What fee do you pay recruitment firms?

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WHAT FEE DO YOU PAY RECRUITMENT FIRMS?Your third-party recruitment company and executive search firm typically 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%.

But what does annual income mean?

A standard definition of annual income is the total of the gross salary per month before tax multiplied by thirteen months. Additinally, other monetary benefits such as fixed allowances times twelve (e.g., transport, mobile phone, housing), annual bonus and incentive, sign-on bonus, and company car.

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 like 2,500 baht per month; and housing that could be set as a fixed 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 Mercedes Benz is calculated as 40,000 baht x 12 months.

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

Is the fee equal to 3 months or 4 months’ salary?

WHAT FEE DO YOU PAY RECRUITMENT FIRMS?A fee of 33% of the annual income equals around four months’ salary whereas a fee of 23% is around 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

Chinese proverb

Admit it, that Chinese proverb above is no 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 12 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 retained executive search in Thailand and a 23% fee (three months) for a recruitment company is like night and day.

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, if you think the value-added services are similar. I could go on and on.

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.

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.