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What are the general costs of using recruitment agencies?

What are the general costs of using recruitment agencies?

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The costs of recruitment in time and effort can seem daunting, which is why so many firms are prepared to employ recruitment agencies. But what are the costs associated with using such agencies?

An expensive activity
Recruitment is a highly organised and often thriving industry, even so, businesses in the UK waste millions on poor recruitment methods.

The average recruitment cost of filling a vacancy, using internal or external recruitment methods is reckoned to be around £4,500.

Finding an excellent candidate using an external agency will save the cost of advertising and time involved in pre-screening candidates, but the time and effort involved in finding that recruiter must be factored in as well. Depending on the nature of your business, this may come at a far greater cost.

Agency fees
In general, agencies charge a fee calculated as a percentage of the annual salary and are paid based on the number of candidates placed within your company.

Obviously, terms and conditions of operation vary so you need to check the agency's terms of business as regards its charging structure.

This is a good thing where you have more than one agency recruiting for a position because you still only have to pay one fee. However, you need to track which agency you are interviewing (and employing) a candidate through so there is no confusion on the fee.

Therefore, if you interview a candidate through agency A then it is likely that you will be agreeing to pay their fee if you go on to engage agency A's candidate. To avoid any disputes over who the fee is payable to, you should decide which agency you wish to work with and confirm to them that you accept their offer and terms of business. You should also make clear to the other agencies that you are rejecting their offer of this particular candidate.

Clarifying the situation
The last thing you want to have to deal with is a legal dispute regarding fees on the nature of your recruiting a candidate through an agency.

If you're looking to enter into a relatively large or long term contract with an agency, it is important to clarify the fee structure before making any kind of formal commitment.

As a rule, agency fees can be split into three main areas: Temporary worker fees: Temporary to permanent fees and Permanent placement fees.

  • Temporary worker fees
    The fee for a temporary worker is made up of their basic salary plus a percentage placed on top. The rate you pay an agency for a temporary employee will depend largely on the particular industry in question and fees will vary.
  • Temporary to permanent fees
    If an agency supplies you with a worker who later becomes a permanent employee, the agency will be legally entitled to charge a temporary to permanent fee which is designed to cover the loss of that worker's value.

    This fee can vary from agency to agency, so you need to know what this is but there is room for manoeuvre. For example, if you want to keep the person longer, the agency is obliged to offer you an “Extended Period of Hire” as an alternative to a fixed payment. In this case, the worker continues to be employed by the agency for a pre-determined time, after which they become a permanent employee of your company.

  • Permanent placement fees
    If you're continually looking for employees you can contract agencies on a retainer basis. This means you pay a fixed fee for the placement of a candidate and the agency is contractually obliged to match your recruitment needs.

    Such fees are usually paid for as: a first instalment paid upfront; a second instalment upon presentation of a short-list of candidates, and the third upon a candidate's acceptance of your offer of employment.

Everything depends upon the terms of engagement with your recruitment agency. For example, there are circumstances where you are entitled to have a refund if the new person resigns soon after being employed. There are also cases of other charges for advertising and recruitment venue costs being passed on to you, the client, so always be clear as to what your agencies costs include.

Do it Yourself or Recruitment Agency? Find the Right Fit for Your Company

Some businesses are perfectly adept at hiring their own staff, but there is value in hiring a recruitment agency for certain employers and situations. Just make sure you fully understand the costs and your particular needs. If you choose a do-it-yourself approach, start today and you can post a free job advert on Monster.