How does recruiting via headhunters work for comp?

Can someone explain how headhunters take their pay cut and what sort of pay cut they take (% of salary, flat fee after helping you land a role, etc.)? Suppose I get hit up on LinkedIn/ email by a headhunter for an opportunity, I take the interview and land the gig. Do I pay the headhunter for connecting me to my new firm, or does the firm pay the headhunter for helping hire me? Let's say all in PE Aso 1 comp is $300k, so does that mean they take 10% off the gross? Or would I keep all the gross and the firm pays the headhunter for their work? Thanks!

Comments (9)

May 18, 2022 - 3:00pm
The Patrician, what's your opinion? Comment below:

They get some % of your annual salary for filling the role but its paid by the company and doesn't explicitly come out of your comp (though you could argue that this cost is built in to how much you're getting paid so still technically paying).

  • Analyst 1 in PE - Other
May 18, 2022 - 4:22pm

So if my comp says $300k all-in, and they take 10%, it's $30k that goes to them. But the company will pay the $30k and I'd still get my $300k right?

  • Analyst 1 in IB - Cov
May 18, 2022 - 3:06pm

I honestly have no idea lol no one is clear at all, like another question is "is there only on-cycle once?" like if you do on-cycle your first year and get nothing, can you do on-cycle during your "second" year of banking? Is that off limits because of the graduating class thing? There is such little clarity on this process lol it's super confusing. The other thing is case studies, like dudes are telling me to trade case studies but bro where tf are you guys getting these, I can't find anything online. I'm also a non-target, so that doesn't help, but damn bro.

  • Associate 3 in IB-M&A
May 18, 2022 - 7:50pm

You can do it if you do a third analyst year to line up with timing of the class below you. Not common though. Most people who do oncycle as a second year skip it the first year because they feel unprepared or can't talk about any deals. But if you just barely miss out + HHs liked you, and for whatever reason you want to do oncycle again instead of off-cycle, no one is stopping you.

Case studies come from friends the year above you at your school, you will get plenty once you start in your group don't worry about it yet. If you know how to work a 3 statement model, you can learn how to do a case study in a weekend.

May 18, 2022 - 3:55pm
arb432, what's your opinion? Comment below:

In almost all cases (at least of roles that my friends and I have recruited for), the firm who is looking to fill the role pays the headhunter. As the individual being hired, I think that paying the headhunter would be highly unusual.

I don't know this for sure so someone should correct me if I'm wrong, but I remember hearing that headhunter commissions were ~25% of first-year pay. I'm not even sure if this is based on first-year salary or first-year total comp (incl. expected bonus). Probably the latter if I had to guess.

Most Helpful
May 18, 2022 - 7:28pm
CompBanker, what's your opinion? Comment below:

Never heard of the candidate paying the headhunter … the employer always does based on my experience and those I've spoken to. Also, while an argument can be made that you are 'indirectly' paying the headhunter because you are more expensive for the employer to hire due to the fee - I've never actually heard of someone getting a lower rate as a result of going through a headhunter. Most IB/PE firms have pretty fixed salary bands and individuals are paid the same whether or not they go through a headhunter.

Lastly - 10% sounds like an amazing deal for the employer. The headhunters I've worked with for associates charged close to 33% of salary + bonus - with minor cost reductions if we made multiple hires.

Mentorship with CompBanker: https://www.RossettiAdvisors.com

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  • Analyst 1 in IB-M&A
May 19, 2022 - 10:37am

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