Different Types of Headhunter Fees: Who Pays for What?

Different Types of Headhunter Fees: Who Pays for What?
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What is a Headhunter and Who Uses One?

A headhunter can seem like an urban job market myth because they are not used for every possible vacancy. The fact that they are reserved for the more difficult vacancies means that their skills must be well-targeted to find the right person for a position that often must have a number of specific characteristics.

The headhunter is basically a job scout. He or she tracks down vacancies as well as potential job seekers and goes about matching available vacancies to their applicants according to their experience, qualifications and even personality.

Who Pays the Headhunter and How Much Do Headhunters Make?

Many job seekers mistakenly avoid headhunters because they think that they are going to have pay a fee for using their service. This is actually not the case. Headhunter fees are paid by the hiring company so the job applicant actually gets access to all their information and knowledge at no cost. Getting on a headhunter’s list can therefore be very valuable for the job seeker, but this is not always easy to do.

Headhunters tend to specialize in certain industries so they only move in small but targeted circles. This means they have a better chance of finding out who is looking for a new placement and where these openings might crop up.

How are Headhunters Paid?

Since the job seeker does not pay for the headhunter’s service, the hiring company picks up the entire tab, but how is this renumeration calculated? The following are examples of headhunter fees.

Retainer Fee

Some large conglomerates actually keep a headhunter on their payroll because the chance of needing their service is high due to the sheer size of their operations. The retainer fees are usually offered to headhunters who focus on executive recruitment and thus it prevents any issues of a conflict of interest from arising.

Imagine a headhunter who is asked to fill a vacancy for two competing firms for instance. The headhunter would be in a position to have inside information on these two rivals that can then be used against them. The retainer prevents the headhunter from working for any other company, or at least any other company in the industry, and so it is usually quite handsome. Typically a headhunter’s retainer amounts to about 70% of the executive’s annual salary which is payable part in advance and the remainder when the vacancy is filled.

Per Head Fee

Other companies use headhunters to fill spots that are not as critical or as high profile so they don’t see the value of paying a retainer. Instead the headhunter is paid a “per head fee” which is basically a reward for finding people for various positions. This type of headhunter is paid on the basis of volume and, as such, usually spends a large amount of time scouting out a ready list of job seekers. The larger their pool, the greater the possibility that they will be able to fill vacancies quickly. The “per head fee” can be in the range of 20% to 25% of the annual salary of the recruit.

Headhunter fees are usually simple structures because the job is a straightforward one. Generally speaking, the more classified and exclusive the vacancy, the more the headhunter will be paid, but the tab is always paid by the hiring company.

Please be sure to check out the other tips and strategies found in Bright Hub’s HR Guide for Recruiting and Retaining Employees.

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