You must have read an umpteenth number of articles on the benefit an executive search company can bring to your organisation, but are you really aware if your executive agency is charging from you more or less? Do you know how do these companies price their services? How they earn profit for their companies? The profit of these firms is the markup you add to the price you pay for getting the labour of the employee. More skills and better training of the employee brings a better profit for the executive search companies. Below mentioned are some of the factors which acts as the basis for the executive recruiter companies to price their services for you:
Less the competition, the higher the price. Indeed, this is the thumb rule for the top executive search agencies out there. If, there is less of competition in the recruitment type they deal with, the markups are usually huge. However, if there is a cut throat competition, the markups are average and thus prices are set as average only taking into consideration the overall industry. In Germany, an average sector usually has 50-70% markup for executive search agencies, while the less competitive sector brings a margin of more than 80%.
Industry plays a key role in defining the basic prices for services. For niches such as IT, Legal etc. the markups are usually high as against the standard niches such as clerical. This is because of availability of staff is more for the traditional niches in comparison to the specialized niches. For specialized niches, the executive recruiter also needs to do a lot research and take the pain to get the right person at the job, hence, they price higher for this category of staff placement.
- Relationship with client
The markups are usually lower for the client company which gives the executive recruiter a considerable business, hence a lower billing rate is offered to such a client. The high volume clients get a special rate even if the company needs to lower its markup as low as 10%. The special rates are usually given to companies who have been with the executive search company for a considerable period of time or offers voluminous business.
- Type of placement
The price that the executive recruiter charges from the client also depends to a large extent on the type of placement, the clients ask for. The fee charged is a way too high for the permanent recruitment category as the company is going to permanently lose the profit on that candidate. If they have invested a lot of training on that employee, the price will hover around 10% of the expected annual salary of the employee.