As a fast-growing company, one of the biggest challenges you’ll face is hiring the right talent to take your business to the next level. However, hiring the right people comes with a cost, and it can be expensive. For years, the on-success recruitment model has been the standard for most companies, but with the emergence of fixed cost recruitment models, it may be time to consider a switch.
In this blog post, we will explore two different fixed cost recruitment models – retained and token – and explain why they may be a better fit for your business during a talent crisis. We will outline the advantages of each model, so you can make an informed decision about which one is right for your business.
Retained Recruitment Model
In the retained recruitment model, a company pays a fixed fee upfront to a recruitment agency for a specific period of time. During that period, the agency will work on filling any open positions for the company. This model is ideal for companies that have a high volume of vacancies or want to establish a long-term relationship with a recruitment agency.
Advantages of the Retained Recruitment Model:
- Predictability in Your Finances During Turbulent Markets
The retained recruitment model allows for predictability in your finances during turbulent markets. With a fixed cost upfront, you can accurately predict your associated costs and budget accordingly. This is especially important during a talent crisis when recruitment costs can skyrocket.
According to a report by Workable, the cost per hire can range from £3,000 to £10,000 or more, depending on the industry and level of the position. With a retained recruitment model, you can mitigate the risk of unpredictable costs and ensure you have a consistent pipeline of talent.
- Lower Cost Per Hire
The retained recruitment model can also lower your cost per hire. With a fixed fee upfront, you eliminate the need to pay a percentage of the candidate’s annual salary as a placement fee. This can result in significant cost savings, especially if you have multiple positions to fill.
According to a report by LinkedIn, the average cost per hire in the UK is £3,000. However, this cost can vary depending on the industry and level of the position. By switching to a retained recruitment model, you can reduce your cost per hire and save money in the long run.
- Lower Total Hiring Costs
The retained recruitment model can also lower your total hiring costs. With a fixed fee upfront, you eliminate the need for multiple rounds of interviews and assessments, which can be costly and time-consuming. This can also result in a faster time to hire, which can be critical during a talent crisis.
According to a report by Glassdoor, the average time to hire in the UK is 27.5 days. However, this can vary depending on the industry and level of the position. By switching to a retained recruitment model, you can streamline your hiring process by outsourcing a very manual and time consumiung part of the process, whilst still reducing your total hiring costs…and not having to sacrifice on quality.
Token Recruitment Model
In the token recruitment model, a company purchases a token for a fixed fee, which represents a successfully placed candidate. The token can be redeemed when the company successfully places a candidate into the business. If for any reason the role they’re working on they do not place a candidate, the token is passed onto another role until the token has been redeemed.
Advantages of the Token Recruitment Model:
- Flexibility and Control
The token recruitment model offers flexibility and control to the company. With a fixed fee upfront, the company has control over how many tokens they purchase and when they redeem them. This allows for greater flexibility in the hiring process and can be particularly beneficial for companies that have sporadic hiring needs.
According to a report by TechCrunch, 40% of companies in the UK are experiencing a talent crisis. By using the token recruitment model, companies can be more selective with their hiring and only use tokens when they have a suitable candidate, rather than being tied to a specific recruitment agency or paying a percentage of the candidate’s annual salary.
The token recruitment model can also be cost-effective for companies. With a fixed fee upfront, companies can avoid paying a percentage of the candidate’s annual salary as a placement fee. This can result in significant cost savings, especially if the company has multiple positions to fill.
According to a report by Recruiter, the average recruitment fee for a mid-level hire in the UK is 20% of the candidate’s annual salary. For a salary of £50,000, this would equate to a fee of £10,000. By using the token recruitment model, you can save a significant amount of money per hire. This is particularly effective with senior hires, with some of our clients having previously saved over £20,000 on one single hire by purchasing a single token upfront.
- Increased Candidate Quality
The token recruitment model can also lead to an increased candidate quality. With a fixed fee upfront, recruitment agencies are incentivised to focus on finding high-quality candidates that are a good fit for the company, rather than just filling positions quickly to receive a placement fee. Whilst this may seem initally contradictory to intuition, with most people presuming that a recruiter will work harder to fill a role if they are only remunerated based on success, this does in fact cause significant flaws in the hiring process. Recruiters often then provide a candidate in process with you to multpiple other companies in an effort to increase their chances of making a placment. In addition to this, Recruiters will often prioritise the roles they either think they are most likely to place, or will pay them the most money if placed; the dedication you can get from a pre-paid recruiter will pay off both in terms of slashing hiring costs, but also in the candidates provided by the recruiter due to their focus and dedication to you.
According to a report by The Muse, it can cost up to 2.5 times an employee’s salary to replace them if they leave the company. By focusing on finding high-quality candidates that are a good fit for the company, the token recruitment model can help reduce employee turnover and save the company money in the long run.
In conclusion, the on-success recruitment model has been the standard for many years, but with the emergence of fixed cost recruitment models, it may be time to consider a switch. The retained recruitment model and token recruitment model offer predictability, cost savings, and increased candidate quality, making them ideal for companies during a talent crisis.
Whether you choose the retained or token recruitment model, it’s important to do your research and find a recruitment agency that aligns with your business needs and values. With the right recruitment agency and fixed cost recruitment model, you can streamline your hiring process, reduce costs, and find the talent you need to take your business to the next level.