Fixed Fee or Flat Fee recruitment. What is the difference?
The world of recruitment fees can be confusing. The traditional model of paying a percentage of the salary as the fee is continually being challenged by other, more accessible models. But sometimes they too are confusing. In this blog, we try to clear the fog that swirls around the difference between fixed fee and flat fee recruitment.
I’ve been in the recruitment industry for 30 years and there’s one thing I can say with absolute confidence – recruitment fees are seen as the biggest deterrent to using the services of a professional recruiter. And in this time of watching their pennies even more closely, clients are asking again and again for an alternative to the traditional ‘percentage of salary’ billing model that is the norm in the recruitment industry.
In this traditional model, the client is charged an agreed percentage of the successful candidate’s remuneration package. This usually always includes superannuation, and in some cases projected bonuses and the value of perks like cars and parking. So, the fee fluctuates depending on the outcome of the salary negotiations with the candidate.
Budgeting recruitment is a challenge
Hard to budget, right? And some clients even feel they’re being held over a barrel a bit when they have no visibility over the recruiter-candidate salary discussions – who’s to say the recruiter isn’t talking the salary up to enjoy a larger fee?
In defence of my industry, I will always reassure any client with this sceptical view that the latter is rarely the case – a truly professional recruiter works towards achieving the best possible outcome for both their candidate and client. And I can tell you from experience that this more often than not involves helping the candidate reframe their expectations and sense of worth downwards, rather than pushing the client upwards!
But while clients reasonably want to have the right people in the jobs for the right price, a professional recruiter deserves to be paid for their years of training and expertise and often, qualifications in psychology, law, finance and so on.
But I digress. We’re here to help you understand two fee alternatives that are often promoted by recruiters but also cause some confusion for clients. Let me explain.
Flat fee versus fixed fee. What is the difference?
Flat Fee Recruitment
Flat fee recruitment is when it’s just that – a flat fee for the placement. The recruiter has already decided what the flat rate will be and has more than likely widely marketed it.
You’ve probably seen the ads – “don’t pay unnecessary recruitment fees. Only pay $1,995 per placement, regardless of the position”. That sort of thing. It’s usually always designed to undercut competitors, and often hasn’t been thought through very well.
There’s no doubt the perceived advantages of flat fee recruitment are attractive to clients – it’s a cost they can reliably budget for and a cheaper service than anything they’ve been offered elsewhere.
But the hidden disadvantages can result in a poor recruitment outcome. Has the recruiter factored in advertising costs, or are they relying on their database to throw up a candidate? Have they cut corners on the evaluation process – dropped reference checks perhaps? Is there a placement guarantee? Put simply, are you getting only the professional skills and experience you’ve paid for?
Fixed Fee Recruitment
Like a flat fee, fixed fee recruitment offers clients a guaranteed price enabling them to confidently budget the cost. But that’s where the similarity ends.
The beauty of a Fixed Fee agreement is that it’s unique to a specific project and has been arrived at by both parties recognising what is involved in the process and agreeing on a fair value for the work to be done. A Trusted Adviser approach.
A professional recruiter with good market knowledge can assess what will be required to source the best person for the job. They may know of someone they’ve already interviewed and reference checked. They will know if it’s a tight market for the skills required, thereby creating a requirement for searching for passive candidates and engaging in an outreach exercise. Or they may advise that advertising on certain job boards will be the best approach. Or it may be that all three components are required.
A professional recruiter will know what the interview and skills assessment process will need to be and they will know the value of getting proper reference checks done. And they will know about how long all that work will take.
And most importantly, they know how to articulate all that in a way that helps their client understand that professional recruitment is not just a matter of ‘picking up the phone and giving someone a call’, or ‘just sending a few resumes across’.
And when a client has been involved in recognising the value of their recruiter, they’re usually easier to work with, trust the advice they’re being given, and pay their invoice on time.
Which one is best for you – fixed fee or flat fee?
Now you know the difference between flat fee and fixed fee recruitment, you can more confidently assess which one is best for you. A flat fee that is applied by the recruiter and driven by their processes, or a fixed fee which recognises the work that is required to get the best outcome and involves you in deciding a fair amount.