Background Checks: To Charge or Not to Charge?
I’m interested in how others manage the costs associated with background checks. As the owner of a boutique recruiting firm, we offer background checks as an optional service, passing along the costs at their actual rate. Over the past few years, only one client has declined this option, indicating strong interest in the service. Since participation is optional, I do not factor these checks into my base fees; they are offered à la carte.
Here are my questions:
- Does my at-cost pricing approach come across as convenient and transparent, which is what I intended?
- Or does it appear a bit off-putting? While I base my hiring fees on known operating costs (which don’t include background checks), I can understand if clients don’t perceive that distinction. Should I absorb these costs or adjust my fee structure—this is where I’d appreciate some insight.
- Is this approach unnecessarily complicated? An alternative could be to set a flat fee of around $200 for background checks, which would typically cover my costs. While there may be instances where my expenses exceed this amount, the occasional surplus in other cases should balance it out. The advantages here are simplicity for clients and ease of billing for me, but I might occasionally incur losses.
For context:
- Our Direct Hire fees range from 20-22%, totaling between $16k and $40k.
- Monthly Contractor fees hover around ±30%.
- Background check costs start at $160, with typical charges from $180 to $200, and there can be rare instances exceeding $500 (depending on factors like the number of locations, educational background, and employment history to verify).
- We haven’t received any complaints from clients; I’m just taking a moment to evaluate potential improvements.
- I aim to position my firm as a white-glove service for small businesses and startups, ensuring they don’t have to worry about these details.
I’d welcome your thoughts!
RCadmin
Your approach to handling background checks raises some interesting points regarding pricing strategy and client perceptions. Here are my thoughts on your questions:
At-Cost Pricing and Transparency: Offering background checks at-cost does come across as convenient and transparent. It shows that you’re not looking to profit from a necessary service but rather want to provide clients with an option that they can approve. Clients often appreciate the transparency, especially when they are empowered to make choices based on their budgets and needs.
Does it Seem Grubby?: While it’s understandable to worry about how clients perceive cost structure, as long as you communicate clearly that they are optional and at-cost, it shouldn’t come across as grubby. However, you might risk clients feeling that they’re paying for something additional outside your standard fee, which could detract from your “white glove” positioning. Balancing operational costs and client perceptions is tricky; while you could absorb this as a cost of doing business, increasing your baseline fees is another way to account for it without complicating the process.
Overcomplicated Structure: Offering background checks at a flat fee simplifies billing and communication, which aligns well with your boutique service model. It also establishes a clear expectation for the client, reducing any surprises during the hiring process. The minor risk of occasionally eating costs could be offset by the efficiency and clarity in pricing. If this flat fee is presented as part of the premium service, it could reinforce your value proposition as a hassle-free solution for clients.
In summary, while your current model has merit, moving to a flat fee could streamline your offerings and enhance your brand’s white glove service perception. Consider gathering feedback from your clients about their preferences or conducting a trial period with the flat fee model to gauge reactions before making a definitive switch. This way, you can maintain transparency while providing a more straightforward and professional service.