The IT industry is constantly growing. As the industry grows, the demand for IT services, especially software developers, also increases. A big software house hires new experts each month. Covering such a high demand for personnel with one’s efforts is difficult, hence software house often decides on outsourcing the recruitment service. Outsourcing the recruitment service in the context of IT personnel is not only used by entities that provide IT service but primarily by large corporations, which build their teams of experts. One of the most important aspects, to be agreed upon in a contract between a recruitment agency and a client, are the rules on establishing remuneration for the provided recruitment service.
Billing models
The remuneration due to the agency is nearly always determined as a success fee, which is due only after the client has hired the specialist proposed by the agency. It is a stiff market standard and it is rare to come across any form of derogations from it. Most frequently, such remuneration also comprises some form of guarantee that predicts a no-cost re-performance of the recruitment service in the case when the candidate presented by the agency - broadly speaking - did not work out.
The most important formal issue concerning the remuneration of the recruitment agency is to agree on the mechanism for its calculation. Here different models can be proposed:
- the most frequent model – the remuneration of the recruitment agency is calculated as an agreed percentage of the candidate’s salary, which will be given in a contract concluded by the candidate with the employer; this model is quite frequently used on market, however, it is not recommended by us;
- recommended model (variant A) – the remuneration of the recruitment agency is calculated as an agreed percentage of the budget for candidate's salary indicated in recruitment order placed by the client;
- recommended model (variant B) - the remuneration of the recruitment agency is calculated as fixed fee.
Which billing model to choose?
The first of the aforementioned models has become the most used in the industry. This is due to the fact that the agency and the client agree that the agency's remuneration should be equal to a percentage of the factual remuneration given to the candidate by the hiring client, as agreed upon by them, and this remuneration is not yet known at the time of the recruitment order placed the client. Neither of the parties wants to be at a loss in case it would turn out that the remuneration given to the candidate is different than the parties originally anticipated. From the legal side, however, this model raises doubts. First of all, it leaves room for disputes concerning the amount of money the agency is entitled to be paid and for certain abuses on the part of the client (particularly if a candidate is hired on a basis other than an employment relationship). Secondly, it leads to the fact that the agency must process data regarding the amount of remuneration agreed upon between the client and the candidate – which, in case of inspection by the President of Personal Data Protection Office, may be regarded as redundant and unnecessary – and therefore incorrect. For these reasons, as it is undeniably simpler to account for and safer to implement, we recommend the second or third variant, in which the agency is not interested in what salary the client has agreed on with the candidate and the remuneration due to the agency is known to the penny already at the time of the acceptance of the recruitment order by the agency.
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