Your third-party recruitment agency and executive search firm calculate their 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%.
What is the definition of annual income?
A standard definition of annual income is the total of the gross salary per month before tax multiplied by twelve months.
Additionally, other monetary benefits such as fixed allowances times twelve months (e.g., transport, mobile phone, housing), fixed/guaranteed as well as variable bonus and incentives attributable to that period, sign-on bonus, and the value of a company car.
A fixed allowance means a similar amount of money paid every month through the pay slip and which is considered personal income by the Revenue Department.
In Thailand, we come across fixed allowances for car or sometimes called transport. This could be 20,000 baht per month for a new car below one million in purchase price, mobile phone like 2,000 baht per month.
Housing allowance could be a fixed monthly allowance or set as a percentage of 10% of the monthly salary.
- If the candidate receives a sign-on bonus, this amount is also included in the fee calculation.
- In the event that the candidate is provided with a company car, the monetary value is added. Example: a Toyota Camry is calculated as 30,000 baht x 12 months.
Finally, as part of the annual income definition, incentives, bonuses or commissions attributable to that period are calculated as an amount based on the candidate achieving 100% of key performance indicators, objectives, targets or similar.
Is the fee equal to 3 months or 4 months’ salary?
A fee of 33% of the annual income equals around four months’ salary whereas a fee of 25% is equal to three months.
But as they say, the devil is in the detail. Attention must be paid 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 reach 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, the Chinese proverb above in the header is not a surprise to you. As I’m sure the following will not be…
- Business 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 Mandarin Oriental Hotel is more expensive than a Khao San Bed & Breakfast – for a reason!
- The Apple iPhone 15 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.
The difference between a 33% fee (four months) for a retained executive search in Thailand and a 25% fee (three months) for a recruitment agency is like night and day.
Sorry to be blunt about this
No, no. And no.
I think you will agree that comparing Mandarin Oriental with a Bed and breakfast or a BMW with a BTS ride is not fair.
Both sides of the comparison have their own merits, their own unique business model, and value proposition.
And so does the business model and value proposition between recruitment agencies selling contingent on hiring and executive search firms who offer unbeatable complimentary benefits and years of warranty.
Be careful, someone is pulling wool over your eyes; someone is misleading you in order to prevent you from knowing what is really going on behind the scenes.