A Software Developer’s Guide to the Recruiting Industry
I can remember the first time I started working with a recruiter.
I had no idea how the recruiting industry worked.
I took my freshly created resume, sent it to a recruiter, and said, “Find me a job.”
It didn’t go so well.
I kept calling day after day, asking the recruiter if they had made any progress on finding me a job.
I was under the false impression that “my recruiter” worked for me.
It was only after some time and quite a few negotiations and placements that I realized recruiters—at least for the most part—don’t work for you. They work for the company who has the job opening and has hired the recruiter to fill it.
(There is one exception, which I’ll talk about a little later on.)
I know this may seem obvious to you, but I was oblivious to it. I just wanted a job.
In the years I worked as a software developer and coached many other software developers to find and get the best jobs, I’ve learned quite a bit about how the recruiting industry works.
It’s actually pretty crazy.
But while it’s crazy, it’s also important that you know how the industry works so you can better navigate the choppy waters of getting a software development job.
It’s very easy to be taken advantage of, led on, and manipulated if you don’t understand this complex industry.
In this chapter, I’m going to share with you everything I know about the recruiting industry and give you some advice on how you can effectively apply this knowledge to get a good job and not end up with the short end of the stick.
Let me mention a couple of caveats before we get into it:
First, I’m not a professional recruiter, so most of my information is from what I have learned and observed.
Second, the recruiting industry is complex. I’m sure more than one whole book could be written on the topic. Here I’m simplifying, generalizing, and giving you a summary.
This is in no way meant to be a comprehensive description of the entire recruiting industry.
Still, I think you will find the information in this chapter useful and surprising.
Types of Recruiters and Agencies (and How They Get Paid)
Recruiters go by many different names: headhunters, employment agencies, staff augmentation, those annoying guys who send you unsolicited LinkedIn requests for jobs you aren’t even remotely qualified for.
However, not all recruiters and recruiting agencies are the same—and not all of them get paid the same way, either.
Understanding each type of recruiter and how they get paid can help you to understand how to work with them—and even which ones to avoid.
Let’s break down each of the major types of recruiters, how they make their money generally, and what this means to you.
Independent and Small Recruiters
These are typically the most annoying recruiters.
Some of these recruiters work on their own. Some of them work on some kind of heavily weighted commission structure and are actually contracted out en masse by larger firms with a sort of scattershot approach.
Since these recruiters or small agencies don’t have a large presence and reputation, they have to aggressively solicit potential candidates to try and fill a position.
Why are they so aggressive, you may ask?
Ah, it’s all in how they are paid.
You see, most recruiters get paid a commission based on a percentage of a candidate's salary.
Before I tell you how much, go ahead and take a guess to see if you can figure it out—the answer may surprise you.
Did you guess?
In general, recruiters are paid between 20 to 35 percent of the annual salary of a candidate they place.
As you can imagine, in the software development industry—especially with recruiting for top jobs—this can be a large amount of money.
Is it all beginning to make sense now?
Can you see why recruiters would be so aggressive and fill up your LinkedIn inbox with messages?
Independent recruiters are often the most aggressive because they don’t have to share their commission with an agency they work for, or they get a much larger chunk of it.
Let’s use some actual numbers, so you can understand how powerful of a motive it is for a recruiter to place someone.
Suppose a recruiter is hiring for a Senior Software Engineer position, and the salary is about $100,000 a year.
An independent recruiter is likely to get a 25 percent commission on placing someone in that job.
So $100,000 * 25% = $25,000.
That is a pretty large score.
Now, like I said, recruiters usually aren’t completely independent, so they won’t get the full $25,000, but some are and do get that full amount. The ones who work for smaller agencies, where they are more like contractors themselves, will take a large chunk of that commission.
However, that is not the only way they operate.
Recruiters can also recruit for contract positions. (See the previous chapter on contracting versus salary for more information on contracting.)
For these positions, recruiters place a candidate and then get a markup on what that candidate is being paid.
Let’s suppose there was a job that a company was willing to pay $75 an hour to have someone do as a contractor.
A recruiter might offer that job at $50 an hour, even though they are getting $75 for every hour that contractor worked.
In that case, their markup or margin would be $25 an hour.
I’m sure you can see how this would be quite lucrative as well.
Large agencies are going to operate in a structure similar to small agencies and independent recruiters with only a few differences.
The biggest difference is going to be reach and how commissions are handled.
Large recruiting agencies will likely have good relationships established with major employers, so they will be much more effective in getting someone placed than a smaller recruiting agency with less connections—at least from the perspective of the job searcher.
Often, large agencies can have enough of a relationship with a large employer that they almost take over the hiring process from the employer, and if they deem you a good fit for a job, you are very close to getting the job already. (This mainly applies for contract positions.)
With a larger agency, as might be expected, the recruiter takes less of the commission.
It’s likely the actual recruiter may get 50 to 60 percent of the recruiting free with the rest going to the agency.
There may also be a split with an account manager who handles the big corporate accounts for the recruiting agency.
Sometimes, large recruiting agencies will take over just about all of the recruiting for a company.
In those cases, the only way to get in is through that agency.
Many corporations make use of what I called embedded agencies or on-site staffing.
In this case, a large agency gets a contract with a major employer to bring staff on-site to fill positions or even to manage entire projects on their own.
Here, the line blurs between recruiting agency and consulting firm quite a bit, especially if they have their own managers or on-site manager contractors.
When I worked at HP, there were a few of these embedded agencies on site who had hundreds of contractors working for them that they recruited and managed on site at HP.
When I was first recruited into one of these contract jobs, the recruiting agency did almost all the interviewing and just briefly put in an interview with an actual HP manager before hiring me to work on site.
These agencies and companies that embed external agencies on site often run afoul of hiring and co-employment laws—at least in the US.
There have been many suits filed regarding co-employment at major corporations because this line is so blurred in this case.
Many medium-to-large-sized companies have their own internal recruiters who go out and find candidates for a job and get them into the interview process.
I’ve been contacted several times by internal recruiters working for Microsoft or Google whose entire job is to find talent to bring into the company.
Often, these internal recruiters are not recruiting for a specific job but are instead recruiting for a specific person who they think would do well at the company and bring in added value, so they might have multiple positions to match you up with.
Unlike agency recruiters, internal recruiters are usually paid a fixed salary with perhaps some portion of it based on commission or some kind of bonus.
This is important to know because their incentive of placing you is much less than an agency recruiter’s, and if you don’t work out, they have to stick around to deal with the aftermath.
This is probably the rarest type of recruiter, and you aren’t all that likely to get contacted by one.
That being said, I have seen more and more of these types of recruiting arrangements showing up in various forms.
This kind of recruiter actually does work for you—or more accurately represents you—since they are your actual agent, just like a book agent or talent agent.
You pay them either a placement fee or a certain percentage of your salary, in most cases.
You would have to be a rockstar kind of developer to gain the advantage of using this kind of an agent—or for one to even be interested in representing you.
Again, they’re pretty rare, but it’s not a bad way to go if you think you have a highly valuable skill and you’d like someone else to greatly assist in your negotiations.
What This Means for You
Ok, at this point you might be thinking that this is interesting information to know, but you might be wondering how this applies to you as a job searcher.
Well, I gave you all this information about recruiters, so you can know how to deal with them a bit better by understanding their motives and what type of recruiter you are dealing with.
Being aware of just how much recruiters stands to gain—especially independent ones—from getting someone hired for a job should influence how you deal with recruiters.
First of all, you should realize that many recruiters are going to be contacting as many possible candidates as possible to get the best chance of finding someone to fill the position they are recruiting for.
Always remember that, although a LinkedIn email from a recruiter might make you feel like a special little snowflake, in most cases you are not. They are just copying and pasting a message and swapping in your name.
This is, of course, not true when it comes to internal recruiters. Internal recruiters have much less incentive, so they are much more likely to be scouting you directly based on your skills and talents.
If you contact a recruiting agency, you should remember they are not interested in finding you a job but are more interested in filling as many jobs as possible.
Therefore, you want to present yourself as strongly as possible since they will ultimately decide what jobs to put you in for.
You want to appear as someone who will get hired easily and that will interview extremely well.
You should also realize that a recruiter is likely to do everything they can to push you through as quickly as possible.
This means that you might not necessarily be a good fit for a job and they might tell you really good things about a job or company to get you there. They might even lie about you to an employer or to you.
There is a large amount of money on the line.
This isn’t to say that all recruiters are bad or unscrupulous, just that you need to watch out for yourself and realize how cutthroat the recruiting industry really is.
If you are job hunting, you should also be aware of what positions a recruiter may submit you for and how that may affect you.
In many cases, the first agency to submit a candidate’s resume for a job is considered to be the source of the lead and is owed the commission.
For instance, imagine a scenario where you have a company that has a job opening, which they advertise on their site. They have also employed two recruiting agencies to fill the position.
You talk to one recruiting agency, Agency X, and give them your resume, and they submit you for the job.
Later, you are searching around and discover the job on the employer’s site directly—not even knowing it’s the same job—and you submit your resume there.
Finally, a recruiter from another agency, Agency Y, calls you up and says you’d be perfect for the job and that they happen to know the hiring manager directly and can easily get you in.
A few days later, the hiring manager for the job and Agency Y both tell you they wish they could help you, but Agency X already submitted you for the job, so you have to go through them.
If Agency X doesn’t follow up very well or offers you a really bad deal because they have a high margin, you could be stuck.
Therefore, make sure you know when a recruiter submits you for a job and what client it is with before authorizing them to do so.
Negotiating Your Salary
You should also consider how recruiters are paid when negotiating your salary, both as a full time salaried employee and as a contractor.
Suppose you are applying for a position at a company who is also utilizing a recruiter.
You know that they are willing to pay a recruiter perhaps $10 to $20,000 to fill the job.
If you apply directly and get an offer, you can potentially ask for a $10 to $20,000 bonus and have a good chance of them saying yes since they were prepared to pay that much anyway.
You should also, of course, know what your markup is going to be if you are being recruited for a contract position.
Not only should you know that markup but also you should negotiate it so that you can keep more of what you are being billed out as.
Using a Recruiter or Going Solo
Let’s wrap up this chapter by talking about one last important topic to discuss when it comes to recruiters: should you use one or not?
Oftentimes, you’ll be in a position where you could apply for a job directly or you could go through a recruiter.
Or you could reach out to recruiters to help you find a job instead of searching completely on your own.
Which is better?
It depends on a few things.
There are some distinct advantages and disadvantages to look at here.
First of all, consider that some jobs with exclusive recruiting arrangements may only be accessible via a recruiter or a specific agency.
When it comes to those jobs, you may not even have a choice.
It’s also likely that some big recruiting agencies will have a virtual lock on recruiting for a specific company since they have such good relationships established.
In many of those cases, if the recruiting agency thinks you are valuable, they can move you right into a job very quickly by utilizing the trust they’ve already established.
This can be especially useful to get into large corporations where the traditional hiring process might be hugely discriminating.
Recruiters may also help you negotiate better than you can do yourself, and they usually have a vested interest in you getting the highest pay possible.
Often, if you can have someone negotiating on your behalf, you can get a much better deal.
The downside is that you may get less than what you could get if you directly got hired by a company since they have to pay the recruiter as well.
This is especially true with a contract job where you could probably get a much higher hourly rate if you negotiated directly and represented yourself.
If you consider yourself a good negotiator (see the chapter on salary negotiations), you might be better off applying directly to a job than going through a recruiter.
In contrast, if you are not a good negotiator, you may find that even with the overhead of a recruiter being paid to place you, you still come out ahead.
Finally, consider that a good recruiter may be able to help you to represent yourself in the best possible light.
Likely, they can help you make some change to your resume, which may help you present as a stronger candidate for a job, and they may have some inside knowledge that could help you during an interview.
All in all, I would say that it depends on the job and how highly you value the recruiting agency.
A good recruiting agency with a strong reputation and good rapport with the client could be a huge asset in a job search, but a recruiter who does nothing but pass on a bunch of resumes, trying to get a commission with as little work as possible, is not going to be much help at all.