Why Recruiting Fees are Non-Refundable
Reprinted with the permission of Bill Radin

A toaster oven, I can understand.

If it breaks, you simply return it to whoever sold it to you and get a full refund. The same is true with a flat-screen TV or a weed whacker. Satisfaction guaranteed or your money back.

So why should the placement of a candidate be any different? If the person doesn't live up to expectations after being hired, shouldn't the employer be able to return the candidate to the recruiter and get his placement fee back?

The answer is no—for three very good reasons.

First of all, a candidate is a person, not a piece of merchandise. And the last time I checked, it was illegal to buy and sell other human beings. You can own a weed whacker. You can't own a person.

When an employer agrees to hire a qualified candidate as a result of my referral, it's not as though the candidate is changing hands from one owner to another. The candidate and the employer are simply agreeing to work together, exchanging the employer’s money for the candidate’s time and services.

Besides, the two principals have had the opportunity to interview each other and engage in due diligence prior to making a decision of their own free will. To compare a candidate to a weed whacker is like comparing an apple to an orange.

Secondly, there’s a limit to what I can guarantee.
For example, I can guarantee that the candidates I refer meet the employer's requirements, with respect to their background and ability. I can guarantee that I'm complying with employment law. But I can't guarantee the future performance of other people or how effectively they work together. If I had that sort of power, I would have arranged for world peace a long time ago.

I can be enthusiastic about putting a deal together—assuming there’s a match. But the actual decision to hire or accept employment is beyond my control. And I can’t guarantee that which I can’t control.

Finally, a major part of my decision to accept a search assignment is based on my prediction of the outcome. Whatever my pricing model, the last thing I want is to spend time on a project that's problematic or is doomed to fail. And if the fee for my services is contingent upon making a placement, I'm going to make darned sure I can fill the job before I spend 20, 40 or 100 hours of my time working on it.

The most compelling reason not to return my fee is that my professional activities—the sourcing, screening, qualifying, appointment-setting, closing, interview prepping, debriefing, offer negotiation and counteroffer-defense—all take time. Lots of time. And the time I spend of behalf of my client’s hiring needs cannot be recovered. That time is gone forever.

Negotiating your terms and conditions
When an employer asks about your guarantee, simply explain that if the candidate leaves for any reason other than lack of work, you'll do everything in your power to find a suitable replacement within a reasonable period of time; and that doing so represents not so much your obligation, but rather a good-faith act of courtesy, dedication and loyalty to the client.

I've found that most employers understand that in a contingency arrangement, the recruiter assumes all the risk, and can't recover his costs associated with a placement that turns sour. Like everyone else, recruiters have bills to pay.

For employers who absolutely insist on a money-back guarantee, I suggest you offer a couple of different pricing models: You can either pay me on a time-and-materials basis, billed at $200.00 an hour; or you can pay me a non-refundable deposit to cover my initial costs before I start the search.

In either case, the risk is shared, with both parties having made an investment in a successful conclusion.

If I’m going to climb onto a high wire, it’s only common sense to insist on a net.