"Why should I pay retainers to recruiters? It seems like I'm paying upfront before receiving any value."
A lot of people as this question. And your concern is understandable.
Some people even argue that once a recruiter receives a retainer, their incentive to perform in-fact decreases. But then, why do the very best recruiters operate only on retainer- and we’re talking $10s of billions each year in retainer fees. So something is missing.
Recruiting is a Reputation Business
This is because recruiting, like banking, law, or medicine, is a reputation-based business. Recruiters win business due to their reputation and proven track record of success. And therefore, you should only work with recruiters who have a consistent history of success, not those who fall short.
Importantly, the very best recruiters only accept searches when they're confident they can find the right candidate. And because of this, most of the risk in the success of the search is actually arising from the employer, not the recruiter. The main risk lies in the employer changing their mind after the recruiter invests significant time in the search. No joke, but some employers even exploit recruiters for “free market research” without any intention to hire.
Retainers help solve this problem by ensuring the commitment of both the recruiter and the employer to the search. But, only pay a retainer to a reputable recruiter with a successful track record in your domain.
3 Types of Retainers
In general, there are three types of retainers:
- Upfront - A one-time payment made before recruitment services commence. This ensures the recruiter's commitment and prioritizes the client's search, building a strong partnership between the two parties.
- Monthly - Regular, fixed payments made throughout the recruitment process. This fosters ongoing collaboration and aligns the recruiter with the client's needs, keeping the search active.
- Progress-based - Payment is divided into performance milestones, linking fees to specific objectives or achievements, such as a number of qualified candidates or interviews. This approach incentivizes the recruiter to deliver results throughout the process.