Advance Blog

September 14, 2022

Are you paying enough for external recruitment service?

Someone is pulling wool over your eyes; someone is misleading you to prevent you from knowing what is really going on with fees in the recruitment space.

Admit it, this Chinese proverb below is no surprise to you. Even in recruitment cheap things are not good and good things are not cheap.

Cheap things are not good, good things are not cheap!

Sorry to be blunt about this, but you are very wrong if you think the service is similar, if you think you get the same attention from the recruitment company, if you think the recruitment planning is the same, if you think the value-added services are similar. I could go on and on.

So, what about the fees?

Your third-party recruitment company or executive search firm calculates their service fee as a percentage of the hired candidate’s first year’s annual income.

The percentage will typically vary from, and be anywhere in between, 15% and 35%.

But what does annual income mean?

A standard definition of annual income is the total of the gross salary per month before tax multiplied by thirteen months. Additionally, other monetary benefits such as fixed allowances times twelve (e.g., transport, mobile phone, housing), annual bonus and incentive, sign-on bonus, and company car.

A fixed allowance means a similar amount of money paid every month through the payslip and is considered personal income by the Revenue Department.

In Thailand, we come across fixed allowances for transport (this could be 20,000 baht per month for a new car below one million in purchase price); mobile phone like 2,500 baht per month; and housing that could be set as a fixed percentage of 10% of the monthly salary.

If the candidate receives a sign-on bonus, this amount is also included in the fee calculation. In the event that the candidate is provided with a company car, the monetary value is added. Example: a Toyota Camry is calculated as 30,000 baht x 12 months.

Finally, as part of the annual income definition, you may also come across recruiters who will include incentives, bonuses or commissions as achieving 100% of key performance indicators, objectives, targets or similar.

Is the fee equal to 3 months or 4 months’ salary?

A fee of 33% of the annual income equals four months’ salary whereas a fee of 25% is three months. Only one month’s difference.

But as they say, the devil is in the detail. Attention must be paid to having all the facts that may not necessarily be seen clearly at first. Don’t jump to conclusions; don’t judge the quotation from the recruiter without enough information because you may reach the wrong conclusion.

In other words, the difference in fee when comparing three and four months may not be the full one-month salary it looks like. It’s actually less when you consider the many great benefits that are included in a four-month fee.

Cheap things are not good, good things are not cheap

Admit it, that Chinese proverb above is no surprise to you. As I’m sure the following will not be…

  • Business Class air travel is more expensive than Economy Class – for a reason!
  • A BMW 7 is more expensive than a Toyota Vios – for a reason!
  • The Mandarin Oriental Hotel is more expensive than a Khao San Bed & Breakfast – for a reason!
  • The Apple iPhone 13 is more expensive than the ZTE from China – for a reason!
  • Executive Search is more expensive than contingency recruitment – for many many reasons! Believe me.

The difference between a 33% fee (four months) for retained executive search in Thailand and a 25% fee (three months) for a recruitment company is like night and day.

Tom Sorensen
Managing Partner of Tom Sorensen Recruitment Co., Ltd.

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