Editor's Take: What if recruiters were paid by the hour?
A recruiter suggested to me recently that agencies might one day consider charging clients by the hour. After all, he pointed out, professional services firms like lawyers and accountants calculate their fees by the clock, so why shouldn't we.
After chatting to a few more headhunters, I was surprised to learn that none could really explain why agencies have always taken a slice of a placement's salary and why this cut has usually hovered between about 20 to 25 per cent (sometimes slumping a bit lower during a downturn).
In the words of another recruiter: "It's just the market standard. We don't really know how, or more importantly why, it came to be set at about that rate."
Although it would be brave indeed for an agency to move away from the current model, recruiters can in theory see some overall advantages to hourly charging, even if they wouldn't necessarily be the party who benefits.
For example, it could prompt them to use their time more effectively as every minute would have to be accounted for, shown to their managers, and billed to their clients.
Hourly fees could also promote transparency. "A lot banks don't actually know what we do with our time. They don't understand recruitment and why we are paid 20ish per cent for filling a job. If we charged by the hour, clients would know exactly what we're doing to help them with candidates and how we are adding value," says the recruiter who first raised the subject with me.
But hourly rates create a minefield of potential problems which perhaps explain why they haven't become mainstream. Could all recruiters be trusted to provide an accurate assessment of their hours?
On the other hand, perhaps job seekers would ultimately be the ones to benefit. Knowing that they are being paid for their time, recruiters might make more effort to contact candidates about specific jobs.
Hasty emails could turn into long, meet-and-greets at cafes in which candidates and recruiters really get to know each other's needs. The days of quick-fire CV flogging in the hope of an easy, fast commission might be numbered.
Realistically, however, the chances of recruiters making the switch are slim as the new fee structure would probably reduce their income. What consultant would want to give up his or her percentages to be a slave to the clock?
Let us know your thoughts below. I'm keen to hear perspectives from all three parties: candidates, employers and recruiters.
