market (and the fierce competition chasing it), it’s not uncommon these days for agencies to retain a recruiter to deliver a mid-level Account Manager.
Contingency recruitment, on the other hand, delivers great results in markets where there’s plenty of talent, e.g. graphic designers. Knowing where it makes sense to draw the line isn’t always easy for an agency, but we’re more than happy to advise you on which type of search is the best fit for your specific role. Just get in touch and we’ll walk you through the options in depth.
Where to Next?
The reality in Sydney is that most creative recruitment agencies tend to operate on a contingency basis, and have preferred supplier arrangements with big global agencies who they often reserve their best people for.
In order for your independent agency to compete and get the best shot at top talent on the market, it’s critical you align yourself with a recruitment partner who isn’t locked into multiple preferred supplier relationships, with their best candidates placed off-limits. You also need someone with deep industry experience and an active network who talks the same language as the people you’re trying to attract.
At Beckon, we exist to help our independent agencies win the war for talent by pro-actively connecting them to the best candidates on the market, not just whoever happens to be on the database. Depending on the exact role, both contingency and retained search can be excellent options, and we’re happy to talk you through which one makes most sense for your current needs. Get in touch today to discuss next steps in detail!