Retained approach vs Contingency approach

When the decision has been made to engage a talent search firm then the next step would be to decide which hiring approach is the right one for your business.

There are broadly 2 main approaches in the talent search sector including retained and contingent.

Contingency approach

In this approach, talent search firms are compensated only after the successful completion of the search. This is normally when the employment contract has been signed and the position has been filled.

In this case you might think all the leverage is in the hands of the organization because you only pay at the end. However, this can also mean that your search assignment is placed at a lower priority than other retained searches. Naturally you would think the talent search firm has to put its best efforts and provide the best possible candidates otherwise they don’t get paid. However this can also be the negative side for the talent search firm as they might not feel motivated enough to deliver if they find out they are competing against an internal team or even another agency.

Retained approach

In the retained approach, the talent search firm is contracted to conduct an efficient and effective hiring process from start to finish.

This approach comes with built-in-exclusivity, as the hiring manager you have the guarantee that the talent search firm is invested and motivated to deliver its best service in sourcing and engaging the required candidates.

There are a few compensation packages for the retained approach could be to 35% of the gross first year salary package. The fee can be divided into instalments based on key milestones in the hiring process.

The contract could also be agreed on a retainer model where the hiring manager could invest in a set placement rates for multiple roles and paid over a bi-annual or annual period. This could work out to be cost-effective for the hiring manager and stable for the external recruiter. This is likely to create and close collaborative partnership once the issues of the contract are completely settled so the focus can be exclusively on the service delivery.

Contingency approach vs Retained approach