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Flat Fee Recruiting: Pros, Cons, and Best Practices

by | Nov 12, 2019 | Owner Issues, Top Echelon Blog

If you’re an independent agency recruiter, you have a pretty good idea of what kind of fees you like. That would be 30% fees. Sure, you’d take 25%, but there’s nothing better than a nice, big, fat, juicy 30% fee.

But what about flat fees?

I can almost hear the collective groans in the audience. But wait! Don’t leave yet. Flat fee recruiters DO exist in the world of third-party recruiting. If they didn’t, you would never see a recruiter earn a flat fee. But it happens in the recruiting industry more often than you think. Or, to put it more succinctly, flat fee recruitment happens more than you might want.

But with just about all things in recruiting, there are times when flat fee recruiting makes sense. And times when it does not.

Flat fee recruiting: the obvious downside

Yes, I know, I know. There are some recruiters who believe that it never makes sense. That’s all fine and good. The biggest con when it comes to flat fee recruiting is rather easy to identify:

  • Flat fees are typically (but not always) lower than fees based upon a percentage of a candidate’s salary during their first year of employment with the client.

That about sums it up, does it not? Another con might be that when you accept a flat fee from a client, that client now believes that you’d be more likely to accept one in the future. You’ve branded yourself as a flat fee recruiter! Run for the hills!

Now that we’ve covered the obvious cons, let’s explore the bright side of flat fees. Specifically, let’s examine when an agency recruiter should accept a flat fee.

Flat fee recruitment: when it makes sense

Your mother probably gave you this advice: there’s a time and a place for everything. That wisdom is so all-encompassing that it extends to the world of recruiting. And while you’d love to earn a 30% fee on every single placement you make during your recruiting career, that’s not going to happen.

No, there’s a time and place for working a flat fee recruiting search. Below are seven such times and places.

#1—When you have the chance to secure multiple job orders.

What’s better than receiving a job order from a client? Receiving more than one job order! Better yet, receiving multiple job orders! What if one of your better clients called you up and said the following:

“[Your name here], I just got the green light to hire an entire department, and I also got the green light to partner with you on the search. We’re talking about five searches to start, minimum, and maybe more after that. There’s a high degree of urgency associated with this whole thing. The catch is that I can only pay you a flat fee of [insert flat fee that would be acceptable to you here]. What do you say?”

More than likely, you’d say, “Sure, let’s get this thing started! Send over the orders!” And the five searches turns into eight. And you fill them all. And then you celebrate in the appropriate fashion.

#2—When you can “negotiate” other aspects of the search

What if a client wants you to accept a flat fee recruiting arrangement for a single search assignment and not eight . . . or five? Try not to be offended. Instead, view this as an opportunity. Is there something that you want in this search for which you can trade? More than likely, there is.

You could answer your client like this. “Sure, I’ll take a flat fee! But in exchange for that . . .

  • “There will be no guarantee period associated with this search.”
  • “The placement check will be cut and sent within 10 business days of receiving my invoice.”
  • “It will be an exclusive search assignment.”

Now will you ask for ALL of these things? Of course not. Don’t get greedy. But receiving one of them in exchange for accepting a flat fee is just fine and dandy. (As long as you can live with the amount of said flat fee, that is.)

#3—When you can scale back on the services you provide

Paul Hawkinson, editor of the late, great Fordyce Letter, once outlined his 26 steps of the job placement process in his newsletter. Then he recommended the following whenever a hiring manager asked a recruiter for a discounted fee:

  1. First, the recruiter should send the hiring manager a list of the 26 steps.
  2. Second, the recruiter should ask the hiring manager which of the steps they would like eliminated in order to justify the fee.

Hey, it’s a pretty simple equation. You want to pay for flat fee recruitment? They you’re going to receive a flat service. At the very least, you’re not going to receive every step of the recruiting process. Full fees pay for full service.

#4—When it’s for an easy-to-fill, lower-level position

Stay with me here. Your client gives you a job order for a position with a lower salary. BUT you know you can fill it, no doubt, and fill it quickly. Sure, it’s a flat fee recruiting situation, lower than you’re accustomed to accepting. However, it’s easy money. More than likely, you’ll present five candidates and your client will choose one within a couple of weeks.

Because of the base salary, you weren’t going to score a huge placement check, anyway. As long as your client knows you won’t be doing this for every search, you should be good.

#5—When you do it as a favor for one of your best clients.

I know this might be cringe-worthy for some of you. But you’ve worked with this hiring manager for years. You’ve provided them with a lot of people and made a lot of placements. In fact, you might have billed more through this client than any other.

So they come to you with a search that has a flat fee associated with it. They really need some people. You’re not a flat fee recruiter, and normally you wouldn’t take the search, but . . . this could be your best client. You like your best client. You want to make your best client happy. “Okay,” you say. “Give me the job order.” Then you fill the position and you and your client live happily ever after.

#6—When you make a “surprise placement.”

What is a “surprise placement”? A placement that you didn’t expect to make. This actually happened recently in Top Echelon Network.

A Network member submitted a candidate for one of their client’s positions. That candidate was not hired for that position. However, the client eventually hired the candidate for another position months later. Check this out: since the hiring manager wasn’t expecting to pay a fee, they asked for a discount. A flat fee discount. The recruiter agreed. Their rationale: “Since I didn’t have to lift a finger to make this placement, I figured why be greedy?” Why be greedy, indeedy?

#7—When the amount of the flat fee is pretty stinkin’ high!

There are instances in which the flat fee is rather high, at least as high as a 20% or 25% commission fee. Now, it’s also true that in these instances, it’s a high-level search. However, the bottom line is the bottom line: the placement fee. In fact, of the top 10 biggest recruitment fees in Top Echelon Network in 2016, two of them were flat fees! That alone should illustrate the earning potential associated with select flat fees.

Would you like to have a 30% commission for the placement? Sure you would. But lacking that, you’d take a better than average fee . . . even if that fee is flat. After all, the money does spend all the same.

Flat rate recruitment and the negotiation stage

When you’re working a search with a flat rate recruitment fee tied to it, there are certain considerations during the negotiation stage. That’s namely because that’s when the subject of your fee comes into focus.

As usual, there are pros and cons to these considerations. Let’s say, for instance, that you’re about to close a deal. The only thing left is the negotiation stage. Here are the considerations if you’re working on commission:

  • If you push for a higher starting salary for the candidate, the hiring manager might ask themselves a series of questions. “Are they negotiating the salary to close the deal? Or are they negotiating the salary to increase their fee? Do I like this candidate enough to offer a larger starting salary or do I refuse? Did I leave the stove on when I left for work this morning?”
  • If you push for a higher starting salary for the candidate, the candidate might also ask themselves a series of questions. “Are they negotiating the salary because they want to get a better deal for me? Or are they negotiating the salary to get a better deal for themselves? Are they putting my offer in jeopardy? Should I have just accepted the initial offer? Did I leave the stove on when I left for work this morning?”

On the other hand, here are the considerations if you’re working for a flat fee:

  • If you push for a higher starting salary for the candidate, the hiring manager knows for a FACT that you’re not doing it simply because you want to increase your fee.
  • If you push for a higher starting salary for the candidate, the candidate knows for a FACT that you’re not doing it simply because you want to increase your fee.

As with most things in life, it all comes down to a matter of motivation. When you work on commission, candidates and clients might question your true motivation. When you’re working for a flat fee, they both know that your motivation is to close the deal. Which brings us to this consideration when you’re working for a flat fee . . .

  • If you don’t push for a higher starting salary for the candidate, the candidate might ask themselves a series of questions. “Are they not pushing for a higher salary because they believe this is the best offer I’m going to get? Or are they not pushing for a higher salary because they just want to get me placed and be done with it? And what the heck is going to happen on the next season of Game of Thrones?”

It’s enough to drive you crazy, isn’t it? Especially if you’re wondering whether or not to work for flat fees. Perhaps this next section can shed some light on that issue.

Should you be a flat fee recruitment agency?

Flat fee recruitment agencies are not necessarily defined as agencies that only work flat fee assignments. They work both for both commission fees and flat fees. They work one or the other depending upon the circumstances surrounding each search.

Here is “wild card” in this whole discussion: relationships.

Remember, this is a matter of motivation. When you build relationships with clients and candidates, you work with them over and over. And when you work with somebody over and over, they know what your true motivation is. You can talk with them and discuss matters in frank terms. They’re not left wondering why you’re doing something. They know why you’re doing it and they trust you for doing it.

And maybe that’s the #1 factor when it comes to commission recruiting vs. flat fee recruiting. Do you trust your client? Does your client trust you? Do you trust the candidate? Does the candidate trust you?

Of all the questions posed in this blog post, these are perhaps the ones that absolutely need to be answered. (Except maybe the question about Game of Thrones. I love that show.)

A veteran recruiter who has been in the profession for an extended period of time and that has built trust with their clients and candidates possesses the following:

  • The luxury of picking and choosing whether or not they want to work on commission or for a flat fee
  • The experience to know when they should work for a flat fee and when they should not
  • The credibility and trustworthiness that allows them to switch back and forth between the two without it negatively affecting their billings

As with most things regarding the profession, the ability to master flat fee recruitment is a skill that is developed over time. The longer you’re a recruiter and the more relationships you build with clients and candidates, the more trust you will create.

And with more trust comes more placements . . . flat fee and commission alike.

(Regardless of whether you do commission recruiting vs. flat fee recruiting, increase your throughput with Top Echelon’s recruiting software. The combination of ATS and recruiting CRM make this software the perfect tool to increase the productivity of recruiting agencies. Try it free today!)

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