What exactly is a Success Fee?

Imagine that you decide on a particular service, but only pay for it when it actually works for you. Sounds good, all too good, right? And that’s exactly what the Success Fee model is, where you only pay a recruitment agency if they succeed in finding and hiring the perfect candidate for you.

The relationship between payment and the end result should be the main motivating factor for the agency to be comprehensively involved in successfully closing each recruitment. Although, as practice shows, this can vary and much depends on the quality standards and the way the agency itself operates, the success fee model can definitely be considered the safest one from the client’s perspective.

In addition to low financial risk, the Success Fee model also opens the door to quick access to potential candidates from the agency’s internal database and the agency’s rich network of contacts developed over the years.

How does it work in practice?

A recruitment agency is fully engaged in the process of finding, screening and presenting candidates who best fit the requirements of the role. These activities are intensive and goal-focused, as the agency’s final compensation depends on the completion of the hiring process. And here’s what it looks like step by step:

  1. Beginning of cooperation: The company contracts a recruitment agency to search for a candidate for a specific position.
  2. Sourcing: The agency begins the search (at Team Up, we use teamsourcing, a proprietary Scrum-based teaming method, in this step). Thanks to the method, in which project teams work in weekly sprints, the sourcing strategy is precisely tailored to the project.
    3 Candidate Selection: From a pool of found candidates, the client selects those who best fit its needs and includes them in the subsequent selection process.
  3. Employment: Once the selected candidate begins work, the agency invoices the client for its services, often offering an employment guarantee as well.

What are the benefits for customers?

First of all, you minimize the risk. You don’t have to pay upfront – this model requires no upfront or recurring fees, and payment is made only upon successful completion of the recruitment process. Secondly, you gain quick access to a broad database of candidates, built up over the years, and extensive networks. In addition, this model often includes extras such as industry reports or consulting, which increases the value of the partnership.

  • No financial risk at the start: You only pay for the result, so there’s no stress about spending money for nothing.
  • Fast access to top candidates: With the agency’s network of contacts, you can quickly find someone perfect.
  • Direct contact and clear info: The agency keeps you abreast of progress, so you’re in control of the process.
  • Cultural fit and data: The reports and analytics you get from the agency help you better understand the market and choose a candidate who will fit into your team.
  • Guarantee for every hire: As a rule, if a candidate resigns or is fired during the guarantee period, the agency agrees to redo the recruitment process at no additional cost to the client. Depending on the terms agreed upon in the contract, the client may also be reimbursed for a portion of the costs incurred.

Is this a good solution for me?

Success Fee is particularly beneficial for companies facing the challenge of finding specialists in a short period of time, or for those struggling to close vacancies that are difficult to fill. It is ideal for both large organizations with extensive HR departments and smaller companies looking for flexible and effective recruitment methods. Whether your company is large, or if, on the contrary, you have a small, well-organized team, when you need quick access to quality candidates without increasing fixed operating costs, the Success Fee model becomes the tool of first choice.

1. For small, medium and large companies: Companies that want to minimize financial risk and benefit from the knowledge and experience of industry professionals may find the Success Fee model an ideal solution.
2. For companies with limited recruitment budgets: Companies with limited recruitment budgets can benefit from the Success Fee model because they only pay for results, allowing them to better control expenses.
3. For companies that value efficiency and quality: Companies that value recruiting efficiency and quality can benefit from the Success Fee model because it motivates recruiters to achieve better results.

Are there any pitfalls?

Success Fee sounds like a near-perfect, flawless model. Keep in mind, however, that things don’t always go smoothly. Since the client doesn’t pay the upfront cost, they must be willing to commit their own time and resources to integrating the agency into their internal recruitment procedures. If the agency is improperly selected and results are not delivered, the cooperation may turn out to be less effective than expected. It is important to carefully verify an agency’s work method, experience and history of success in the IT industry before starting to work with it.

And what are the most common behaviors of agencies that can negatively affect the results of cooperation?

  1. Sugarcoating – the client is not informed about possible difficulties that the recruiters encountered during the process, is informed only about successes, and unresolved problems pile up and negatively affect the time and efficiency of recruitment.
  2. Lack of solution-driven feedback – the client does not get reliable feedback that can modify the recruitment strategy, is not informed at each stage of the project what actions the agency has taken and what are its next steps, which prolongs the time to fill.
  3. Lack of market data – proven market data help hiring managers make changes that lead to filling positions, allow them to react immediately to changing market conditions and see important trends. Their absence makes it difficult to adjust to current market needs and requirements.

Summary

The Success Fee model in IT recruiting is something you should definitely consider if you are looking for new talent for your company. It offers flexibility, minimizes financial risk and gives you access to a wide pool of candidates. You’re also working with people who are just as interested in success as you are. Remember, however, that the key to success is choosing the right agency. Find one that works with methods that suit you, is transparent in its communications and has experience in the IT industry. Good relationships and clear rules of cooperation are half the battle. Don’t be afraid to ask and verify. At the end of the day, the point is that both parties should be satisfied with the results.