What Is Recruitment? Definition, Process, Costs, and Modern Alternatives

Pietro Mattina

June 23, 2026
8 minutes

Definition of Recruitment

In a nutshell: Recruitment refers to the process in which an external staffing agency identifies, approaches, and selects qualified candidates and then places them directly with a company. The candidate is hired directly by the company seeking to fill the position under a permanent employment contract. For this reason, recruitment is often referred to as direct placement.

The question “What is recruitment?” is becoming increasingly important, especially for companies that need to fill vacant positions quickly and efficiently. Essentially, a specialized recruitment service provider handles the search for suitable professionals and executives, while the client company benefits from a professional pre-screening process.

Unlike temporary staffing or temporary work, the candidate is not employed by the service provider. Instead, the candidate is hired directly by the company seeking to fill the vacancy.

Recruitment agencies are particularly often used for hard-to-fill positions, when there is a shortage of skilled workers, or when internal recruiting resources are limited.

An Overview of the Recruitment Process

The recruitment process at a staffing agency typically follows a clearly structured procedure. The goal is to efficiently identify qualified candidates and successfully integrate them into the company.

Phase 1: Job Description and Search Strategy

The process begins with a detailed analysis of the open position. We work with the company to define the technical requirements, qualifications, professional experience, and cultural aspects.

Based on this information, the recruiter develops a customized search strategy. This involves identifying target groups, relevant industries, search channels, and potential competitors.

Phase 2: Active Sourcing and Candidate Outreach

The active search for candidates then begins. In addition to traditional job postings, modern recruiters rely in particular on active sourcing methods, professional networks, and their own talent databases.

Especially when it comes to specialists and executives, directly approaching potential candidates plays a key role. This process is often referred to as headhunting.

Phase 3: Preselection, Technical Interviews, and Profile Creation

Once suitable candidates have been identified, a structured pre-selection process takes place.

Typical components of this phase are:

Qualification Exam
Initial Phone Consultations
Expert Interviews
Personality and Motivation Analysis
Reference tests (if necessary)

The most suitable candidates are then presented in the form of detailed candidate profiles. The applicant management process is conducted in accordance with applicable data protection regulations and GDPR requirements.

Phase 4: Matching and Signing the Employment Contract

After suitable candidates are referred, the company conducts its own interviews and selection interviews.

If an agreement is reached, contract negotiations take place between the company and the candidate. The actual placement process ends with the signing of the employment contract.

Many recruiters also provide support during the first few weeks of employment to ensure a successful onboarding process.

Recruitment Costs: Who Pays the Fees?

The fee structure is one of the most common questions regarding recruitment. In the B2B sector, the fees are generally paid by the client company.

Essentially, two compensation models have become established:

Performance-Based Placement

Compensation is due only if a hire actually takes place. This model is particularly widespread and, at first glance, low-risk for companies.

Retained Search

In executive search engagements, a portion of the fee is due at the start of the search process. This model is often used for particularly challenging or strategically important positions.

The amount of the placement fee is usually based on the annual target salary of the specialist or executive being placed.

Standard market rates range from 20% to 30% of the gross annual salary.

Example:

Annual salary for the position: 80,000 €
Brokerage commission: 20–30%
Brokerage fee: 16,000–24,000 €

This can result in significant recruiting costs, especially when hiring multiple employees or experiencing rapid staff growth.

In general, job seekers do not incur any costs through traditional recruitment agencies in Germany.

Recruitment fees are paid exclusively by the hiring company. This distinguishes traditional recruitment agencies from certain specialized forms of private employment agencies.

Permanent Placement vs. Temporary Work: The Differences

Although the two models are often confused with one another, there are significant differences between recruitment and temporary staffing.

In direct placement, the candidate is hired directly by the company seeking to fill the position. The company thus becomes the direct employer and enters into the employment contract with the new employee itself. The goal is typically to fill the position on a long-term and permanent basis. A one-time placement fee is usually charged for a successful placement. Since the specialist is integrated directly into the company’s structure, employee retention is generally very high. At the same time, this model offers less flexibility if staffing needs change on short notice.

In the case of temporary work, or employee leasing, the employee remains employed by the staffing agency and is assigned to the client company for a specific period of time. The employment contract is therefore between the employee and the staffing agency. This model is particularly well-suited for addressing short-term staffing shortages or fluctuating staffing needs. Instead of a one-time placement fee, ongoing hourly rates apply for the duration of the assignment. This results in significantly greater flexibility, although long-term employee retention is often lower than with direct employment.

For companies with many external service providers and complex staffing structures, a professional vendor management system (VMS) can also be useful for centrally managing all suppliers, processes, and resources.

Why Traditional Recruitment Puts B2B Companies at Their Limits

Traditional recruitment still serves an important purpose. At the same time, many growth-oriented companies are increasingly running up against the structural limitations of this model.

Among the most common challenges are:

High one-time fees
Recruitment fees are incurred again with every successful hire. These costs can quickly add up to six-figure amounts, especially when there are multiple vacancies.

Risks Associated with Terminations During the Probationary Period
Even with careful selection, hiring the wrong person can happen. Although many service providers offer replacement guarantees, delays and additional work are still inevitable.

No sustainable knowledge transfer
With each new opening, the recruiting process essentially starts from scratch. Valuable candidate networks, search strategies, and recruiting insights often remain with the external service provider.

Lack of Scalability
If staffing needs increase in the short term, placement costs usually rise proportionally as well. This rarely results in a recruiting structure that can be planned for the long term.

Why Traditional Recruitment Puts B2B Companies at Their Limits

As a result, many companies are increasingly turning to modern recruiting models such as Recruitment Process Outsourcing (RPO).

With RPO, the service provider acts as a strategic partner, taking on the entire recruiting process or selected parts of it. Rather than filling individual positions, a sustainable talent acquisition structure is established.

Benefit 1: Sustainability through in-house talent pools
Unlike traditional recruitment, this approach creates a company-owned talent pool.

Candidates who have already been identified remain available on an ongoing basis and can be contacted again for future openings.

In addition, a professional recruiting process strengthens the company’s employer brand in the long term.

Benefit 2: Predictable and scalable costs
Instead of unpredictable referral commissions, you get transparent monthly cost structures.

This makes workforce planning much more predictable and independent of individual placement successes.

Benefit 3: Higher-Quality Recruitment
Through standardized processes, data-driven decisions, and continuous optimization, both time-to-hire and cost-per-hire can be reduced in the long term.

Companies benefit from faster hires, higher-quality candidates, and a recruiting organization that is effective in the long term.

For more information, please visit the EMS service pages on Recruitment Process Outsourcing (RPO) and Talent Acquisition.

A Real-World Success Story

For years, a medium-sized company relied on traditional recruitment agencies to fill technical specialist positions.

After transitioning to an RPO model, the following results were achieved:

Sustained Reduction in Recruitment Costs
35% reduction in time-to-hire
Establishment of an exclusive in-house talent pool
Significantly greater planning certainty for future hires

The result was a sustainable recruiting structure with measurable efficiency gains.

FAQ: Frequently Asked Questions About Recruitment

What is the difference between recruitment and temporary staffing?

In permanent placement, the hiring company hires the candidate directly. In temporary staffing, the employee remains employed by the staffing agency and is merely assigned to the client company on a temporary basis.

Who pays the fees when using a recruitment agency?

In the B2B sector, the client company bears the entire cost. For job seekers, recruitment services in Germany are generally free of charge.

How much is the referral fee, typically?

For traditional recruitment agencies, the placement fee is typically between 20% and 30% of the gross annual salary of the specialist or executive they place.

What is meant by "direct placement"?

Direct placement is another term for recruitment. In this process, an external service provider identifies and screens suitable candidates, who are then hired directly by the client company.

What happens if someone is hired for the wrong position during the probationary period?

Many recruitment agencies offer replacement guarantees within a specified time frame. With an RPO model, this risk is mitigated from the outset, as candidates are evaluated more thoroughly and a pipeline of new talent is continuously built up.