In redefining our recruitment pricing, we've transitioned from the conventional percentage-of-salary model to a client-centric, fixed fee structure.

This shift means more predictability and fairness in pricing for you. You get tailored recruitment solutions that consider the unique challenges and value of each role, without the uncertainty of fluctuating costs tied to salary.

This approach aligns our efforts with your specific needs, ensuring that you pay for the true value and expertise we bring to your hiring process, not just an arbitrary percentage of the final salary offered.

The detail

Over the last couple of years, we’ve made some significant changes to the commercial model we have in place with the startups and scaleups we recruit for. In simple terms, we’ve moved away from charging a percentage of salary to individually pricing campaigns based on value.

When we talk to founders on an individual basis, they’re enthusiastic about the change but sometimes it takes a bit of explaining. This is why we wanted to put some detail down in writing - so hopefully we can help more people see the value in how we work and charge.

If you’ve ever engaged with a recruiter to help you hire, you’re probably familiar with the most common pricing methodology – a percentage of salary. The recruiter will charge you a proportion of the salary you end up paying to your hire. Sometimes that’s a flat percentage across all roles, say 20%, sometimes it changes depending the salary, say less than £50k it’s 20% and above £50k it’s 25%.

The percentage of salary method is convenient in a few ways. As a client, you can quickly understand what you will pay. Hiring for a role at £75k and find a recruiter charging 20%, that will be £15k. Someone else offering 15% fees, you know you’ll be paying £11.25k.

Why might this not be the best approach? Firstly, it focuses both sides on the percentage and often excludes a more useful conversation on what you’d find valuable other than simply cost.

The drawbacks of the percentage model

The percentage-of-salary model, while straightforward, has significant limitations in recruitment pricing.

Salary correlates strongly to the value of your employee, but that’s not the same as the value of the recruitment service.

For example, recruiting a Head of Marketing might involve a larger pool of candidates and more interviews compared to a Data Scientist, who might require targeted headhunting. These roles may have similar salaries but demand different recruitment efforts and costs.

One of the other risks with a percentage of salary is the uncertainty of the final price you’ll pay. If you offer a higher salary to secure your ideal candidate, your recruitment costs unexpectedly increase and perhaps not deservedly so.

And does it risk a lack of alignment with your recruiter? You want them to find the best candidate. They may decide to focus on candidates with higher salaries to maximise their fees.

Finally, from our perspective, if a role is going to be difficult to hire then we’d ideally want that reflected in our pricing, and salary isn’t always a good proxy for effort.

Say we have two clients looking to hire the same role, with a fair market salary of £60k. But one client says they will pay £50k, and the other £70k. All things being equal it’s easier to find someone for the client paying more, so on that point we should charge less.

But on the percentage model, we charge in exactly the opposite way – the client it’s easier to hire for pays more, and we have less incentive top tackle the other, harder to fill role.

So, the percentage of salary model has a few issues. It’s led us to adopt a value-based, individual pricing approach for each recruitment campaign, aligning better with the unique needs of each role and our clients.

This shift, complemented by 65% of our recent revenue from retained or subscription services, represents our commitment to align more closely with the needs of startups and scaleups we partner with.

How we price

When thinking about how we price, our philosophy is that it should reflect two aspects – the value to you as a client and the resources we’re investing. It’s not an exact science but that’s what underpins our approach.

The value to you might be mostly a time saving one. We spend time filtering out the people that aren’t what you’re looking for, so your time is focused on meeting the people you want to hire.

Sometimes it’s our knowledge of how to hunt out the passive talent, people that are in good jobs but would be tempted by a great opportunity like yours.

It might be the network we’ve built up over the years, which means we can give you a head start on a hiring campaign and improve your chances of having people start sooner.

Or it could be that we give you insight on the market for talent, align that with your needs, and translate what you’re offering into an opportunity that appeals to the best people around.

The resources we invest could be the historical ones that help us move quicky when you need, or it might be the thoroughness we’ll take in engaging with a diverse talent pool so that you’re not limited to the usual suspects.

It might be our specialist sourcing tools, or variety of advertising channels. For a lot of founders, they find the resources we invest in their talent planning incredibly useful to make sure they are clear on the roles they need before they start hiring.

For most clients it’s a combination of all these things, meaning they have a long-term talent partner and can consistently hire the best people.

Benefits of fixed fees

Some of the other benefits to this approach?

We fix the cost up front, so you won’t suffer the pain of a late increase in recruitment fees because you wanted to offer a bit more salary to secure the candidate you wanted.

You’re not overpaying for the roles that might be easier. And you’re not underpaying on the tough ones, losing the effort you need secure that key hire.

When you need multiple hires, our commercial model means it’s easier to show how efficiencies in our campaigns translate into reduced fees for you.

Both sides are aligned on finding you the best candidate, rather than the danger your recruiters are pushing you to pay top salary because they want to maximise their fees.

It also means that the best candidates get a fairer shot, because we’re not focused on only the highest paid talent.

How it’s worked so far

So how has this change in commercial model worked so far? Pretty well we think.

For Clue Software, working on a subscription basis has resulted in 50+ hires with savings on recruitment fees of over £200k.

For HopeTech, it led to 2 key hires made in a 28-day period.

For Cyberhive, it’s meant they hired 6 people while saving £20k.

The challenges

We’re clear on the benefits in moving away from charging on percentage of salary, for us and our clients, but it’s not without challenges.

The first is simply that we’re up against a model that’s been around for years and is well established as the norm, so trying to disrupt this means we have to work harder to educate prospects on why there’s a better way.

It also means both sides need to take more time getting to know each other and understanding what’s needed before we can give clarity on costs. We think that’s a better way than giving an arbitrary percentage of salary in response to a two-line email with not much more than a job title, but sometimes we know it’s frustrating that a quote isn’t instant.

Quoting individually on every role is another aspect that can be cumbersome, so we’ve addressed this by agreeing a few different fee levels across a campaign. We assign the initial roles and agree some principles for future roles so that both sides know the likely costs, and review regularly to make sure we’re not over or under-pricing.

Get in touch

Being transparent, some of our work is still undertaken on a percentage of salary model. Not everyone is ready to make the leap just yet, but our hope is that over time we’ll show more startups and scaleups agreeing costs for each campaign is a better way for them to hire.

We love our work but know the recruitment industry isn’t perfect and this is one of several ways we’re trying to innovate.

And of course, no matter how we charge, our business is built on the quality of service we deliver and the strength of our client and candidate relationships. We love seeing the value a good recruiter and talent can add, but we can’t do that alone!

We hope that laying out our approach on pricing helps you understand why it’s a better model. If you’re looking to hire and want to talk more about how we could work with you we’d love to chat. You can get in touch with our co-founder and CEO, Alan Furley, on alan@isltalent.com.