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Contingency vs. Retained Recruiters

If you spend any amount of time talking to search firms, you will stumble upon what looks like a class war between contingency and retainer shops. Here's how not to let the battle trip you up and put your next job search at risk.

Unlike contingency consultants, retainer firms receive a portion of their fee no matter what the outcome of a search. They consider themselves an extension of the client firm and may seem to look down their noses at their scrappier (and more numerous) contingency kin as something like ambulance chasers representing the hoi polloi.

'Contingency firms have very loose relationships with a number of institutions that may hire job seekers,' says Allan R. Starkie, a partner at New York-based executive search firm Knightsbridge Advisors, whose clients include UBS, Legg Mason and Commerce Bank. 'They send out resumes like crazy to any company they think might be pertinent.'

Contingency firms offer their own spin on the matter. Susan Teeman, president of contingency-search firm Teeman Perley Gilmartin, whose past clients have included Goldman Sachs, Bear Stearns, and Morgan Stanley, says, 'I've followed on the heels of many retained search firms that don't fill a search. I know enough people on Wall Street that it's not necessary to pay me up front.'

Why should you care? Because how recruiters collect their fee affects both their accessibility and your chance of landing the job at hand.

Contingency Shops Play By the Numbers

Contingency firms, whose fees usually range from 25-35% of a successful candidate placement's first-year compensation, differ from retained-search shops in certain significant respects besides fee arrangements.

More often than not, contingency firms are hired on a non-exclusive basis. Competition with other firms can turn the candidate selection process into a numbers game: whoever gets the most resumes to the client first has the best chance of earning the fee. For this reason, contingency recruiters tend to be more receptive to receiving unsolicited resumes and may even bypass an introductory interview in their eagerness to forward your details.

If you're seeking the broadest possible audience, contingency firms may be the way to go. But in their dash to the finish line, contingency shops don't always seek permission to forward your resume. You may wind up overexposed and desperate looking-or even dropped by a potential employer worried about paying two fees after receiving your resume from two different recruiters.

Or, if your resume lands on the desk of a company you're already networked into-a company enticed by the idea of hiring you without a fee-you could find yourself stricken from the hot list altogether.

Still, many (good) people find many (good) jobs through many (good and bad) contingency firms, and you'll need to balance the risk of overexposure against the opportunity at hand and how fast you want to make a move.

Inside the aristocracy

Retained search firms operate more deliberately. They're usually hired exclusively by a client firm for a guaranteed fee of around $50,000-$70,000, payable whether or not a hire is made, plus a hefty percentage of first-year's compensation.

Unlike contingency firms, retained search firms only work with senior-level candidates whose earnings start at around $150,000-$250,000 per year and ascend into the multi-millions. Retained firms will turn a laser-like focus on you once you penetrate their inner sanctum. Says retained search consultant Starkie, 'It's almost as if you're meeting with the person who's going to give you the job.'

While that may sound good, you have to get a meeting first. Retained consultants tend to consider only candidates identified through their own research or referred to them by trusted intermediaries. Prospective candidates are winnowed to a small handful of perhaps five, and if you make the list, your odds of winning the position are substantial. To help the client firm decide, elaborate dossiers on each candidate are prepared.

Still, even if you're in the position to choose among retained and contingency firms, the decision isn't always clear. Rod Williams, a consultant with outplacement firm Lee Hecht Harrison, says, 'While retained firms are able to put you on a shortlist of candidates, contingency firms can give you more exposure.'

Whomever you work with, one rule remains the same: Cultivate a long-lasting, give-and-take relationship with your recruiter and you may find the best prizes come to those who wait.

AUTHOReFinancialCareers News Insider Comment
  • Lo
    Lori Miler
    6 February 2016

    The answer would depend upon the language of the agreement / contract you signed with the first recruiter. If it includes words to this effect, " Company agrees to pay a fee if candidate presented is hired for this position or any other within a 12 month period," then you would be required to compensate the first recruiter.

  • Pa
    4 December 2007

    Question about payment of fee? I received Resume for Candidate A from a recruiter five months ago for an open position. Filled by another candidate B. Another recruiter sends me the Candidate A for a different position and I hire him. Am I liable to the 1st Recruiter or not? Candidate A 1st Recruiter gave me a contract stating if his Candidate A is hired within one year of last communication, I'm liable! Candidate A did have another job for three months between first presentation by first Recruiter and second Recruiter. Where do I go to answer this question?

  • Ka
    Kathleen Coulson
    15 November 2007

    RE: "Or, if your resume lands on the desk of a company you're already networked into-a company enticed by the idea of hiring you without a fee-you could find yourself stricken from the hot list altogether."

    Totally Untrue and Inaccurate. This happens all the time. If the candidate got his/her resume to me first, we are under no obligation to pay a search firm who subsequently presents the same candidate's resume. Now way. Does not happen. That's what e-mail date and time stamps are for. If there's ever any dispute, I can produce exact records of date and time of submission.

    Kathleen Coulson
    Manager, Recruiting & Employment
    Wedbush Morgan Securities

  • Ex
    Executive Recruiter (Contingen
    14 November 2007

    I recieve compliments from both clients and candidates about how thorough my process is and how much attention I pay to the culture of a company and how a specific candidate's chemistry would fit within that culture. I take offense to blanket negative statements about contingency recruiters. I think the best advice of this article comes at the end--develop a mutually respectful relationship with your recruiter and you will see results.

  • ri
    risk manager
    9 November 2007

    Have dealt with both-retainer firms have laid back recruiters who generally do not care much about the candidate. Better to go with an "active recruiter" who knows a bit about the business and gets you lots of interviews

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