Cost-Effective Recruitment with an Agency: Budget-Friendly Business Models

Cost-effective recruitment is not frequently associated with working alongside recruitment agencies, and we understand why decision-makers might see it this way. Traditionally, the dominant business model for collaboration between recruitment agencies and hiring companies has been the “success fee” model, where fees are calculated as a percentage of the annual salary of the hired candidate. However, as the recruitment landscape evolves, new business models have emerged that are not only more budget-friendly but also provide predictability from the outset. As a recruitment agency operating in the games industry, we aim to familiarize you with these models, ensuring that all key decision-makers at hiring companies are aware of their options.

Before We Start: a Friendly Reminder

While this article is primarily aimed at HR and management teams within hiring companies, it may also catch the interest of job seekers. To all individuals, here’s a crucial reminder: in recruitment, it is the hiring company that bears the fees, not the job seeker.

If you are a job seeker and any recruitment agency requests payment from you to secure a job offer, treat it as a serious red flag.

Such practices are illegal in many countries. Always verify the legality under local laws and thoroughly check the recruitment agency’s credentials before proceeding. Now, coming back to the topic.

How to Calculate a Success Fee for Recruitment?

A success fee (sometimes called contingency search) arrangement typically includes a small retainer fee paid upon project engagement, with the remainder due only upon the successful completion of the project. At 8Bit, the initial retainer fee is fully deducted from the final fee, though this practice may vary elsewhere.

To calculate the total success fee, the hiring party should take the annual base salary of the hired candidate (usually excluding bonuses and commissions, but be sure to check your contract terms), and multiply it by 0.XX, where XX represents the agreed percentage in the contract. For example, if a candidate’s monthly salary is €5,000, their annual base salary would be €60,000. With an agreed percentage of, say, 22% (a popular market average, but this also may vary), the final success fee would be €60,000 x 0.22 = €13,200.

As mentioned earlier, in many cases, if a retainer fee was paid at the start of the project, its amount will be deducted from this final success fee.

Is the Success Fee a Cost-Effective Recruitment Model?

Frankly, no, it isn’t. Its main advantage isn’t being budget-friendly but being perceived as risk-free. Apart from the initial retainer fee, the success fee is payable only upon successful candidate placement. This means if the hiring company halts the recruitment process or fills the position internally, the only cost incurred is the small retainer fee.

Let’s play a quick thought game. When you partner with a business, do you enter the relationship assuming, or even hoping, that they won’t deliver? Or does signing a contract with a business partner suggest a shared vision and a mutual commitment to effectively fulfill your business needs?

See our point? From this perspective, let’s consider an alternative to the success fee model, one that we believe is not only more cost-effective but also more sustainable in the long run for recruitment outsourcing.

Subscription: a Way to Recruit Top Talent on a Small Budget

At 8Bit, we’ve developed a business model that game studios we collaborate with find truly beneficial for recruitment savings: the subscription model. How does a subscription work for hiring? It’s quite similar to subscribing to any other service, such as a streaming platform. You pay a fixed monthly fee and enjoy unlimited movies and shows. Similarly, the hiring company pays a fixed monthly subscription fee and can fill as many roles as needed without any additional charges.

This model isn’t just cost-effective because it’s cheaper, but also because it offers predictability right from the start. Unlike the success fee model, where HR departments can only confirm expenses to the finance department after a hire (potentially complicating financial forecasts) a subscription model provides a clear, consistent financial picture from the outset.

The subscription model could be your go-to business model when:

a) You plan multiple hires: it allows for unlimited hiring within the subscription period, making it ideal for volume recruitment.

b) You seek dedicated service without engaging multiple agencies: unlike the success fee model, where hiring companies might pay a small introductory retainer fee to several agencies to see which one delivers. The subscription model would not be neither sustainable nor cost-effective in this scenario.

Is Recruitment Process Outsourcing Cost-Effective?

Recruitment Process Outsourcing, or RPO, is a partnership model between companies and recruitment agencies. It’s like outsourcing other business processes, focusing on taking over some or all parts of the client’s hiring process. This means a recruiter from the agency works directly with the hiring company’s team, handling tasks such as finding candidates, screening them, and managing recruitment operations.

This method is really useful for studios that need solid, strategic support in recruitment. The recruiter helps set or refine the hiring company’s long-term HR goals while also taking care of immediate hiring needs. RPO can be quite cost-effective, especially for young or newly established studios, or those that are growing quickly.

If a studio doesn’t have its own HR department yet, or if the current HR structure is too small to meet growing needs, using RPO can kickstart the recruitment process immediately. This approach eliminates delays associated with training or onboarding new staff, allowing the studio to scale efficiently and effectively.

Often, companies choose RPO for long-term partnerships instead of building their own in-house recruitment teams.

Retained Search: Recruitment Without Big One-Off Payments

Lastly, another cost-effective recruitment model offered by agencies is the Retained Search. This model refines the success fee approach, making it more sustainable and partnership-oriented by spreading the one-off payment into several installments. Before the project begins, the client and agency agree on a percentage of the annual base salary to calculate the final fee. However, payments are made in parts, following the completion of specific milestones in the hiring process.

This structured payment approach makes financial planning more manageable and feasible for companies.

Summing Up: Cost-Effective Recruitment Models

The models we’ve discussed – Success Fee, Subscription, Recruitment Process Outsourcing (RPO), and Retained Search – all aim to hire talent but are tailored to meet different needs within a hiring company.

For those new to working with recruitment agencies or those who are cautious about financial risks, the Success Fee model might be the best option for a single hire. If you’re set on working with just one agency and aren’t looking to fill multiple roles, or your financial department is not happy about big one-off payments, Retained Search could be ideal.

For companies planning to hire for various roles in the upcoming months, a Subscription model will offer the most cost-effectiveness. And for those requiring comprehensive, multi-faceted recruitment support, consider RPO.

At 8Bit, we provide all these recruitment models tailored for game studios looking to assemble top-notch teams. Reach out to us at contact@8bitplay.com for a detailed offer and to discuss how we can support your hiring needs.