Jun 6 2007 by Jason

What Should I Pay a Recruiter?

Q: When working with a recruiter to hire for VP Engineering, etc. jobs, what are the standard terms I should expect in the recruiter’s contract?  Should there be a time duration in which the new employee should stay with my company prior to the recruiter getting paid?

Todays answer is courtesy of Seth Levine, one of our partners.

A: (Seth) Maybe it’s collusion or maybe the industry has just done a nice job of towing the line, but overall I think you’ll find a great deal of consistency in the terms that most recruiters will offer you. 

Standard recruiting fees run 30% of a placement’s first year salary.   This should NOT include any variable pay, but may include either guaranteed bonuses or up-front payments (you will, of course, try to negotiate these out).  You should expect to pay a retainer in the range of $30k (you may be able to break this up into multiple payments).  You should absolutely expect to get a “guarantee” on the placement that will run between 90 and 180 days – you won’t get your money back, but the recruiter will find you a replacement candidate if their first candidate doesn’t work out (note: it’s important to find a recruiter who is really going to see your project through – they are essentially working for “free” if their first placement fails and your relationship with the recruiter and their level of integrity is what keeps them working hard to find you a match).

For more senior searches (CEO and possibly COO) and particularly when working with a higher profile search firm the fee is often higher (40% is common, sometimes rising as high as 50% for a high profile CEO search).  For lower level searches (say for engineers) you might pay a bit less (and in some cases can negotiate a fixed fee per engineer rather than a % of salary – especially if you use the same recruiter for several positions).

Good recruiters should spend the time to understand your business, its culture and your specific position needs before really digging into their search.  You should also expect (demand) that they perform a detailed screen on each candidate (i.e., your recruiter should only be presenting you with highly vetted candidates).