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Recruitment Agency Fees II – Permanent Placement Fees

By November 22, 2018HR Management Tips
Permanent Placement Fees: Money handed over

Recruiting for the Long Term…

Permanent placement fees. Perm fees. Retainers. Exclusivity deals. Oh please stop talking so much jargon! I’m an HR expert/business owner and I don’t have the time to understand and read your bible of confusing gumph. Here are some top tips on recruitment agencies’ permanent placement fees, and how to avoid pitfalls when hiring a candidate on a permanent basis.

Procuration Fees

Also known as perm fees or placement fees, permanent placement fees are the first and usually the only part of negotiating deals with a recruitment agency.

The Recruitment and Employment Confederation (REC) have standard terms of business for placing permanent staff members.  Most agencies will sell top down on their fee structure. This starts at around 25-30% but it is highly unlikely they are selling in at these rates unless they are head hunting boutique candidates wearing diamond-encrusted Jimmy Choo!

You can always come down you can never go up. Usually, the agency should work to around 12-15% if working on an ad-hoc basis. If you are looking at a £100k+ annual spend, then they need to drop their drawers for 10%.

Exclusivity?

Do you really want to work with one agency? And if so, how long before you move onto another agency? You need to be very careful you’re partnering with a true recruitment agency that vets their candidates. What you don’t want is an agency that sits on the vacancy because they are busy finding higher priced permanent placement fees for their candidates with other businesses. Offer a maximum of 2-4 weeks exclusivity. If they cannot deliver decent candidates within this timescale, they are not worth working with.

Permanent Placement Fees: Reserved Exclusive Agreement

Salary Only, Please!

Only ever agree to pay permanent placement fees based on salary. Reason? You’ll end up paying more if you offer bonuses, cars, etc. Why should you pay more for making your job more attractive for them to sell? Don’t do it and don’t allow it. Write over the terms if they send you them and put this in. 

Invoice Terms

Only ever pay once the candidate starts. Never pay before, and never agree to the invoice being raised before they start. Some agencies have clauses in their terms of business – stating that you will still have to pay them even if the candidate doesn’t start. NO WAY! Strikethrough it and sign it where you strike!

Permanent Placement Fees, Invoice Agreement Picture

Pay Over 30 Days…

Recruitment agencies will always want their permanent placement fees to be paid within 30 days. Usually 7! Push for a minimum of 30 days. Why? If your candidate doesn’t work out in the first month – it’s a waste of everyone’s time – what are you paying them for? Ask them to state clearly, that, if the candidate leaves within the first month of employment, for instance, no fee is due.

Word of Caution!

Working with lots of agencies on the same vacancy makes your business look desperate and seeks to cheapen the role you are looking for.

Tier Supply

From experience, typically, I would always have a preferred supplier, one that you can trust knows your culture and business ethos and will really sell it to the candidates. Give them exclusivity for a couple of weeks, if you don’t make the progress you would have liked then have a second tier in place.

Don’t always base it solely on the value of their permanent placement fee. Although it makes sense to have a conversation with your preferred supplier to come down to 10-12%!  However, it should always about the quality of their work.  When you get an agency you like working with you may be willing to pay a little extra.

What Should You Get for Your Permanent Placement Fee?

The following is a list of the minimum expectations of the work that should always be carried out by the agency when sourcing the right candidate. That is what the permanent placement fees you pay entitles you to. You should walk away if it isn’t done:

  • Screening CVs. Agencies shouldn’t just send you a bag of spanner’s for you to sift, they should listen to your needs and be prepared to challenge you if they feel you are low on salary. Agencies should have a recruitment plan for your role (interview dates, when are you expecting to receive CVs, do you want them all at once or as and when we receive them?).
  • A telephone interview to see if they are sound of mind, know their CV and are a good fit for the business and role. It’s the third stage after receiving CVs (1st) and sifting then for matches against profile and experience (2nd).
  • They should send you their synopsis of the candidate, salary & package expectations and reason for leaving the current role and explain any gaps.
  • You need to then give the agency feedback on why you want them or why you don’t want them. Do it in a reasonable timescale (I usually say within 48 hours). Telling someone why you want them helps build a better working relationship with the agency. Lastly, it helps them learn what they are looking for.

Summary

Negotiating the right permanent placement fee can be a minefield. Don’t be afraid to negotiate or tear up their standardised agreements. Moreover, in paying a permanent placement fee you are making a large investment and putting a lot of trust in the agent to find the right person for the long-term. Don’t forget it! Always ensure that they are working in the best interest of your business and walk away if they are not working hard enough to source the right talent that meets your immediate needs.

This is the second part of a series of guest articles on recruitment by Gemma Polanski.  You can find the first article on Temporary Contract Fees here.


For further useful tips and information, you can take a look at our Ultimate Guide to People Management Skills. Also, don’t forget to check out our YouTube Channel and our award-winning blog to see more helpful HR Management Tips and articles.

Gemma Polanski

About Gemma Polanski

Gemma is a seasoned HR professional, having started her career in the early 2000s. She initially got into HR through her love of people and wanting to achieve the best for them. She has spent a number of years sidestepping into the recruitment industry and heading up fast paced fresh food manufacturing HR Departments throughout the UK. Her passions are dogs, the countryside and having the best standards in place for employees and organisations alike.

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