Are you paying too high fees to recruiters – or too little?

  • Post published:06/09/2023
  • Reading time:8 mins read

Taking for a rideRecruiters are pulling wool over your eyes; deceiving and misleading you to hide what is really going on behind the scenes.

Every Tom, Dick, and Harry can set up a recruitment business, so not a surprise that the concepts of moral right and wrong are relative and mean different things to Dick and Harry.

The extremely low investment to set yourself up as a headhunter, a coach, or a consultant, is obviously attractive to many.

No one bothers and you can call yourself any of the three names – headhunter, coach, consultant – without having a qualification, academic background, work experience, or business license.

Calling yourself Headhunter when all you do is shopping on LinkedIn is not right. It would have been a case for Thailand’s Office of the Consumer Protection Board if recruitment was not a B2B service. Oh well.

How are recruitment fees calculated

How is a fee madeYour third-party recruitment company, or executive search firm, calculates its service fee as a percentage of the successful candidate’s first year’s annual income.

The percentage will typically vary from, and be anywhere in between, 15% and 35% and even up to 40%.

A standard definition of annual income is as follows:

  • Total of the gross salary per month before tax
  • Fixed and contractual bonus
  • Monetary benefits such as fixed allowances (transport, house)
  • Value of a company car
  • Sign-on bonus
  • Performance bonus, commission, incentives

A fixed allowance means a similar amount of money paid every month through the pay-slip and is considered personal income by the Revenue Department.

In Thailand, we come across fixed allowances for transport. This could be 20,000 baht per month for a new car below one million in purchase price; mobile phone 1,500 baht per month; and housing that could be set as a fixed percentage of 10% of the monthly salary.

In the event that the candidate is provided with a company car, the monetary value is added. Example: a Mercedes Benz is calculated as 40,000 baht x 12 months.

If the candidate receives a sign-on bonus, this amount is also included in the fee calculation.

Finally, as part of the annual income definition, you may also come across recruiters who will include incentives, bonuses or commissions as achieving 100% of key performance indicators, objectives, targets or similar.

But as they say, the devil is in the details

5A fee of 33% of the annual income equals four months’ salary. A fee of 25% is the same as three months’ salary.

You must pay attention to having all the facts that may not necessarily be seen clearly at first.

Don’t jump to conclusions; don’t judge the quotation from the recruiter without enough information because you may jump to the wrong conclusion.

In other words, the difference in fee when comparing three and four months may not be the full one-month salary it looks like.

Cheap things are not good, good things are not cheap.

Admit it, this Chinese provert is no surprise to you
  • First Class air travel is more expensive than Economy Class – for a reason!
  • A BMW 7 is more expensive than a Toyota Vios – for a reason!
  • The Oriental Hotel is more expensive than a Khao San Bed & Breakfast – for a reason!
  • The Apple iPhone 14 is more expensive than the ZTE from China – for a reason!
  • Executive Search is more expensive than contingency recruitment – for many many reasons! Believe me.

Majority of contingent searches are never completed

Why don't calla spade a spadeWhy do contingent recruiters not honestly tell their clients that only a fraction of the jobs they work on will end happily with a candidate hired and placed?

If your recruitment provider is only paid if you hire one of the candidates they introduce, it is called contingency recruitment as the fee is only paid contingent on hiring.

As much as up to 80% of jobs that the contingency recruiter works on will remain unsuccessful and unfilled. Not my words but recruitment colleagues of mine.

I have no problems with the contingency business model per se. But my ask to agencies is to tell their client that hopefully, the job order ends up in the 20% of successful placements and not in the 80% that remain unfilled with a disappointed client as a result.

Sorry to be blunt about this one

The difference between a 33% fee (four months) for retained executive search in Thailand and a 25% fee (three months) for a recruitment company is like night and day.

A four months fee, with an impressive list of free value-added services including warranties of years and not months, is the proof. Something that is non-existing in the 3-month fee model.

Sorry to be blunt about this, but you are very wrong if you think the service is similar, if you think you get the same attention from the recruitment company, if you think the recruitment planning is similar, and if you think the free value-added services are similar. I could go on and on.

Tom Sorensen

Tom Sorensen is an executive search veteran with over 25 years of experience recruiting in Asia, Europe, and Africa. He has worked in executive search in Thailand since 2003 and is recognized as one of the country’s top recruiters and most profiled headhunters.