What is Contingency Recruiting | Meaning & Definition

What is Contingency Recruiting?

Contingency recruiting is when an organization uses a recruitment firm to pool candidates and hire new employees for a position.

To elaborate and simplify, an organization contracts with a recruiting agency that carries out all the recruitment-related processes, from pooling candidates to selecting the best-fit people for the organization. The company then hires someone from the shortlisted candidates.

The recruiting firm gets paid based on hiring by the company from the pool of candidates. Usually, contingency recruitment firms work for multiple clients at the same time.

How Does Contingency Recruiting Work?

Contingency recruiters may be indicated as indirect competitors to the HR departments in many organizations, which is why they work faster and are motivated by the commission they make.

Let’s go through the steps for hiring people through a recruitment firm.

Steps for Contingent Recruitment

The hiring client or representatives of the hiring company provides a job description, explaining and stating their ultimate goal.
Upon discussing the targeted remuneration of the hired candidates, the company and recruitment firm agree on a fee. They also discuss other conditions in this phase.
The recruitment firm advertises on all necessary platforms, targeting prospective candidates to source talent.
After creating a talent pool, the recruiting firm does an initial screening to confirm their fit for the organization.
Candidates who pass the screening stage are sent to the hiring client.
The hiring company shortlists candidates after passing every interview stage.
Once they find the perfect employees from the talent pool, they offer them employment in the company.
The hiring client pays the recruiting firm for every candidate they hire and also based on the remuneration of the position.

How Do the Contingency Recruiters Get Paid?

The earnings of contingent recruiters aren’t always stable. Unlike retained recruiters who get paid instantly and up front, they get paid only when someone is recruited from the candidates they’ve shortlisted.

How much they get paid depends on the position the clients are hiring for and the commission rate that has been fixed after negotiation. This payment is usually a percentage of the position's salary for which candidates were shortlisted.

How Can Contingency Recruiting Help an Organization?

Here are some of the benefits of taking assistance from a recruitment agency:

Recruiting agencies have extended networks from which they can shortlist capable candidates, making them perfect for companies who want to hire knowledgeable candidates.
There’s no necessity to commit long-term to the recruiting agency since there’s rarely any contractual obligation, and the company can work with multiple agencies.
The hiring company has to spend much less time and resources on the recruitment process. They’re only paying a certain fee if they hire someone from the candidates pooled by the agency.
Contingency recruiting firms have resources and tools that may otherwise be expensive for the companies alone.
The agency may have more knowledge of the industry and the type of candidates required for the company.

What Drawbacks are there to this Process?

Contingency recruitment also has its disadvantages, some of which are listed below:

These recruiting firms may compromise the quality of the candidate pool as numbers drive their job.
Since each contingency recruitment firm works for several clients, they may give the best candidates to the higher-paying companies.
Depending on the recruitment industry, one-time fees can be much higher than just having an HR take care of the process.
One candidate may end up getting shortlisted for multiple companies.
The recruiting agencies may be knowledgeable about the industry but know little about the company culture. This makes it difficult for them to introduce candidates to a company’s unique attributes.

When Does an Organization Require Contingency Recruiting?

There are a few instances when a company may need the help of a recruitment agency to find suitable candidates for their open positions:

When the HR of a company is occupied with other projects and duties;
When a start-up company can’t hire an HR professional, they opt for agencies;
When a company doesn’t have the tools to gather potential candidates;
When a company wants an efficient recruitment procedure.

What Criteria to Look for in these Recruiters?

When looking for a reliable contingency recruiting agency, employers should look for the following things to ensure they get their desired candidates:

The industries and roles they specialize in;
The years of experience they have worked for particular industries and functions;
The companies they’ve previously worked with;
The tools they use and the sources they have for talent pooling;
The processes they go through with the candidates before sending them to the hiring companies.