Considering to hire a headhunter for your business but worried about the costs and if it’s worth it? Here’s what you need to know:
- Headhunters, also known as executive recruiters, specialize in filling key roles and have access to candidates not actively job searching, potentially offering a better match for your company.
- Costs can vary widely, usually ranging between 15-30% of the hired candidate’s first-year salary, depending on the job level and other factors.
- Benefits include access to top talent, industry expertise, and saving time and resources in the hiring process, which might make the investment worthwhile.
- Alternatives such as Recruitment Process Outsourcing (RPOs), staffing firms, and platforms like Floowi offer different benefits and might be more cost-effective for some businesses.
Before deciding, consider the role’s importance, the specific skills required, and how a headhunter’s network and expertise can benefit your hiring process.
Before Deciding to Hire a Headhunter, Let’s Define it:
A headhunter is someone who helps companies find the right people for big jobs, especially the ones that are hard to fill. They know a lot about different jobs and have many contacts. They look for people who are really good at their jobs but might not be looking for a new one.
Unlike regular recruiters who wait for people to apply for jobs, headhunters go out and find these people themselves. They might get in touch with them through someone they know or by finding them online.
How Headhunters Differ from Recruiters
Headhunters and recruiters do similar things, but there are some big differences:
- Candidate Type: Headhunters look for people who are happy in their current jobs and not actively looking for new ones. Recruiters work with people who are looking for jobs and apply to job openings.
- Role Level: Headhunters focus on big jobs like executives or leaders. Recruiters help fill all kinds of jobs.
- Search Process: Headhunters actively search for the right person for a job. Recruiters post jobs and look at the people who apply.
- Exclusivity: Headhunters usually work on one big job at a time. Recruiters might be trying to fill many jobs at once.
The Strategic Value To Hire a Headhunter
Even though they might cost more, headhunters can be really useful because:
- Access to Passive Candidates: They can find people who aren’t looking for a job but might be perfect for the role. This means companies can find better people.
- Industry Expertise: Headhunters know a lot about the jobs they’re trying to fill, so they’re good at finding the right match.
- Culture Fit: They make sure the people they find will fit well with the company’s culture and values.
- Confidentiality: Companies can look for new people without everyone knowing, which can be important for various reasons.
So, for important jobs where you need someone just right, or when it’s important they fit well with the rest of the team, headhunters can be a better choice than regular recruiters.
The Cost to Hire a Headhunter
Common Headhunter Fee Structures
Headhunters usually ask for payment in three ways:
Contingency Fees
- This means the headhunter gets a part of the new employee’s first year salary (about 20-30%).
- They only get this money if the person they found takes the job and stays for a bit.
- It motivates the headhunter to find the right match.
- This is less risky for the company hiring.
Retainer Fees
- The company pays an upfront fee that they can’t get back to make sure the headhunter works for them.
- This guarantees the headhunter puts in the effort from the start.
- It’s for covering the headhunter’s early work.
- This means the company has the headhunter’s full attention but takes more risk if no one is hired.
Hybrid Models
- This is a mix of both upfront and success-based fees.
- An initial fee makes sure the headhunter is committed.
- The success part is paid when a hire is made.
- This mix tries to balance commitment and cost.
Influencing Factors on Headhunter Fees
A few things can change how much you’ll pay for a headhunter:
- Industry – Different fields might cost more because it’s harder to find people.
- Role complexity – Tougher jobs or ones that need special skills cost more.
- Candidate experience level – If you’re looking for someone with a lot of experience, it might cost more.
- Geographic location – Prices can vary depending on where the job and headhunter are.
Other things like how big your company is, how many people you need to hire, and the job market overall can also affect the price. Knowing these things can help you plan your budget better.
Breaking Down the Costs to Hire a Headhunter
Fee Ranges by Role Tier
Headhunters charge different amounts depending on the job level they’re helping to fill. Here’s a rough idea of what they might ask for:
- Tier 1 (Entry-level): 15% of the first-year salary
- Tier 2 (Manager): 20% of the first-year salary
- Tier 3 (Director): 25% of the first-year salary
- Executive (C-suite): More than 30% of the first-year salary
For instance, if a headhunter finds a Director who will be paid $150,000 a year, the headhunter’s fee could be 25% of that, which is $37,500. The higher the job position, the more you’ll likely pay the headhunter.
Other Potential Cost Considerations to Hire a Headhunter
There are a few other things to think about when figuring out how much a headhunter will cost:
Upfront Retainers
Some headhunters might ask for some money upfront to make sure they really focus on your job opening. This is often about a third of what you’ll pay in total.
Replacement Guarantees
If the new employee leaves soon after starting, some headhunters will find someone else for the job without charging you more. This is a way to make sure you’re getting a good deal.
So, when you’re planning to use a headhunter, remember to ask about any upfront fees or if they offer a replacement guarantee. Knowing all the possible costs upfront can help you avoid any surprises later.
Comparing Headhunter Costs to Traditional Hiring
When you look at how much headhunters charge compared to the usual way of hiring, headhunters might actually help you save money over time. Let’s look at the main costs you need to think about:
Recruiter Fees
- Headhunters get a part of the new hire’s yearly pay, usually 20-30% for higher-up jobs.
- With the normal way of hiring, there’s no cost for an outside recruiter, but the company’s HR team ends up doing a lot of work.
Job Board Postings
- Headhunters use their contacts so companies don’t have to pay to put up job ads.
- Putting ads on big job sites can cost a lot for just 30 days. Often, you need more than one ad.
HR Overhead
- Headhunters take care of sorting through applicants, setting up interviews, and other tasks.
- In the usual hiring process, the HR team spends a lot of time on things like looking at resumes and organizing interviews. This can take up 10-20 hours each week for a few months.
Productivity Loss
- Headhunters can find someone for the job 2-3 times faster than the regular way. This means the company doesn’t lose as much because the job isn’t empty for long.
Even though you have to pay headhunters, the money you spend on them can be made up by how quickly they work and by not having to do everything yourself. They know a lot of people and can find great candidates for important jobs or virtual positions faster than if you tried to do it on your own.
The Return on Investment (ROI) to Hire a Headhunter
Hiring a headhunter means you’re putting money down now in hopes it’ll pay off later. And often, it does. Here’s how a headhunter can really make a difference:
Access to Better Candidates
Headhunters have a lot of contacts and know how to find the best people for the job. This means:
- You get to pick from the best of the best.
- The people you hire are more likely to be really good at what they do.
- You’re more likely to find the perfect match for your company.
Time and Cost Savings
Instead of spending hours looking through resumes and interviewing people, you can let a headhunter handle it. This saves you a lot of time and effort. You also save money because:
- You fill the job faster, which means less time without someone doing the work.
- You don’t have to spend money on job ads.
- You’re less likely to have to redo the hiring process because of a bad hire.
Strategic and Financial Benefits
The right person in a job can really help your business grow. They can bring new ideas, make better decisions, and lead teams well. This can lead to:
- More innovation and money coming in
- Better leadership and happier teams
- More work getting done better and faster
When you think about the money you spend on a headhunter compared to what you get back, it’s often a smart choice. The benefits of getting the right person in the job can far outweigh the cost of hiring a headhunter.
At JB Hired, we focus on finding you the best candidates quickly and efficiently. Find out how we can help you with your hiring needs.
Alternatives Options to Hire a Headhunter
There are other ways to find new employees that might cost less than using a headhunter. Let’s go over a few.
RPOs
Recruitment process outsourcing (RPO) companies take care of finding employees for you. They’re different from headhunters because:
- Pricing model: RPOs might charge by the hour, every month, or based on how many people they help you hire. Headhunters usually take a percentage of the new employee’s salary.
- Process focus: RPOs handle everything from start to finish in hiring. Headhunters mainly find and suggest candidates.
- Commitment: RPOs work closely with you for a long time to fill many job openings. Headhunters usually work on finding one person at a time.
Using RPOs can save you a lot of money. They also give you a dedicated person to talk to and reports on how things are going.
Staffing Firms
Staffing firms help you find temporary workers for short-term needs. Here’s how they’re different from headhunters:
- Worker type: Staffing firms focus on temporary help. Headhunters look for people for long-term jobs.
- Cost: It’s usually cheaper to pay a staffing firm than a headhunter’s fee.
- Speed: Staffing firms can get someone to start quickly, while headhunters might take longer to find the right person.
Staffing is a good choice for temporary or seasonal work, but the workers might not always match your company culture or have very specific skills.
Floowi
Floowi is a website that helps you hire marketing and creative workers from Latin America at a lower cost. They make sure candidates are a good fit by checking their skills, English, and if they’d work well with your team.
Here’s why it might be a good option:
- Lower pay rates because the talent is based in places where wages are generally lower.
- Pre-vetted candidates are matched to your needs quickly.
- Flexible contracts let you adjust as your needs change.
For companies watching their budget, hiring from places with lower costs can be a smart move. Just remember, it might take a bit more work to make sure everyone works well together.
RPOs, staffing firms, and websites like Floowi are some choices you have instead of spending a lot on headhunters. The best choice depends on how much you can spend, what you need, and if you need someone with special skills.
Conclusion
Hiring a headhunter can cost a lot, usually between 15-30% of the new employee’s first-year salary. But for important jobs or jobs that need special skills, using a headhunter can be really worth it.
Weighing the Pros and Cons
When thinking about using a headhunter, look at the good and bad sides:
Pros
- They can find people who aren’t actively looking for jobs.
- They know a lot about the industry and can find the right person for the job.
- They make sure the person fits well with your company culture.
- They can find someone faster than the usual way of hiring.
Cons
- It costs more at the start.
- There’s no promise they’ll find the perfect person.
- You might still need to do more interviews.
Think about how important the job is before deciding to pay for a headhunter. Consider things like how senior the job is, if it needs special skills, and how much it affects the company.
Calculating the ROI
Even though headhunters cost more, they can bring a lot of value through:
- Better productivity by filling the job quicker
- Increased innovation from hiring really talented people
- Higher sales and revenue because of good leadership
- Greater retention because the person fits better with the company
Try to figure out how much these benefits can help your business to see if a headhunter is worth the cost.
An Ongoing Partnership
The best headhunters work with you over time, not just once. They get to know what your company needs and keep finding great people for different jobs. This way, the benefits of using them can grow over time.
Think carefully about the costs and benefits to decide if a headhunter is right for you. For some jobs, especially those that are really important or need special skills, the benefits of finding the right person can be worth the cost.
