What Is Placement Fee?
A placement fee is a very useful term to know in staffing. In essence, a placement fee is one-time payment to a staffing firm in the event of a successful referral.
There is, of course, more to it than that.
It is important to remember that recruiters are doing a lot to earn that placement fee. As a third party, they are taking much of the burden of identifying talent off the hands of the client. They are saving the client valuable time and effort.
Many businesses involve agencies and agencies fee. From sports and entertainment to real-estate and publishing, agents abound in various verticals, and a fee is typically at play. For instance, if you are renting an apartment, you might spend $2000 on a "broker's fee" to a real-estate broker.
A placement fee is very similar. As a real-estate agent identifies an apartment and shows it to the renter, a recruiter identifies a candidate and shows him or her to the client.
How Much Should a Placement Fee Be?
Placement fees are generally set as percentages of the employee's annual salary. That is, the employee that has been placed with the client.
Now, it's important to remember: recruiters are putting a lot of effort into finding the right fits for a position. They're not just typing "IT consultant available today" into Google. They're using cloud-based ATS systems--such as JobDiva--to find talent.
They are doing hard work, even if this work is made easier by their ATS systems. Generally, ATS systems help to speed up and optimize the recruitment process.
So the fee is repayment for all that time spend reaching out to, qualifying and engaging with candidates. Some ATSes, especially JobDiva, have communications technologies that help recruiters engage their talent.
The fee will generally be set by the recruiter beforehand and depend on the difficulty of the assignment, along with the potential salary at play. As in sports and entertainment, where a larger contract nets a larger fee for the agent, a larger salary will carry with it a larger fee. But the role will probably be that much more important.
What Else Should I Keep in Mind About Placement Fees?
The bottom line is this. For many staffing companies, placement fees are the lifeblood of their business.
Staffing is a very competitive business with a lot of uncertainty. Recruiters make many, many submittals before they make a hire. For high-salary positions that require much research and many man-hours,
Though top-ranked ATSes like JobDiva make recruiting easier, it still requires people skills, time and lots of candidate rejections.
Your average employment agency uses placement fees to help power their business. And that's a fact.
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