Background Checks: To Charge or Not to Charge?
I’m interested in how others approach the costs of background checks. As the owner of a boutique recruiting firm, we currently offer background checks as an optional service, charging clients at-cost. In recent years, nearly every client except one has opted for this service. Since it’s optional, I don’t incorporate these costs into my standard fees, treating it as an a la carte offering.
Here are my questions:
- Does my at-cost pricing model come across as convenient and transparent? That’s the intent behind it.
- Or does it seem a bit off? I base my hiring fees on known operating costs, which don’t include these optional background checks. I understand that clients might not see the distinction. Should I absorb these costs or adjust my fees? I’d appreciate a gut check on this.
- Is this model overly complicated? Another option could be to set a flat fee, like $200, which would usually exceed my costs. On the rare occasions where the cost goes above $200, I would anticipate that the previous excess would even things out. Pros: simpler for clients and easier for invoicing. Cons: I might occasionally incur losses totaling a few hundred dollars.
For context:
- Direct hire fees are typically 20-22%, with totals between $16k and $40k.
- Monthly contractor fees are about +/- 30%.
- The minimum cost for a background check is around $160, with the average ranging from $180-$200. Some cases can exceed $500, depending on the number of verifications required.
- I haven’t received any complaints from clients; I’m just reassessing ways to improve our processes.
- I aim to provide a white-glove service to small businesses and startups, positioning ourselves as a hassle-free solution (“We’ve got this, you don’t have to think about it”).
RCadmin
Your approach to handling background checks raises some important considerations for your boutique recruiting firm. Let’s dive into your questions:
At-cost Pricing Perception: Providing background checks at-cost can indeed communicate transparency and convenience to your clients. It shows that you’re not marking up the fees unnecessarily and are committed to ethical practices. However, it’s essential to clearly articulate this model to your clients; if they understand the rationale behind your pricing structure, it reinforces trust and the perception of value.
Grubby or Just Pragmatic? Whether it seems grubby may depend on individual client perspectives. Some clients may appreciate the a la carte option, while others might prefer a more inclusive service. It’s worth considering that clients might view this as an extra hassle. Upping your fees to include a flat rate for background checks could simplify the process and present a more comprehensive service offering that aligns with your white glove positioning. If it helps avoid confusion and maintains your brand image, it could be a worthwhile investment even if it means absorbing occasional excess costs.
Overcomplication? Offering a flat fee for background checks simplifies the billing and communication process. Clients generally prefer straightforward pricing structures, especially in a high-touch service context like yours, where ease and professionalism are prioritized. While the occasional excess might be a downside, it could also be offset by the improved client experience and perceived value.
Additional Recommendations:
– Market Research: Consider gathering brief feedback from clients on how they perceive the current model and if they have a preference for a flat fee or at-cost model.
– Bundle Services: Explore the possibility of bundling background checks into your recruiting fees in some scenarios to make it more attractive.
– Invoice Clarity: If you maintain the at-cost model, ensure invoices are crystal clear to avoid any misunderstandings about the charges.
In summary, while your current approach has its merits, a flat rate could significantly enhance client satisfaction and streamline your processes—especially given your positioning as a premium service. Balancing transparency with simplicity will likely yield the best long-term results for your firm.