Bringing in a recruiter to fill a position at your business can cost as much as 35 percent of what you'll pay your new hire in her first year. That price tag may make you step back and think about whether a recruiter is all that important to your hiring process. With the costs associated with going through a recruiter, it's worth carefully considering exactly what a recruiter will be able to help you with.
The Three Types of Recruiters
At least in terms of payment, recruiters can be broken down into three categories: contingent, retained and contract. Recruiters who work on contingency don't require an upfront payment to start looking for a candidate for your company, but will expect a fee equivalent to between 20 and 35 percent of the first year salary of the candidate you hire. A recruiter working on retainer will expect a similar fee, but with the first third paid upfront, the second third paid part way through the recruiting process, and the last third paid when you hire your new employee. Lastly, you can hire recruiters on an hourly basis on contract, with rates usually ranging between $75 and $150 per hour.
Each of these approaches has its benefits and drawbacks, of course. If you're working with a recruiter on a contingency basis, he will want to fill the position as quickly as possible. This is helpful, but he may do so by throwing every candidate he can find at you in the hope that you'll just pick one. Similarly, contracting with a recruiter will ideally cost less than the other two options, but it's very easy for a recruiter to run up a big bill.
Consider the Position You're Hiring For
As a general rule, a recruiter will be most helpful in hiring for a position that requires a specialized skill set—something that you can't hire just anyone who responds to a "help wanted" ad for. If you're prepared to train your new employee or the job responsibilities are more generalized, it makes a lot less sense to pay someone else to collect resumes and sort through them.
Even with more specialized jobs needing a high level of talent, it can be worthwhile to exhaust other possibilities first. You may have several connections in your network who would be ideal in the position, and you can see what it would take to bring them into your company without going through a recruiter. Even if you aren't able to hire one of those people, you've at least narrowed the field a bit and can help your recruiter direct her search in more worthwhile directions.
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The Question of Time
There is one reason to work with a recruiter even if you are hiring for relatively unspecialized position: If you simply do not have time to spend on the recruitment process, bringing in a pro will let you get back to tasks that only you can handle in your business and complete the recruitment process much faster. A recruiter has more resources for finding good job candidates than the average small business owner, which means that even if you do have some time to spend on finding a new employee, a recruiter can simply do it faster.
Furthermore, a good recruiter will offer a guarantee on the employee you hire: If that new hire is fired within the first 30 days of employment, the recruiter will find a replacement for free. Depending on the recruiter, the guarantee may also include replacing an employee that leaves within the first two or three months of employment for a reduced rate. If you are able to offer repeat business to a recruiter, you may be able to negotiate lower overall costs and a longer guarantee.
Do You Have the Necessary Expertise?
If you are unfamiliar with the hiring process, or you've had problems with it before, working with a recruiter can be a way to make sure the matter is handled by someone experienced in the field without needing to pick up a degree in human resources yourself. There are quite a few potential pitfalls in the hiring process, especially for a small business that may not be in a position to have a full-time human resources department. Some recruiters offer consulting services to help you overhaul your hiring process as well as handling hiring a new employee.
That sort of expertise can be invaluable, especially when you consider that lawsuits regarding unfair hiring practices can damage both a business's reputation and its ability to continue operating.
Make Sure to Maintain Control of the Situation
When you're considering working with a recruiter, it's a good idea to sit down before you sign a contract or even start planning the recruitment process and get a feel for how she works. Depending on the payment system a particular recruiter uses, this is your opportunity to put an upper limit on things like the number of hours a recruiter can bill you for or the number of resumes you're willing to look at. That way you can reduce some of the potential problems that can drive up the cost of working with a recruiter. It's also important to pay attention to the recruiting process as it goes along, even though you're essentially handing it off to someone else. It's a matter of making sure that your business is protected throughout the process.
You can also get a feel for whether a recruiter is going to be able to help you with your specific needs. Many recruiters specialize in certain types of employment, making it important that you find a good fit. If you're looking to fill a technical position, for instance, you need a recruiter who understands enough about the technology in question to correctly asses a job candidate's skills, bringing you only the resumes of potential employees who can really do the job at hand. The alternative is having to handle much of the recruitment process yourself, reducing the usefulness of a recruiter significantly.
Thursday Bram is a senior writer at Wise Bread, a leading personal finance community dedicated to helping people get the most out of their money. Get daily money tips by following Wise Bread on Facebook or Twitter.