What Is Contingency Recruiting? (Plus How It Works)

Updated September 30, 2022

Contingency recruiting is the process of a recruitment agency getting a fee for finding a qualified candidate for a job only if the company hires the candidate. This is a form of recruitment outsourcing that can save a company time and energy. Learning about contingency recruiting can be helpful if you want to work in human resources (HR) and recruitment or the business niche.

In this article, we explain what contingency recruiting is, describe how it works, discuss its potential advantages and disadvantages and answer frequently asked questions about it.

What is contingency recruiting?

Contingency recruiting is when a company hires a recruiter or an agency to find candidates for an available job, with a fee paid only if the company hires a candidate. Payment for recruitment depends on the recruiting company finding a candidate that the company hires. When this happens, the recruiting company receives a fee for its services.

Contingency recruiters can be very motivated to find a suitable candidate for a company, as their pay is dependent on their performance. If the company doesn't hire their candidate, the recruiter doesn't receive a fee. For this reason, the contingency process is sometimes known as "no win, no fee."

How does contingency recruiting work?

Contingency recruiters may try to work quickly when producing candidates for companies, as they often compete with the HR departments of the companies. Contingency recruiters can use a variety of methods to find suitable prospective employees, including online advertising and print advertising. They typically have many business connections as well, which can make it easier for them to find qualified candidates.

When a contingency recruiter begins a search, they can follow several steps to help increase their chances of finding appropriate candidates. Here are the six steps that many contingency recruiters follow:

1. Company representatives give the contingency recruiter a job description

Representatives from the company that's hired the contingency recruiter explain what the job position they need filled entails. They help the recruiter understand what types of candidates for which they should search. Reviewing the job description allows the recruiter to look for candidates with suitable education and experience.

2. The company and the recruiter agree on fees and other terms

Both parties agree on how much the fee is for the recruiter if the company hires the candidate they find. The company and recruiter may also agree on other terms, such as how long the search for candidates should last. The parties may also sign a contract during this phase.

Related: What Is Direct Hiring?

3. The recruiter contacts prospective employees

The recruiter begins talking to potential candidates to find an ideal person for the position. These discussions may happen virtually or during in-person meetings. Typical communication channels for contacting candidates include email, social media, telephone and video meeting platforms.

4. The candidates agree to attend an interview with the hiring company's representatives

The candidates give a recruiter permission to let the hiring company know that they agree to an interview. This is the stage when the prospective candidates are almost ready to meet a representative from the hiring company. The recruiter prepares to possibly bring their candidates and the company together.

5. The hiring company chooses prospective employees to interview

The hiring company reviews the options presented by the recruiter. Then, the hiring company's representatives decide which candidates they want to interview. The company may eventually hire one of the recruiter's candidates.

Related: Last-Minute Interview Tips

6. The hiring company offers employment to a candidate

If the hiring company finds a suitable candidate for the open position, it may provide that person with an offer of employment, which is an employment contract. Both parties sign this contract so that it's legally binding. After the company hires one of the contingency recruiter's candidates, the recruiter receives payment.

Advantages and disadvantages of contingency recruiting

With this form of recruiting, there are both benefits and drawbacks. Learning about these aspects can help you decide whether this form of outsourced recruiting is a smart strategy for the company at which you work. Here are the possible advantages of contingency recruiting:

The company may have cost savings, and there are no upfront expenses.
Continency recruiting may decrease HR's workload.
There's no exclusivity clause in the contract, so companies can hire multiple recruiters simultaneously.
If a hired candidate isn't successful within a set time period, the company can lower the recruiter's fee.
A recruiter may provide a company with other guidance, such as advice about negotiating salaries.

Here are the possible disadvantages of hiring a contingency recruiter:

Searches may focus more on quantity rather than quality.
A one-time fee can be expensive for a company.
Recruiters who do contingency work can present the same candidates to a variety of clients.
Companies may need to pay for candidates who only work for them for short periods of time.

Related: What Is Recruiting?

FAQs about contingency recruiting

Here are answers to some frequently asked questions about the contingency recruiting process:

How do I choose the right contingency recruiter?

When choosing a contingency recruiter, consider how a prospective recruiter uses data in their searches for candidates. Recruiters who rely on a data-driven approach can generally get good results for clients. They may have high-technology tools to use, such as programs and databases, which help them find suitable candidates quickly.

Related: How To Talk to Recruiters

How much do contingency recruiters charge?

Many contingency recruiters charge a percentage of a hired employee's annual salary. That percentage can vary, but it's generally between 10% and 30%. Various factors may impact a recruiter's rates, such as their reputation in the recruiting field and their success rate in their niche.

Why does a company hire a contingency recruiter when an HR department looks for candidates?

HR departments are typically busy parts of companies, and HR professionals have many assignments to complete. For instance, they may monitor the performance of existing employees, train and support workers and create policies that promote safe, productive and respectful workplaces. For this reason, HR employees may not be able to devote much time to finding new hires. Hiring a contingency recruiter can help to reduce HR's workload and bring new talent into a company.