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ajm
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Joined: December 15th, 2005, 4:41 am

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January 13th, 2006, 3:35 pm

Just curious to know how the incentives for recruiters are structured. If I get hired through a HH, does he/she get a flat percentage of the starting salary? What is the typical percentage figure and is there wide variation in that?On the face of it, if the recruiter is getting x% of the 1st year salary then he has just as much incentive as you to get the best deal. However, that's not the end of the story, as Steven Levitt writes in his book "Freaknomics". He gives the example of real-estate agents and makes the point that the marginal gain to the seller's agent from a $10,000 increase in the house price is a pittance (for six-figure house prices and at the typical commission of 3%). However, the marginal gain to you is almost $10,000! How much Levitt's analysis applies here depends on what x is.I am not saying that all HHs are going to disregard your interests. But it helps to know that the incentives are not perfectly symmetric.
 
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Strangy
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January 13th, 2006, 4:21 pm

Either: Retained Search - Set fee paid in thirds for taking on job, shortlisting and deliveryContingency - set percentage of your eventual basicNamed search - lower set percentage of your eventual basic.
 
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DominicConnor
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Joined: July 14th, 2002, 3:00 am

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January 14th, 2006, 3:37 pm

We've got a couple of "if you see someone like X , let us know", which is arguably a 4th type.The incentives are not perfectly symmettric.Strangy's right about the fee paid to the firm, but the commission paid to the HH himself is any one of dozens of different schemes, and if you're trying to understand motivation it's that you should be concerned about.It certainly is not in the HH's interests to push for money so hard it alienates the client, but this is moderated by the fact you want there to be a good strong financial suck for the move. Sadly a % of moves fail because of the candidate pulling out afterr being offered. Sometimes this is buy back, sometimes change of heart. Can't change people's hearts, but you can influence their wallet.Also of course it's not in nayone's interests for your move to be surrounded by acrimony, since you're going to have to work with them.It's also the case that HHs are capped for some roles, so they get no more money if you do.I've bot read the Levitt book, but I think the situatiuon is more complex than simple ratio of shared benefit.Firstly for many roles a HH is competing with other HHs. The more he asks for a candidate, the lower the probability of placement. Given that there is no prize for coming secondin this "race", there is a clear incentive to under price.It also rather follows that the HH will have some model of what the client is prepared to pay, and if that is more than the candidate might ask for, then there is an incentive to go in higher than the candidate's expectations.Some firms have quite non-linear relationships between fee income and personal commission, typically this provides an incentive to try for higher salaries.