What fee do you pay recruitment firms, 3 or 4 months’ salary?

Your third-party recruitment company, or executive search firm calculate their service fee as a percentage of the successful candidate’s first year’s annual income.

But what is the percentage and what does annual income mean?7013_dollar_stack_colorLow_resize

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 the total of the gross salary per month before tax multiplied by thirteen months plus other monetary benefits such as fixed allowances times twelve (e.g. transport, mobile phone, housing). The thirteenth month represents any fixed and variable bonuses no matter how many months a client ends up paying.

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.

1206_taxi_orangeIf 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.

A fee of 32% of the annual income equals around four months’ salary whereas a fee of 22% is around three months.605_calculator_wheat

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.

Admit it, the following Chinese proverb is no surprise to you:

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

  • 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 7 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 32% fee (four months) for retained executive search in Thailand and a 22% fee (three months) for a recruitment company is like night and day.9545_Sunrise - LowRes

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.

What do you think? Leave a Reply.