Episode 7 – Types of Recruiting Services
Pete Newsome :
You’re listening to the Hire Calling Podcast. Your source for all things hiring, staffing and recruiting. Today we’re going to discuss the different types of recruiting services that are available in the market. This is a good podcast for anyone who is unfamiliar with the recruiting industry, or may have a need to work with the recruiter, either as a client or a candidate. Let’s go! Welcome everyone and thank you for listening to the higher calling podcast. I’m your host Pete Newsome and it’s really good to be back recording again after a few weeks as I’ve been traveling with my family on vacation. And during this time, I’ve thought of a lot of topics that I’m really excited to present and talk about in the higher calling podcast, and one in particular is the different types of recruiting services that are available in the market. Being in the industry as I’ve been in it for a long time now, it’s easy to take for granted the different ways that someone could work with a recruiter or staffing company either as a candidate or client. But in reality, the terms that we use, and the different ways that someone could be recruited, are unfamiliar to a lot of job seekers and unfamiliar to a lot of companies who may require or benefit by using a recruiter, but haven’t done so in the past. So today is really going to be focused on giving a very brief, but hopefully easy to understand description of the different types of services that are offered. The first one that I’ll talk about is what I call direct hire, recruiting. This is probably the most traditional way that people think of working with either recruiter or a headhunter. So I’ll also called headhunting, or even permanent placement, although we try not to use that word permanent because as we’ve all Learned unfortunately, if we didn’t know already, given the recent market conditions, nothing’s really permanent. So we like to think of it as direct hire. And direct hire recruiting is simply this. It’s a scenario where the end user company who has the hiring need will work with a third party recruiter to represent them in the market. And the reason why we call us direct hire is once a candidate is found and interviewed in an offer is made and accepted, that person will go directly on the payroll of the end user client. So the recruiting firm in between is only there to understand the hiring need at a very deep level when it’s done right. Source, meaning find, and qualify the candidate who’s going to be presented and ultimately hired. And that’s really the extent of the relationship. Now I’m simplifying it – it is really much deeper than that. Both the conversations that take place with the candidates and the recruiter as well as the depth of knowledge that’s needed in order for this process to work successfully. But the recruiting firm is really never in the middle of the candidate and the client. It’s really I think of it at times as matchmaking. So that’s direct hire recruiting or headhunting in the traditional sense. Now, one caveat there that I think is is potentially important distinction, not the candidates really need to be aware of the difference, but on the client side, is that most of the time, this is done on a contingency basis. And what I mean by that is, the end user who has the hiring need, and solicits a recruiting firm to work with them on that need, isn’t paying anything upfront. So it’s a bit of a risk for the recruiting firm and that’s where the qualification process really comes into play on the client side, first or recruiting company could spend a lot of time and potentially lose a lot of money by spinning their wheels. But in most cases, that doesn’t happen. In most cases, it’s very smooth and comfortable process for all involved, but the recruiting firm is working on contingency where they’re only paid once they find the candidate who’s going to be hired. And sometimes there’s guaranteed periods involved in that will really get into that a full of depth today, but the recruiting firm is highly highly motivated to produce quickly, to produce thoroughly, and to make sure that all parties involved are really happy with the outcome. So it does no good for them to find a candidate who’s not going to be hired and is not a good fit for that particular job opportunity for the company. In other cases, with the direct hire or headhunting process, the third party recruiter may work on retainer. And that’s usually done for higher level roles where there’s a smaller candidate pool, more niche roles where the recruiting firm, although they have the the skillset and the capability of finding that individual who’s needed, understands up front that it’s going to be a great level of effort make greater than normal, maybe it’s an executive role where they have to scour the entire country to find the very, very small handful of people or, or sometimes even one person who’s qualified for the role. And so, in those scenarios, the recruiting firm is looking for the end user company to have some skin in the game. And it’s a very specialized type of recruiting and for staff level roles is typically not the case. Most of the time, the vast majority of the time, the staffing company recruiting firm is working on contingency, but that’s what a retain searches it’s where The end user pays upfront. Some percentage, and there’s limitless varieties of how these contracts work they pay up front for the recruiting firm to initiate the search. And generally speaking, a portion is paid to initiate and then a portion is paid, maybe at a mid middle stage of the process. And then the final payment is made once the candidate has been selected and hired, and sometimes stays for a certain period of time. That’s direct hire recruiting, The next type of recruiting is what we call contract or temporary. Now those words really mean the same thing. A lot of people use them interchangeably. I typically stay away from the phase temporary, only because I think of that is more of day labor, or maybe a scenario where a person is out sick for the day and a temporary staffing company would provide that resource on the fly. Ex: get a call at 8am have someone there at 830. I make a distinction there because that’s not the type of services my company provides. And so I tend to think of temporary staffing as being really “on demand” in terms of starting the same day versus contract staffing, which in my mind, and the way we talk about it in, my organization is more thorough and a bigger effort in recruiting upfront and more planning involved. Maybe that’s, you know, not not how most folks would look at it, but if if I’m going to be expected to produce the candidate on the same day I get the phone call, that means I have to have them ready to go on standby, a pool that is available without time to really consider all of the options in the market to find the very best candidate, it’s more on-demand staffing. So that’s what I call temporary. And then contract staffing is the same thing, but it’s usually done for more of a specialized role, sometimes volume based roles where if a company needs a group of folks to meet a project need a seasonal need, but, again, more planning involved where the staffing company is going to put forth considerable effort in order to not only source the right number of candidates with the specific skill sets that are needed, but also do a lot of vetting on on the front end, reference checking, interviewing the candidates, oftentimes more than once. So contract staffing versus temporary it really means the same thing, but a bit of a different level of staffing and different level of effort involved for sure. In both cases, however, the candidate who is recruited and selected is an employee of the staffing company. And that’s really the big difference between contract and temporary or direct hire, or headhunting where the contract employee or temporary employee is an employee of the staffing company for the duration of the time they work at the end user client. That means the staffing company is their employer of record in as far as the federal government is concerned and all of the requirements that go along with that. They will typically provide insurance for the employee both from a liability standpoint because their employees working at their client site, as well as health and medical benefits. So according to the federal government, by any measurement, the staffing company is the employer of record. The way staffing company makes their money in these scenarios is generally off of a markup. If they pay the employee $20 an hour, they pay all the associated payroll taxes and fees, and then after that is met, the difference of what they pay the employee minus what they bill, their end user client, is where their profit comes from. So very consistent across the industry. There’s different margins that come into play, sometimes there’s guarantees, set markups, that sort of thing. But generally speaking, the staffing company is making their their profit during the contract period, when the difference between what they pay their contract employee and what they build their client. I didn’t mention us in direct hire recruiting but it’s it’s worth noting that in those cases, That’s where it’s not a retained search where it is a contingent search. This recruiting firm is, in most cases making their money as a percentage of the selected candidates annual salary. I won’t get into detail about what those percentages are, as it does vary a lot. But what’s probably worth noting, for candidates who are listening who are considering whether it makes sense to work with a recruiter, just know that the vast majority of the time the recruiter who you’re working with is motivated to have your salary, your income is as large as it can be if they’re working off of a percentage, but even if they’re not, they’re motivated for you to make as much as you can. Because that increases the likelihood that you’re going to be happy in your role that you’re going to stay there. You’re going to show up, you’re gonna be a happy and productive employee. And I mentioned that only because I know that There’s a sentiment at times, which is really a fallacy that recruiters are working against their candidates, there’s a lack of trust there or concern that there’s reason to have a lack of trust. And it couldn’t be farther from the truth. In every case that I’m familiar with placing thousands and thousands of employees, I can tell you without exception, the recruiter is always motivated to have the person that they’re recruiting is happy with the outcome of the job offer as they possibly can, because that’s the only way that they’re ultimately going to win and succeed in the business in the short term, because it’s how they make their money by having the person not just walk in the door but stay there and be happy and productive. But also in the long term in terms of building a solid reputation and having repeat business. I could go on for a long time about that, but I will What could really sweater focus on the different types of recruiter, recruiting services? So we’ve covered direct hire, also referred to as headhunting oftentimes, contract and temporary staffing, which is really the same thing. I just looked at it a little bit differently in terms of duration, and how quickly that candidate is needed to be produced on a specific basis. And then the third is what is in between these two, and that’s what I call contract to hire staffing. And that’s really become prevalent in the past 15 years, where the company intends to hire the individual to be their long term employee, but for one of a variety of reasons, they don’t want that person to start off that way. The there’s many reasons and and one could be that they don’t have existing headcount, the need is there, but they don’t have the long term budget. So they need to hire that person to start as a contractor. It could be that they simply don’t have the resources internally to recruit for that role, qnd they need a third party to do it for them, but they don’t have approval or budget to pay a percentage of the salary, and it’s easier for them to pay over a period of time instead of a lump sum up front, or what’s really become common in a lot of scenarios is and this is a bit of a crude way to phrase it is try or buy before you buy scenario where the end user company who has the need for a specific resource goes out to a staffing company and wants to have someone work with them within their setting. We’ll see if they’re a good culture fit or they could fit on the team for a period of time, before they’re really looking to make a long term commitment. Now, there’s lots of folks who don’t have the best perception of that, and I’m not going to share mine on this podcast right now. Because that’s really not the purpose of it. But it’s become a very prevalent thing, and those candidates who are on the market right now, who are opposed to the idea of taking a contract job, are really going to limit your available options. And that’s a message that I would be remiss if I didn’t deliver today is the fear or concern of taking a contract job is something I absolutely understand. I would have trepidation about that too, if I were on the job market because it does seem temporary in nature. But look back to why you’re in the situation in the first place on being on the job market. If it wasn’t your choosing, is that it is misguided to think that you have comfort in a permanent job that’s not a contract. And I can assure everyone who’s listening, I see no difference whatsoever in terms of the long term likelihood of someone saying at a job, whether they were hired as a contractor initially or hired into a direct role. If you’re good at what you do, and the company has a need, and they have the budget for you, they will find a way to keep you and I don’t know how comforting that is to hear, but it’s something that I you know, share as, as often as I need to, with my very close friends and family. So the advice I give here is always gonna be the advice I give to, to to those who are close to me in my personal life. So don’t be afraid of those those jobs – contract to hire is a way of just really making making the numbers work making the available resources work to secure the right resource in a way that makes it easier for the end user company who’s hiring given the parameters are working under. So that is it for today. I want to thank everyone for listening. I would love it if you could subscribe to the Hire Calling Podcast as well as rate and review. And if you have suggestions, I would love to hear those too. I’ve got a lot of ideas, a lot of thoughts on ultimately what I want to share on this podcast, but I am all for pivoting and addressing what the market would benefit from. So please email us it is higher calling at four corner resources calm, very simple, and we look forward to hearing from you thank you for again for listening and have a great rest of your day.