This post was originally published on the RecruitLoop Blog, by Paul Slezak.
It's generated some interesting comments, so thought we'd share it here as well.
The average recruitment agency charges a hefty fee for its service, and will often try to justify it by offering their clients a guarantee. However, if you ever need to take up that guarantee, you could be left with a nasty surprise.
Recruitment agencies today charge clients anywhere from 15% to 30% of a new hire’s total salary package for the first year. For more senior appointments, this fee can equate to the price of a new car.
Many firms are happy to pay this if their newly appointed employee turns out to be everything they’d hoped for.
But if the new hire doesn’t work out, that’s a lot of money down the drain, so recruitment agencies nearly all now offer the reassurance of a guarantee.
A typical guarantee promises that if the new appointment either leaves or is terminated within a certain period of time (usually 3 to 6 months), then the recruitment agency will undertake to find the client a suitable replacement candidate free of charge.
While that all sounds well and good, the reality can in fact be quite different. For one thing, the client has paid all that money to fill a position and now they are left with a vacancy that needs to be filled even more urgently than before.
The recruiter may have already received their commission, so they may not necessarily feel the same sense of urgency and their attempts to find another suitable candidate can in fact take a lot longer and produce candidates of a much lower calibre. Hence, they’ve ‘stolen your wallet’, because you’ve already paid them the full fee.
There are also a number of conditions that are often attached to such a replacement guarantee. These might include:
A Victorian company recently experienced problems when trying to have their recruitment guarantee honoured by a Melbourne-based recruitment agency.
Shortly after being billed more than $7,000 in recruitment fees by the agency to hire a sales person, the company found that the new hire was unsuitable and requested a replacement candidate from the agency.
There was no reply from the agency for three months (coincidentally, the period of the guarantee), after which time the company requested a refund.
The agency refused to pay, claiming the company was late in paying their initial recruitment fee and therefore, the guarantee was void.*
The question that would have to be asked is, would you, as the client, have been in a hurry to pay the initial fee if the appointed person had proved to be unsuitable and the agency was not even returning your calls?
Obviously, there are good and bad operators in every industry and two sides to every story, but it begs the question of whether the recruitment industry needs more self-regulation. Perhaps there is a need to formalise the terms of such a guarantee and to draw up best-practice guidelines to be observed by all recruitment agencies.
In the meantime, there are a number of ways in which hiring companies can protect themselves when dealing with recruitment agencies offering such a replacement guarantee:
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