How do Executive Search Firms Charge?
Many up and coming SaaS firm Leaders have never directly engaged an Executive Search firm, especially those who have had worked for some of the large SaaS firms like Salesforce or Oracle, whereby the Headhunter relationships are maintained directly by the Talent / HR departments. This leads to the question, How do Executive Search Firms Charge? There are certainly cultural differences depending on where the Headhunting firm is based when looking at how much recruiters charge.
Further, some SaaS Leaders could be about to start a new Headhunting campaign in a new geography and have to sign up an overseas supplier for the first time.
So how do Executive Search Firms charge? We will focus on the two main charging models:
Typically Executive Search firms charge between 25% and 35% of the total first year’s annual compensation paid to the candidate. Many executive recruiters include first year commissions and bonuses when estimating total first year compensation, but do not include the cost of benefits. For retained search firms, some portion of the fee is always due when the search commences (often one third) and another third on the acceptance of a suitable shortlist, but the final fee is often dependent on what salary the candidate accepts.
Naturally, the Executive Search firm’s fee can be negotiated. We have noticed that the very large, global Headhunting firms often charge the highest fees, whereas the smaller boutiques who may have lower running costs, are more flexible and may only charge on the basic salary as opposed to the total compensation.
Retained Search is often used for exclusive, senior level Executive Hiring campaigns which involve months of work from both parties.
This is a success-only model whereby the Executive Search firm will only charge its client a percentage fee (for example 25% of the basic salary) if they are successful in placing a candidate in their client’s firm. Typically this charging model is used for job roles that are relatively junior and certainly not at CXO or VP level. Further, the contingency model is often used for non-exclusive searches and whereby the Headhunter does not invest so much time and effort as a Retained search.
We have attached below an overview of some of the differences hiring firms can experience depending on which recruitment agency charges they opt for and the difference in service levels:-
From our experience, there is certainly a cultural difference depending on which country the Executive Search firm is located. We find in some countries in Europe such as France, Germany and the Benelux, retained searching models are more common compared to similar job positions in the USA.
We investigated some of the Top Trends for Executive Hiring in Europe in this previous blog >>