How Do Recruitment Agencies Get Paid: A Clear Explanation

Misconceptions about how do recruitment agencies get paid can lead to hesitation and misunderstanding among job seekers. A common myth suggests that the agencies take a portion of a candidate’s salary – which is never the case. We recently came across a LinkedIn discussion where an experienced game development professional mentioned they ignore agency recruiters approaching them with relevant roles, even though they are looking for a new gig. They believe that being represented by an agency will result in a lower salary offer from the hiring studio. To address this confusion, let’s delve into the actual payment models for recruitment agencies. Spoiler alert: agencies do not deduct fees from the candidate’s future earnings.

How do recruitment agencies get paid in the success fee business model

Firstly, it’s crucial to debunk the myth:

recruitment agencies do not take a cut from your salary.

This misunderstanding likely stems from the “success fee” model, where the agency’s payment is equal to a percentage of the candidate’s annual salary. However, this fee is charged to the employer, not deducted from the candidate’s salary, leaving the latter’s income unaffected. For instance, an agreement might specify that the agency’s fee will be X% of the hired candidate’s annual salary, a cost borne entirely by the hiring company from their recruitment budget.

While the success fee model used to be popular enough to give rise to this misconception, it’s fair to say nowadays companies are increasingly opting for more stable and budget-friendly options. Success fee may still be chosen from time to time, for example by companies new to working with recruitment agencies, if decision-makers want to test the partnership and prefer to pay after a successful hire. However, vast majority of companies now opt for models that offer predictable, budget-friendly payment installments instead. We discuss them below.

But speaking of the success fee, let’s debunk one more myth, shall we? Is it true that agency recruiters working in this model promote higher-paid candidates to increase their fees? This perception has been common years ago, but it’s becoming less relevant. With the rise of salary transparency in the video games industry and easy access to detailed salary data for various roles, any such behavior (make sure to check our Gamedev Salary Pulse for 2024!) would be quickly noticeable by the clients. Why would an agency risk its reputation for a short-term gain? Engaging in such practices could seriously damage credibility and trust, which are crucial for long-term success in the recruitment industry.

Having discussed the above, let’s move forward – how do recruitment agencies get paid when not using the success fee model?

Subscriptions and Recruitment Process Outsourcing

You already know that recruiters approaching you do not take a cut from your future earnings. Most likely, their compensation model is not tied to your expected salary. So, what is the arrangement between the agency and your potential future employer?

Other, more common business models include flat fees or fixed prices, which are more predictable and easier to budget for. These models are more cost-effective and efficient for both the agency and the hiring company, supporting multiple recruitment processes without linking fees to the candidate’s salary.

At 8Bit – Games Industry Recruitment, we offer alternatives such as Recruitment Process Outsourcing and Subscription models. These approaches provide comprehensive support for hiring companies at a fixed cost, promoting efficiency and cost savings compared to the success fee model. How do recruitment agencies get paid in these scenarios? Through predetermined, transparent fees that enable the hiring company to manage recruitment costs effectively.

If you are interested in diving into the details, please review the list of all available 8Bit business models here.

Fees from the candidates? Red flag 🚩🚩🚩

Lastly, addressing a critical concern: do recruitment agencies get paid by candidates? It’s essential to know that:

in most of the countries it is illegal for agencies to charge candidates for participating in the recruitment process.

Let’s repeat. It’s not “unwanted, unpopular, unwelcome”. It’s illegal.

Any request for payment from a candidate is a significant red flag, indicating a scam rather than a legitimate agency operation. While agencies may offer paid services like CV reviews or career consulting, these are separate from the recruitment process itself and should not be misconstrued as a fee for job placement.

In summary, understanding how recruitment agencies get paid helps clarify that these fees do not impact a candidate’s salary and that legitimate agencies operate with transparency and integrity. Misconceptions can deter job seekers from leveraging valuable recruitment services. It’s vital to recognize the diversity in agency payment models and the legal and ethical standards governing these practices.