Price of recruitment in Lithuania – why is pricing so different?

Recruitment is a service that often has different pricing. Different pricing from recruitment agencies can sometimes be difficult for employers to understand, as changing recruitment companies requires a new pricing model from another recruitment agency. However, although recruitment pricing often differs between different providers, we can identify two basic recruitment pricing models and examine them:

1. Success fee-based staffing pricing

This is the pricing of recruitment and search services, where you only pay for the candidate you have already selected and recruited. This pricing is more commonly used in lower level recruitment where a large number of low-skilled staff need to be recruited. Success fee based recruitment pricing does not necessarily result in a lower cost of service, as the total cost per candidate recruited may even exceed the total cost of upfront pricing. This success fee based recruitment payment simply refers to the distribution of payments for services, where there is no payment at all at the beginning of the recruitment process and the full amount is only paid once the selected candidate is recruited.

The pros of success fee-based staffing pricing:

• There is no risk of not recruiting the right candidate once the advance payment is made. This pricing is in principle favourable to the employer, who pays no fees for the services of the recruitment firm until the right result is obtained.

Disadvantages:

• This staffing pricing model is mostly used by recruitment agencies that are less well known in the market and do not have the confidence of employers. By applying this aggressive pricing model, these recruitment agencies hope to attract clients and prove the quality of their services. Unfortunately, the shorter experience often means that these recruitment services are not of a high quality.
• This recruitment model does not ensure that the recruitment agency provides a dedicated service to the employer. This is because recruitment firms using this pricing model have a particularly large number of clients and therefore allocate candidates to several or more clients rather than to a single client. In the expectation of a dedicated recruitment service, this working principle is not appropriate.
• Such pricing results in extremely low client commitment. If a client sees that a recruitment firm does not offer candidates or offers the wrong candidates, it has no right to complain about the poor quality of the service, since it has not been paid for.

2. Advance and success fee based pricing for recruitment

This is pricing applied by a recruitment and search agency where part of the price is paid at the beginning of the recruitment process and the other part is paid after the recruitment agency has recruited the selected candidate. Example: for the selection of a production manager, 40% of the recruitment price is paid at the start of the recruitment process and the remaining 60% of the price is paid once the selected candidate starts. Sometimes the pricing of the advance and the success fee is more complex and part of the success fee is not distributed after the recruitment of the selected candidate, but after the offer of e.g. 3 selected candidates. It is also less common for recruitment agencies to defer part of the payment beyond the probationary period of the recruited candidate (these recruitment agencies do not usually apply the guarantee of free recruitment again).

The pros:

• The recruitment firm commits itself to the recruitment process for a certain period of time by receiving an advance payment. This is a plus compared to success fee pricing, where the recruitment agency’s commitment to the employer is minimal in the absence of an upfront payment.
• The recruitment payment is spread more evenly and does not need to be paid in full at one time.
• Recruitment agencies that apply this pricing model normally ensure a high level of quality of service, as all their existing clients opt for the service by paying an upfront payment. This indicates that such recruitment services are valued higher in the market than recruitment firms that operate on a success fee only basis. The high level of market confidence usually indicates that you can expect top quality when you purchase these recruitment services.

Disadvantages:

• Risk of not selecting and recruiting a candidate after paying an upfront fee for the recruitment. Of course, in this case, the recruitment fee, which is normally a higher percentage of the pricing, will not be paid. It is precisely because of this risk that it is advisable to choose a recruitment company whose upfront fee does not exceed 50% of the total cost of the recruitment and, even better, 40% or less. This reduces the risk of unsuccessful recruitment with an advance payment.

Which is the better payment for recruitment?

There is no clear answer, but in summary, pricing based on a success fee should be more favourable for businesses looking for a large number of low-skilled staff. In this case, a very high quality of recruitment services is not required. If the search is for a highly qualified professional or manager, it is recommended to opt for a balanced approach to recruitment pricing with advance payment. In this case, high quality and a large number of suitable candidates can be expected in a short period of time.