How Companies Pay to Hire Someone

When it comes to hiring new talent, companies utilize various payment methods to attract and onboard new employees. One common approach is through commission-based hiring, where the company pays a percentage of the candidate's salary to the recruitment professional involved. This method is particularly popular in industries where the cost of hiring is significant, and where the aim is to find the best possible candidate.

Commission-Based Hiring

Commission-based hiring is a popular method where recruiters or freelance professionals are compensated based on the successful placement of a candidate. For example, they might receive a percentage ranging from 10% to 20% of the candidate's salary. This range can vary depending on the industry and the specific job requirements. A 10% commission is typically lower and may be used in less expensive roles, while a 20% commission is more common for high-salary positions or specialized roles.

One of the most well-known platforms where commission-based hiring occurs is , particularly popular with Upwork and FiveThirtyEight (though there is a typo in the original content). These platforms are designed to connect businesses with independent professionals, including recruiters and talent aggregators, who can find and vet candidates on behalf of their clients.

Recruitment Fees and Referral Payments

Another method used by companies is to hire professional recruiters who then search for talent for their clients. These recruiters can charge a fee that is typically based on the candidate's salary. For instance, they might charge 25% of the candidate's first-year salary as a recruitment fee.

Recruitment fees can also be structured based on an agreed-upon rate when a candidate is selected. This structure incentivizes recruiters to find the best candidates, as the higher the quality of the candidate, the higher the fee they earn. This approach benefits both the company, which is looking for top talent, and the recruiter, who is rewarded for their efforts.

In addition to commission-based hiring, companies may also employ recruiters who work on a retained basis. With a retained recruiter, a company agrees to pay a fee to a recruiter to find and present qualified candidates. This approach is more structured and less competitive, as the recruiter is working exclusively for the company.

Referral Fees within Companies

Within companies, when a job opening arises, employees may be given the opportunity to refer someone for the position. If the referred candidate is selected and hired, the employee may receive a referral fee. This fee can be a flat amount or a percentage of the new hire's salary. Referral programs are common in tech companies and startups, where they want to quickly onboard talented individuals and reward their current employees for helping to bring in new talent.

Employing commission-based or referral-based hiring methods allows companies to lower the cost of hiring while still ensuring high-quality candidates. It also creates an incentive for talent aggregators and employees to work harder to find the right fit for the company.

Conclusion

In summary, companies have multiple options when it comes to paying for hiring. Commission-based hiring, recruitment fees, and referral payments are just a few of the methods used. Each method has its own advantages and can be tailored to fit the specific needs of the company. Whether you are a freelancer, a recruiter, or a company, understanding these payment structures can help you navigate the hiring process more effectively.