Contingency vs Retained recruitment – which is better?

Recruitment agencies get some bad press – as the ‘middleman’ between the client and candidates, they are often at the mercy of both parties, struggling to explain delays to the candidate, struggling to explain dropouts to the client, in additional to managing every other scenario that presents itself during the recruitment cycle.  Often, the problems arise because the client has opted for what is called contingency recruitment – but there is another approach that has the potential to be less stressful and more productive for all parties.

In this article I’m looking at the pros and cons of both approaches.  Full disclosure – at Blues Point we work on a retained and exclusive basis, rather than contingent, so if you read on and think that a contingent approach is what you require, we are probably not the right recruitment partner for you!

What is contingency recruitment?

So, this is the approach most people are familiar with, and done badly it can induce rage from clients, candidates and recruiters alike!  In contingent recruitment, the client engages multiple recruitment agencies to help them fill their job/jobs.  The agencies will go out to market, usually using advertising and job boards to find candidates, and then send CVs to the client to review.  Only the recruiter that makes the placement will get paid, so the others would not be able to charge a fee for their work.

What is retained recruitment?

The main difference is that retained agencies do not work in competition – the client would engage exclusively with one recruitment agency and would pay them a proportion of the placement fee upfront.  This means that the agency is invested in finding the right person for the role.  A typical model might be that you pay them a third of the fee upfront, a third on receiving a shortlist of candidates, and a third when the successful candidate starts.



Contingency Recruitment


What are the advantages of contingency recruitment?

If you have multiple roles to fill and expect to receive a high volume of CVs, contingency recruitment might be a good path for you, but only if you manage it properly and understand the risks involved.  With multiple agencies competing to fill the roles, you are likely to receive a high volume of CVs, and for many clients, this is desirable if they simply need to make hires quickly.

The contingency approach tends to work best for roles where there will be an abundance of candidates on the market, for example if you need to hire a team of telesales agents or customer service advisers quickly.

What are the disadvantages of contingency recruitment?

When agencies are competing to make a placement, due diligence is often abandoned in favour of speed, so while you might receive a lot of CVs, you may find that the majority of them are far from suitable.  Contingency recruiters use reactive methods to find candidates, which means they search for active candidates on job boards, so you can anticipate a high dropout rate as some of the candidates secure roles elsewhere.

You may find that agencies get into disputes as to who submitted the candidate first, which can cause headaches for the client as they try to ensure that the process is fair and that multiple agencies cannot legitimately demand payment for the placement!

This approach also has the potential to enrage candidates – when their CV is one of many, its more likely that they will struggle to get feedback from the client if they are not shortlisted, and just as likely that their CV will fall into the proverbial recruitment black hole.

When faced with the reality of difficult-to-fill roles and the fact that other agencies are working on the same role, there may be a lack of commitment from the recruiter.  If they are failing to find candidates, they may simply decide not to work on the role any further and may not even inform the client.

Ultimately, the contingent recruitment process is transactional (ie no placement, no fee) so you may not get the best service from the recruitment agencies who work on this basis.

Retained Recruitment

What are the advantages of retained recruitment?

When you engage with a recruiter on a retained basis, the agreement that you enter into will have a project plan and milestones to ensure that the work gets completed in a timely manner.  The agency knows (as long as it’s a quality role) that they will fill the role, and they have space and time to find the right candidates, rather than the ‘right now’ candidates that a contingency approach tends to yield.

A retained approach enables the recruiter the time to seek out passive candidates – those that are not on the market and being courted by your competitors.  This often results in a more successful offer to acceptance ratio as the candidates are much more engaged in the process and interested in the opportunity.

The recruitment process is consultative, so you’ll have a deeper relationship with the recruiter – they will ask a lot of questions to ensure they understand the role and the business with a view to identifying candidates that will be a good fit in person rather than just on paper.

From the candidate’s perspective, they will have regular contact with the recruiter, so they will know the status of their application.  They may have to complete a video interview prior to shortlisting, and even a psychometric or technical assessment. All of these things are beneficial to the candidate, and from the client’s perspective, they test the candidate’s commitment and ensure they are sufficiently qualified for the role.

The retained approach is best for jobs with niche skillsets, technical roles, and senior leadership roles, which require more in-depth candidate sourcing and/or proactive headhunting, or roles where there may be a skills shortage.

What are the disadvantages of retained recruitment?

You probably won’t get a high volume of CVs, so if that’s important to you, this might not be the right approach.  However, the shortlist of candidates that you receive are more likely to be well-qualified, suitable for the position, and genuinely interested.

A retained approach is likely to be more expensive – however some of the risks of making a bad hire are mitigated as there is more time taken to understand the candidate’s motivations and identify if they are a good fit for the role.

Which approach is right for my business – contingency recruitment or retained recruitment?

If you are restricted on budget, have multiple roles, and have positive relationships with agencies that are happy to work on a contingent basis, you might find that this approach works for you.  However, if your role is senior or requires a niche skillset, and you are happy to wait for the right candidate, a retained relationship with a recruiter specialising in your industry may be better placed to assist you.  If you haven’t worked this way before, you might find that the advantages outweigh the cost, particularly when it comes to identifying candidates that are the right fit for your business.