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  • 05 Jan 2018  |  Recruitment100.com | Recruitment 101: The Basics | Part 1
    How do Recruitment Agencies work?

    For many, especially the uninitiated, the intricate relationships between agencies, candidates, and employers can appear to be abstract concepts.

    In the first article of our ‘Recruitment 101’ series, we interview Clemens Mielke, Founder of Recruitment100.com, to discover how the recruitment industry, specifically in the GCC, functions.

     

    Clemens, at a glance, what do recruitment agencies do?

    Clemens Mielke: You can imagine recruitment agencies to be like brokers. They make money by introducing candidates to companies and vice versa, so if you are looking for a new job, or to bring new talent into your organization, you will get in touch with the agency functioning as the middleman and facilitator.

    Recruitment is a service, with a good agency necessarily maintaining and growing a network of organizations and candidates in their respective industries.

     

    So how does the procedure look like for an organization working with an agency?

    CM: Usually, the employer signs an agreement with an agency, contracting the agent to introduce candidates. The introduced candidates should meet specifically agreed-on criteria such as years of experience, educational background and professional certification for the open position.

    This agreement, among others, stipulates three core components: the introduction fee payable by the employer to the agent for a successful introduction, the introduction period as well as the placement guarantee. The agency will then identify and contact candidates that qualify for the position and introduce their profiles to the employer. Agencies also usually facilitate the interviewing and hiring processes.

     

    You mentioned three core components of the agreement – would you go into detail for those?

    CM: Sure. The introduction fee is the amount that the employer pays the agency if one of the introduced candidates is hired. This is often a percentage of the candidate’s annual compensation. For instance, let’s assume a construction company hiring an engineer introduced by an agency would pay 20% of the engineer’s annual salary to the agency – given a salary of AED 15,000/- per month, that is AED 180,000/- per annum and a fee of AED 36,000/- for the agency.

     

    How much is the usual fee for contracting an agency?

    CM: Usually between 10% to 30% of the annual compensation, depending on the agency, the industry, and the profile of the candidate the employer is looking for. The trend goes toward a success fee model, called ‘contingency’, in which the agency is only paid if the employer hires one of the introduced candidates. The opposite are ‘retained’ models, in which the agency is paid part of the fees up front and often works on the assignment on exclusive basis. There are also other fee structures, such as flat fees for each hire.

     

    And what does the introduction period refer to?

    CM: The introduction period is somewhat of a security for the agency. Usually lasting between six months to one year, the introduction period translates into an employer hiring any introduced candidate within the stipulated period to be liable to pay the agreed-for introduction fee to the agency.

    Taking the above example, aside from the engineer that was hired, the agency has also introduced four other engineers that would have been suitable for the post. From the date of introduction, if any of the four remaining engineers is hired, the employer must pay the introduction fee to the agency as long as the introduction period lasts – even if the agency is only involved with the initial introduction(s).

     

    How about the placement guarantee?

    CM: Each party has a security: one is the introduction period for the agencies, and the other is the placement guarantee for the employers.

    The placement guarantee refers to a period in which the agency will credit either all or a fraction of the introduction fee back to the employer if the hired candidate ceases working with the organization. Crediting the fee is often staggered based on length of time worked; with the longer the candidate working for the employer, the smaller the fee that will be credited back to the company.

     

    What would be the average placement guarantee?

    CM: It can vary, but usually between 1 to 6 months.

     

    Considering the components that go into the relationship between employer and recruitment agency, what are the implications for candidates?

    CM: Ideally, the candidate will not be affected by the contractual relationship between the employer and the recruitment agency. It is uncommon for candidates to pay for the services of recruitment agencies, with some jurisdictions rendering agencies charging candidates illegal. Similarly, it is unusual for introduced candidates to be asked to compensate their respective employer for leaving employment after the placement guarantee period expired – however, it always depends on the individual arrangements between the involved parties.

     

    Putting it all together, how does a typical recruitment assignment look like?

    CM: Imagine a hospital is looking to hire a cardiologist with ten years of experience, fluency in English, Arabic and Spanish as well as a specialization on aortic valve replacement. The more specific a role, the more complex is finding the right candidate. Furthermore, the more senior an individual is, the more likely they are to be a passive job seeker, which refers to them not actively screening recruitment portals or applying for openings.

    At this point, the hospital contracts a recruitment agency to find and introduce someone who is both fitting the profile and is also interested in taking the job – reasons behind this, for instance, could be pressure to fill the position as soon as possible, lacking resources and manpower to fill the position without external help, or no one suitable within the hospital’s known network of practitioners.

    The agency will then start to search for and introduce suitable candidates, also referred to as ‘headhunting.’  The ways an agency does that are manifold and will be discussed during our next articles, together with how a good agency can easily be identified – so stay tuned!

     

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