How Do Executive Recruiters Get Paid?

Why executive recruiters have a vested interest in your company’s success.

Executive recruiters play a critical role in helping companies find top talent for high-level positions. While you may think of recruiters being involved in identifying, vetting, and recommending the best candidates for a particular role, their role doesn’t end once a candidate is hired. In fact, if an executive recruiter is worth his or her salt, they have a vested interest in the success of the new employee.

Why is that? Because executive recruiters typically have a compensation structure that involves a percentage of the candidate’s first-year total cash compensation. This structure purposefully aligns the success of the recruiter with the success of the company, providing key motivation to find the best fit for the position and ensure the success of the new employee. 

Phase 1: Contract

Many executive recruiters split their pricing into thirds to create a performance-based payment plan. The first third of the fee comes due when a company engages the recruiter to fill an open position. Once hired, the recruiter typically spends significant time and resources to identify and vet the best candidates for the role. This process involves sourcing potential candidates from a variety of channels, such as their personal networks, industry contacts, and online job boards.

Once the recruiter has identified a pool of potential candidates, they then conduct a thorough screening and evaluation process to ensure that the candidates are a good fit for the company and the position. This process may involve initial phone screenings, in-person interviews, and reference checks. Recruiters may also conduct background checks, skills assessments, and other tests to verify the candidate’s qualifications and suitability for the role.

Throughout this process, the recruiter strives to understand the hiring company’s culture, goals, and challenges, as well as the candidate’s skills, experience, and goals. By taking the time to fully understand both the company’s needs and the candidate’s strengths, the recruiter can identify the best match for the position and increase the likelihood of a successful placement.

Phase 2: Interview

The next step in the payment plan comes due when the recruiter submits a list of qualified, vetted candidates to the company. Most recruiters aim to have a list of a least three candidates, but may have more or less depending on a variety of circumstances.

As the recruiter has already interviewed, evaluated, and vetted this shortlist of candidates, the company can then immediately begin the next level of the interview process. Using notes and other information from the recruiter, the company can better interview the clients and start further ahead in the process than if they had been recruiting themselves. 

Throughout the interview process, the recruiter will stay in constant contact between the candidates and the company, acting as a go-between to answer questions on both sides and act as an expert resource. They can debrief interviewers and interviewees, offer unbiased evaluations, and give advice.

Phase 3: Hiring

Once a candidate is chosen to hire, the recruiter continues to act as a liaison between the new hire and the company, helping to negotiate terms and begin the onboarding process. This is typically when the final third of the recruiter’s fee comes due. They often maintain contact with the employee and employer during the early months of employment to ensure a smooth transition and address any issues that may arise. This level of support can help ensure that the new employee is set up for success and can hit the ground running in their new role.

Phase 4: Guarantee

Once the candidate is hired, though, the recruiter’s focus on the success of the new employee doesn’t end there. Many recruiters offer a guarantee period where they may have to provide a refund or replacement candidate if the newly hired employee leaves the company within a certain period, such as six months or one year. This guarantee period can provide the hiring company with some additional security and peace of mind, as they know that the recruiter has a vested interest in finding a long-term fit for the position.

Total fee

The typical compensation structure for executive recruiters typically involves a percentage of the candidate’s first-year total cash compensation. This percentage can vary, but the industry standard typically ranges from 20% to 35%. However, the exact percentage can depend on various factors, such as the level of the position being filled, the industry, and the geographic location.

Overall, the compensation structure for executive recruiters is designed to align their interests with those of the hiring company and the candidate. By offering a percentage of the candidate’s first-year total cash compensation, recruiters are motivated to find the best fit for the position and ensure the success of the new employee. Stipulations such as guarantee periods can also provide additional security for the hiring company. By working with a reputable and experienced executive recruiter, companies can increase the chances of making a successful and valuable hire, which can have a positive impact on their bottom line.

Here at Healthcare Talent Advisors, we follow the three-part, performance-based pay structure to show our commitment to finding the right person for your open position. Quite literally, your success is our success! For additional information, or to start your free trial of our signature search, contact us today. Let’s talk about how together we can make your next hire your best one yet.