Recruiting fees are fees paid to an executive search firm for finding and recruiting an employee to work for you. The fees are based on the reasonably expected annual compensation of the employee that you hire through the search firm.
Is it Really this Expensive?
Recruiting fees range from ~15% to 30% or more depending on the difficulty of the position to fill. So the answer is yes it is expensive. That's why it pays sometimes to do it yourself!
The fee is calculated like this:
40K salary x 25% Fee = $10,000
Types of Fees
There are 2 types of fees. Contingency fees and retained fees. The difference is that on a retained search you pay part of the search fee up front and part on the back end when the search is completed.
In a contingency search, there are no fees until a person is hired and the search is complete. In other words, they work for free until they find someone that fits your job!
Can I Lower the Fees?
Absolutely, but do it carefully. Here's why. If a company has an A+ candidate and 2 or 3 companies that need that candidate, where do you think they are going to send that candidate first? The one with the lowest fee? Here are 3 tips for helping lower the fees;
Find out if the company works with your competitors
Ask if this is the best rate they have.
Offer multiple searches
The competitor's question is important because, if you are their only client that would use a certain type of candidate then they have less leverage about sending that A+ candidate elsewhere. Basically it comes down to this, send that candidate to you or get paid nothing.
Asking for the best rate is always a good idea and offering multiple searches could induce them to both give you a better rate per search because the total fee for multiple searches will be a larger total sum. This is especially true if it is filling multiples of the same position.
One alternative is to barter services. This may not work but sometimes is will. Offer to introduce the recruiter to 1-2 potential new clients. Who couldn't use more business?
When all else fails ask the service if they can extend terms. Say 50% is due upon hire and 50% is due in 45 days. Somehow writing 2 checks for $5,000 is better than writing 1 for $10,000.