Retained Recruiters versus Contingency Recruiters

By David E. Perry, Mark J. Haluska

Some external recruiters are retained. Retained recruiters work exclusively on a single assignment until it’s complete, and they’re compensated for their expertise rather than for a successful hire.

Typically, retained recruiters are paid one-third of their fee upfront. They receive the second third upon submission of a short list of candidates. The final third is due when the position is filled (regardless of whether the candidate came from them or from another source) or when the search is terminated because the desired candidate fails to materialize.

Sometimes, retained recruiters develop exclusive relationships with a client company, essentially becoming their unofficial talent scout.

Other external recruiters operate on a contingency basis. Instead of charging an upfront fee, these recruiters are paid when — and only when — the client company hires one of the candidates they present. If they fail to produce a “winning” candidate, contingency recruiters are paid nothing at all, regardless of how much time they spent on the search. For this reason — and because companies often pit multiple contingency recruiters against each other to fill the same position — contingency recruiters typically conduct multiple searches at once, focusing on easy-to-fill or commodity-type positions to improve their chances of getting paid.

Companies might employ multiple contingency recruiters to fill a single lower-level position, but this rarely happens at the executive level. With executive searches, confidentiality is crucial. The fewer recruiters, the better.

So, which type of recruiter should you use for your executive search? Go the retained route if possible. Contingency recruiters just can’t put in the time needed to conduct an exacting executive search. Contingency recruiters are also less likely to develop true and trusting relationships with their clients and candidates. That being said, if you aren’t in any hurry to fill the position — if you have, say, 6 to 12 months — then a contingency firm might work.