I used a recruiter to find my current job and my company uses two recruiting firms exclusively. Whenever we hire an employee we pay the recruiting firm a percentage of the new hire's salary. It has no effect on the new hire.
The upside is we don't have to weed through a ton of crappy resumes. The recruiter does all the dirty work for us and sends us however many candidates we want to interview, usually three or four. We make a decision and pay the firm when the probation is up. If the new hire doesn't work out within a certain time frame, they send us another one, or round, without any additional charges.
The downside is the firms are pricy initially. Since we need to pay the employee market, their true cost for the first year is 20-30% higher. This balances off with better quality candidates who stay longer and we aren't wasting any time and/or money doing the recruiting ourselves.
As a potential employee I like recruiters because they have access to jobs you won't know about and will help negotiate your salary. They can give you some behind the scenes information that outside candidates won't have.
As a employer I like recruiters because they take care of things I don't want to, and allow me to focus on what I am good at, aka looking at the internet. The benefits outweigh the costs for me.
Be careful, as not all recruiters are equal. Some are specialized in certain industries and others are just better at doing it.
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