Recruitment agencies get paid. However, many people have questions about how they get paid, by whom, and how much they are compensated for their services.
How recruitment agencies get paid is a common question that gets discussed in the industry. Our executive search team fields questions all the time about compensation. Employers and job candidates alike are curious about how compensation for a recruitment agency works.
To shed some light on this commonly asked question, our recruiters have provided some general information about how recruiters get paid. Below, we’ll provide answers to these three key questions:
- How do recruiters get paid?
- How much do recruitment agencies charge in Canada?
- Can recruitment agencies charge candidates?
How do recruiters get paid?
Recruitment agencies are hired by companies to help them find and place suitable candidates. Once the agency successfully fills a position, the employer pays the agency a fee for their services. Here’s a clear breakdown of how they earn money:
The Typical Fee Structure
Employers (the client) pay a recruitment agency a percentage of the candidate’s annual starting compensation. Typically, this is around 25%. But this number can change based on a variety of factors.
For example, let’s say an employer hires a recruiter to help them recruit a marketing manager. The position has an annual salary of $80,000. With an agreement of 25% of the candidate’s salary to fill the role, the employer would pay the recruiter $20,000 for their services.
Contingency vs. Retainer Payment Structures
Another distinction to make is the difference between a contingency and a retainer. A contingency means the recruiter will be paid once they place a candidate. Retainer means the recruiter is paid upfront for their services on an ongoing basis.
- Contingency Payments for Recruitment: Under this payment agreement, the agency is paid only if it successfully places a candidate with an employer. The fee is usually a percentage of the candidate’s first-year salary.
- Retainer Payments for Recruitment: The agency is paid an upfront fee to conduct a specialized or executive-level search. Payments are usually split into phases: upfront, during the search, and upon placement. Common for high-level or hard-to-fill roles.
Contract Placements
How a recruiter gets paid for contract placements is a little different. For contract workers who are paid hourly, the client pays the recruitment agency a markup based on contract length & scope.
A La Carte Recruitment Services
Not every agency provides this service option. At IQ PARTNERS, we offer our services if clients need help executing individual sections of the search process. For example, they may require assistance with candidate references, candidate assessments, or interviews. The client pays the agency an hourly or flat project fee.
Bonuses and Repeat Business
Agencies can earn performance bonuses from employers if they meet certain criteria. For example, they fill vacancies within a certain period. Or they develop long-term contracts with companies, especially if they consistently deliver good candidates.
How much do recruitment agencies charge in Canada?
Recruitment agencies in Canada typically charge a fee based on a percentage of the candidate’s first-year gross annual salary. This fee generally falls within the range of 15% to 30%, depending on several factors such as the level of the position, the industry, the complexity of the search, and the agency’s pricing structure.
On average, most recruitment agencies charge around 20% for standard placements, particularly for mid-level roles or positions that require common skill sets. This is considered a typical rate for general recruitment services.
However, fees can increase significantly for more specialized or senior-level positions. For executive search services or roles that demand niche expertise, the rate can climb to 30% or higher. In some high-stakes executive placements, especially those conducted by retained search firms, fees may even exceed 30%, and may include additional costs such as retainer fees, milestone payments, or expenses incurred during the search.
Can recruitment agencies charge candidates?
If a recruiter requests payment from you, as a candidate, you should consider disengaging and seeking out alternative options. This is a red flag that the company may not be what it appears to be. Recruiters are paid by employers. Employers should always ensure they are completely clear about recruiter compensation and how it works before entering an agreement.
A final word on how recruiting firms get paid
Recruitment agencies are paid to help employers fill vacancies. They are incentivized to find qualified candidates because their fees are tied to successful placements. Compensation agreements can vary by industry, location, services provided and many other factors.
If you have more specific questions about how recruitment agencies get paid or how we operate at IQ PARTNERS, don’t hesitate to reach out to us.
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