Too Many Fee Options May Mean No Fee At All

Article main image
Jul 16, 2014

Dear Barb,

For years we charged 1% per $1,000 for direct placements, but that seemed to confuse our clients. As a result, we have several different fee options. We also charge a lower fee percentage if a client does not request us to conduct reference checks.

Our normal fee is 25%, which we will lower to 20% if a signing bonus is included in calculating our fee. When we place someone at the executive level, we charge a 30% fee, unless they make multiple hires from us and then we reduce the fee to 28%. For positions that pay under $20,000 we charge 20%.

We made these changes based on the requests from our clients to have a graduated fee schedule. Is this the type of fee schedule you would charge? I know we are being beat out by the first competitor who only charges 15%, but I don’t want to reduce our fee that much. I also find us negotiating on our guarantee more than I care to admit. We’ve now come up with six different guarantees based on the fee charged. How do you handle fees and guarantees?

Frank B., Ft. Worth, TX

Dear Frank:

I’m 100% totally confused, and I’m in your profession. One thing you need to keep in mind, A confused buyer does not buy.”

Providing the lowest prices is a totally unsustainable advantage. Furthermore, if you aren’t the absolute lowest, you have no competitive or marketing advantage. A few years ago The New York Times had an article headlined, High End Retailers Report Strong Profits, but Wal-Mart Still Struggles.” If Wal-Mart, which actually guarantees the lowest price, was struggling while the premium retailers were doing well, isn’t that a reason to stop competing on lower pricing or extended guarantees?

My advice would be to adapt the KISS method: Keep It Simple, Stupid. We charge a 25% flat fee to all clients. If there is a signing bonus, it is included in the annual earnings and our fee. Our guarantee is a 12-month pro-rated replacement guarantee. If we have a fall-off up to one year after our placement, our client can hire someone at a reduced fee, based on how long our candidate worked. If you’d like a copy of our guarantee, please email me and put “12-month guarantee” in the subject line.

If you provide a consumer with too many choices, they often will not make a choice. Your fees are just way too confusing, so my advice is to simplify. Have the same fee percentage for every placement.

Barbara J. Bruno, CPC, CTS

Get articles like this
in your inbox
Subscribe to our mailing list and get interesting articles about talent acquisition emailed weekly!