How do you fancy two weeks’ holiday in Morocco at the company’s expense to increase fees? After all, just by visiting the local bazaars and markets, you would pick up negotiating skills that would pay for the cost of their trip many times over in the months following your return to work!!
A ludicrous suggestion? Probably – however, every day, recruiters are wasting thousands and thousands of pounds by caving in to clients’ requests for lower rates and margins. How much better would they handle these requests if they possessed even the most rudimentary rate negotiation skills of a market trader?
In my experience, rate negotiation is a seriously neglected training issue. To prove that, I once had a recruiter calling me regarding our own current vacancies (she was top biller in her company with over three years’ experience). Her response to my request for a slightly lower rate was painful to hear. “I’ve just spoken to my boss and whilst he rapped my knuckles he has agreed to the discount.”
Sadly, she could easily have secured full fee if only she had been more thorough whilst taking details of my vacancy and then been able to justify her fee. However, after making those initial mistakes, what did she then gain in return for giving away part of her company’s profit margin? Exclusivity on that vacancy? Commitment to future business? A client meeting to pro-actively get on to a PSL? Introductions to other hiring managers?
Somewhat predictably, in her haste to secure the business, none of these thoughts appeared to cross her mind. Would this have been the case if she had been trained how to negotiate rates more effectively and then regularly practiced her delivery via role-plays with managers, directors or colleagues?
In my opinion, many recruiters ‘cave in’ on rates because they feel uncomfortable handling those types of calls. Rate negotiation shouldn’t be traumatic – it should be fun. Recruiters who can justify their fees and then overcome rate reduction requests in a professional manner will not only have less of the former and more of the latter but they’ll naturally make more money for themselves and their company along the way.
Most new clients will try to reduce the rate that you quote but you must remember that whilst rates are very important to some clients, many are simply ‘trying it on.’
Here are a few tips for temporary and contract recruiters and then separately, for permanent recruiters. Naturally, the techniques below are less effective if you’re dealing with an RPO or tight PSL, but nevertheless there are plenty of employers out there that are not controlled by RPOs. Part of your job is to find them and then close for full fee!
10 rate negotiation tips for temp and contract recruiters
① Quote a slightly higher charge daily or hourly rate than you expect to get.
② Stand firm initially – “Good temps/contractors are in demand and are liable to being poached by other agencies unless we pay them a good rate.”
③ Ask, “How crucial is it that the temp/contractor completes his/her assignment with you? Do you really want to run the risk of another agency poaching them away from you?’
④ If the client says other agencies have charged considerably less than that in the past, probe into calibre, reliability and what rate the person was receiving out of that charge rate.
⑤ Try rebuttals like; “Mr Client, whilst rates are important isn’t it really the service you pay for when selecting a consultancy like XYZ? If I save you time and ultimately money by providing you with better calibre workers isn’t it worth paying an extra XXp per day?”
⑥ “How much does it cost each time you recruit the wrong person, Jim? f I save you time, and ultimately money, by consistently providing you with better calibre workers, isn’t that worth paying for?”
⑦ “As with most businesses, we will negotiate for bulk business but clearly I can’t do that for our very first temp/contractor. Why don’t we put this one to bed and then meet to discuss what I can do for you for the future?”
⑧ If you have to reduce the charge show some “pain” and try to get something in return – e.g. sole agency on the client’s next two requirements.
⑨ If you are in danger of losing the assignment, (but you feel it’s worthwhile working it) you may wish to try the following – “OK, Jim, you’re looking for X and I’m looking for Y. If I can save you the time of calling other recruiters and arrive at a point where we’re both happy, are you prepared to make a decision to hire Dave now?” “Let’s put it to bed then and meet half way at X.”
⑩ ALWAYS, ALWAYS try to get something in return if you have to discount.
10 rate negotiation tips for permanent recruiters
Some of the hidden secrets of defending fees in permanent recruitment, are as follows:
① When taking a job specification from your client, create a perception of superior value by asking for more challenging questions than your competitors (this is best achieved by using a template job order form with the most powerful questions already built into it)
② Build in ‘fee defender questions’ whilst taking job specifications from your clients. For example, “Mr New Client, I’d like to learn where things have gone right or wrong for you when recruiting. May I ask, how many people have you recruited in the last 12 months? And how many of those are no longer with you?” NB: You can use this information later in the process, see below.
③ Establish the client’s perception as to how easy or difficult the role is to fill – and find out how the client would be impacted if the job were to remain unfilled.
④ Explain in fine detail how you are going to fill the job. “Mr New Client, let me explain how I am going to fill the job for you. From the detailed description you’ve given me today I will have X suitable candidates to talk to. The hard work starts for me now in that I am going to call every single one of these people and re-interview them for your job. A lot of these calls will be made in the evening, but I am more than happy to put that extra work in for you provided that we work together in partnership. In addition to selling your opportunity to these people I will also be screening these already-interviewed candidates again again to weed out people who may not be right for you. By the time I’ve finished I will be down to the best three or four people for the job. How does that process sound to you?
⑤ Only then, after highlighting the value, present your fees.
⑥ If the client says, ‘that’s too expensive, remind them of what they told you when you asked fee defender questions earlier in the conversation.
“A moment ago, didn’t you say that 3 of the last 8 people you’d recruited hadn’t worked out costing £19,000 in fees? You also told me that I have a greater understanding of your needs than any other recruiter you’ve dealt with, thank you for that.
Don’t you think the extra knowledge I have means that the problems you’ve described are less likely to happen with me?”
⑦ If this doesn’t work, use rebuttals such as:
“Like any business we will consider discounts for bulk buying, but I can’t discount for a one-off placement. So why don’t we put this one to bed and then I’ll sit down with you and look at a deal for committed future business?”
“If your other supplier deals with you at 15%, but has other clients that will pay them 30%, where do you think they will send their best candidates?”
“What do you think of the old adage “You get what you pay for in life?”
(NB: I know 27 rebuttals to protect fees. How many do you know?!!!?)
⑧ If you have to negotiate, make sure that you get something in return. For example:
• Interview slots in their diary
• Internal referrals
• Introductions to other companies
• Put you on the PSL
⑨ Don’t give 5% off your fees, give a 5% discount off the final invoice value – that’s much better for you!
⑩ Practice your rate negotiation ability through role-play. You’ll add £10,000s to your billings as a result.