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GETTING THE MOST FROM RECRUITING
  

Why Use Physician Recruiters?

How to Select a Recruiting Firm
How Does a Firm Perform a Search?
Does Physician Search Work?
Retainer or Contingency
How Firms Charge for Assignments
How to Work with a Physician Recruiter
Advice on Interviewing
How To Be A Good Client

How Firms Charge For Assignments

The firms work in two distinct ways. Contingency firms are paid only when their client's position is filled by a candidate identified by the recruiter. If another candidate gets the job, the recruiter gets nothing. Modified retainers involve a partial payment up-front, followed by the balance being paid when the candidate signs the employment or upon the candidate's start date. Retainer firms, in contrast, are paid regardless of the outcome of the search.They may be hired to work on a specific assignment, or they may be put on a true "retainer" to work on assignments on a continuing basis, but in either case they will submit invoices regardless of their rate of successfully closing searches.

Basic Rates

The most common approach to fees is to charge a flat fee per placement. This can range anywhere from $20,000-40,000. Sometimes recruiting firms will offer discounts from these fees in return for a guaranteed volume of assignments. Flat fees are paid about 80% of the time.

A less popular alternative is a percentage of total compensation. This is usually 30% of the first years income. By simply doing the math on any candidate salary and compensation package, this can be a very costly proposition.

Occasionally recruiters will work on some other basis, such as hourly rates for time spent, or even (with some venture capital backed start-ups) for equity instead of cash. But the flat fee model remains the standard approach in the profession.

Timing of Payments

Retainer firms have varying policies concerning when they submit invoices. One common method is to bill one-third at the outset, one-third a month later and the final third a month after that. Or, the first invoice may be sent after the first month's work. Or the firm may use fifths, with a fee due every month until the full amount is paid or the search is completed. Sometimes the final slice is paid only when the position is filled.

Modified retainer arrangements involve the payment of a flat fee up front to initiate the search and recruitment activities, 50% of the remaining fee due when the candidate signs an employment agreement with the client and the remaining 50% due when the candidate starts work.

Expenses

Almost all firms bill for the expenses they incur while working on an assignment. Typically including telephone and fax charges, travel, and meals while interviewing candidates, expenses can range from 5% up to 20% of fees, and even more for some complex international searches. Clients should pay close attention to expenses. In general, clear policies should be agreed upon up front. The best and most reasonable policy should be an expense cap from the outset written into the recruiting agreement that any additional expenses must be preapproved in advance and in writing by the Client.

From time to time, we hear instances of recruiters using expenses as a profit center by marking them up, or double-billing one meal or trip to two clients. Such abuses are thankfully rare, since most firms realize that their biggest asset is their professional reputation.

We recommend that clients monitor expenses carefully, but also bear in mind that being too aggressive could inhibit recruiters from making sufficiently thorough efforts on the assignment.

What If an Assignment Is Canceled?

It depends on when the assignment is canceled and the reason for cancellation. It is not unusual for clients to find a candidate on their own for a position after engaging a recruiter. In this case, the Client should notify the firm(s) that they are working with that the position has been filled. Contingency firms would not be paid anything.)

Sometimes clients change the job description substantially during an assignment so that the recruiter has, in effect, to begin a new search.

When the search fails to produce a candidate that the client is prepared to hire, or when the candidates offered the position turn it down, contingency firms walk away without compensation. In theory, retainer firms will be paid in full, since their agreement is independent of the outcome of the assignment. In practice, there should be some discussion of why the search failed. If the recruiter bears some responsibility, it is not uncommon for the search firm to receive partial payment only, or to give the client a credit against future work.

Not every newly hired candidate succeeds in his or her new position. When the candidate is terminated or resigns for performance-related reasons within a 90 day period of being hired, most search firms will agree to find a replacement for zero or modest fees.

Clearly there are a number of ambiguous and potentially awkward situations that can and do occur regarding fees. While these problems cannot be predicted in advance, they can be mitigated if the client selects recruiters on the basis of building a close working partnership, not simply to carry out a hiring transaction.