Recruitment agencies play a crucial role in connecting businesses with talent. But one common question many people have is, "How do these agencies get paid?"
In Australia, the payment models for recruitment agencies can vary based on the type of service they provide, but here’s an overview of the most common methods:
1. Contingency Recruitment
In this model, the recruitment agency is only paid if they successfully place a candidate with the employer. It’s the most common structure in the industry, and the fee is typically a percentage of the candidate's first-year salary.
- How it works: The agency works on behalf of the employer, sourcing and screening candidates. If the employer hires someone through the agency, a fee (often 15-25% of the candidate’s annual salary) is charged.
- Pros: No upfront costs for the employer, and payment is made only upon a successful hire.
- Cons: It can create competition between agencies if multiple recruiters are working on the same role.
2. Retained Recruitment
This model is often used for executive or specialised roles. The employer pays the recruitment agency in advance (retainer) to conduct an in-depth search for the right candidate.
- How it works: The employer agrees to pay a portion of the fee upfront (usually 30-50%) with the balance paid once the role is filled. This model gives the agency exclusivity in finding the candidate.
- Pros: The agency invests more time and resources into finding top talent. For both parties, this is the best way to recruit a specialised role.
- Cons: It’s more expensive upfront, and the employer still pays even if a suitable candidate isn't found.
3. Temporary Staffing
When businesses need short-term employees, they often turn to recruitment agencies that specialise in temporary staffing. The agency hires the worker and manages payroll, while the business pays the agency for the worker's services.
- How it works: The agency charges an hourly or daily rate, which includes the employee’s wage and a markup for the agency’s services (typically 15-30%).
- Pros: Flexibility for businesses, especially for short-term projects or seasonal work.
- Cons: The cost can add up if the temporary employee stays for a long period.
4. Contract Recruitment
Similar to temporary staffing, contract recruitment involves placing workers on short-term contracts. However, these roles are usually more specialised or higher-skilled.
- How it works: The business pays a daily or hourly rate, which includes the contractor’s pay plus the agency’s fee. The contractor may be on the agency’s payroll or work as an independent contractor.
- Pros: Access to highly skilled workers for project-based work.
- Cons: Costs can be higher for skilled contract workers.
5. Flat Fee Recruitment
Some recruitment agencies offer flat-fee services, charging a set price for filling a role regardless of the candidate’s salary. This model is often used for lower-level or high-volume roles.
- How it works: The employer pays a fixed fee, agreed upon upfront, for the recruitment service. The fee may include candidate sourcing, screening, and sometimes initial interviews.
- Pros: Cost certainty for employers.
- Cons: It may not be suitable for more complex or high-level roles.
Key Takeaways
Recruitment agencies in Australia offer a variety of payment structures depending on the type of role and the employer’s needs. Whether through contingency, retained, temporary, or flat fee, businesses should choose the model that aligns with their hiring goals and budget.
Understanding these models can help both businesses and job seekers navigate the recruitment process more effectively and set clear expectations with their recruitment partners.
It’s all about the people.
