LOW RECRUITMENT FEES – HOW TO PAY LESS THAN 5% TO HIRE NEW STAFF
In today’s job market, companies, both large and small, are looking at ways to reduce their outgoings when it comes to hiring new staff, and one of the ways this can be done is to cut back on recruitment agency fees. However, finding new, cost-effective and efficient ways to do this can be challenging and time consuming. Historically companies only had a few choices when it came to filling their job vacancies. They could either use a recruitment agency, hire direct via a job board or their own website, offer a finder’s fee to their own employees for candidate referrals that go on to get hired by the company, search for candidates via LinkedIn or pay to access a CV database through one of the many online job boards. Unfortunately, all of these hiring methods are either expensive, time consuming or do not provide enough candidates, with the latter, leaving the Hiring Manger less choice of candidates and running the risk of potentially making a wrong hire due to the lack of suitable applicants, which can add to the cost and work out even more expensive for the company in the long run.
DIRECT AND INDIRECT COSTS TO HIRING NEW STAFF
Recruitment agency fees can be expensive and add to the overall cost of hiring new staff, especially when you take into account all the direct and indirect costs for the whole hiring and onboarding process and not just the recruiter’s fee. As an example, once a new employee starts within the business, you need to take into account the cost of initially training the new recruit for the job in question. This can involve a great deal of time, which is often overlooked as an expense to the business. Training a new recruit for some businesses may involve spending a few hours a day for a week or two, or even just an afternoon showing them the ropes. But, in reality, will take away more time than anticipated from the staff member managing the new recruit, which needs to be taken into account. Another expense that needs considering when taking on a new staff member is desk space if it’s an office based role, in addition to buying new software licences, computer equipment, phones, PPE (if required), tools of the trade, uniforms etc. etc. the list can go on and on.
Due to the many direct and indirect costs to hiring new staff, carrying out the right recruitment / hiring strategy from the beginning and implementing that strategy long-term is extremely important for the business and can contribute to huge savings over the years, especially if you have multiple job vacancies. However, companies should not stop using recruitment agencies, due to their high fees, altogether to the detriment of their ongoing hiring needs. Jobs still need to get filled by candidates who will develop into great employees who are, to be honest, the lifeblood of any organisation. Without great employees some of the world’s most successful organisations would not be here today or as successful as they are.
RECRUITMENT AGENCY FEES – Am I paying too much?
Recruitment agencies and all great recruiters will always have an extensive network of candidates to contact in relation to sourcing potential applicants for your vacancies. These candidate networks can be invaluable to the recruiter as they can be the major factor in determining whether the recruiter successfully fills their client’s vacancy or not. Recruitment is a very competitive industry and all good recruiters know it’s not just how fast you find an applicant, it’s also down to the quality of that applicant and how well they match the client’s requirements. The recruiters are also aware that time costs money and if they are unable to find the ideal candidate, they will not earn their commission. However, recruitment agency fees can be expensive and generally range from 15% to 25%. If you’re lucky enough you may find a recruiter that will provide their services at 10%. However, there are ways to pay less than 5% to fill a job. In fact, you could fill the majority of your vacancies direct, advertising on multiple leading jobs boards and without having individual contracts with each job site or being tied into long term advertising contracts, which can work out expensive. As an alternative way to recruit directly, save money and reach more candidates, AWD online have created a range of Multi-Job Board Advertising Packages, with their OPTION 1 (Multiple Online Advertising) package costing just £199+vat or less.
Although not necessary for the majority of job vacancies nowadays, recruitment agencies still offer a valued service to businesses, but are not always the best solution for all jobs. When deciding the best way to fill a job vacancy, it’s important to define and consider key areas that are important to the business such as cost, time and candidate reach.
COST: Keep costs low without sacrificing quality of service, but at the same time balancing the cost with the return on investment. No one likes paying more than they should to fill a vacancy. If advertising directly, how much does it cost to advertise on one job board or multiple jobsites. Will those job boards provide enough candidates to make that investment in advertising worthwhile? Or does paying for a recruitment agency provide better value?
TIME: How much time can be saved. This can relate to the time it takes to write a job advert and then post a job ad directly online. This could also include the time it takes to go through, filter and shortlist the candidate applications or searching through various CV databases or looking for passive candidates via LinkedIn. We also can’t forget about the time it takes to arrange and hold candidate interviews, prepare offer letters, send out contracts induction training etc. etc. This list could go on and on as recruiting for new staff is extremely time consuming, so finding a way to minimise this and keep costs to a minimum is extremely important in any recruitment campaign.
CANDIDATE REACH: Having a great job opportunity within the business is fantastic, but it’s equally important that as many potential candidates hear about this exciting role and apply for the job, which will give the Hiring Manager more choice when selecting the best applicant for the position. Using a recruitment agency doesn’t always provide the best choice of applicants as most recruiters will only send over two or three candidates to review or at most five candidates. Admittedly, some of those candidates will be well matched to the role. However, it’s always nice to have a few more candidates to review and shortlist for interview rather than be force fed a small selection of candidates to decide on. Advertising directly on one job board can be risky as all your eggs are in one basket. If that job board doesn’t perform and generate enough candidates you’ve just wasted your money and time. Advertising your job on multiple job boards is an option. But this can work out expensive, especially if you want to advertise on more than two job boards, unless using one of the Multi-Job Board Advertising and CV Sourcing Packages provided by AWD online.
DO YOU PAY RECRUITMENT AGENCY FEES UPFRONT?
The quick answer is ‘NO’. Unless you’re using a specialist Search and Selection Agency, also known as a ‘headhunting firm’. If you have a senior management / director / executive level vacancy that needs filling, you may decide to use a Search and Selection Agency. These agencies will spend time searching for suitable candidates, utilising their networks for referrals and using sites like LinkedIn to ‘head hunt’ potential candidates. Search and Selection firms can be expensive and usually charge their fee in three parts, which is broken down below:
FIRST PART – SEARCH & SELECTION FEE
The first part of the Search & Selection Agency fee is to retain their services. This will be the time when the search and selection recruiters gather all the job requirements, personal specifications and salary and benefit details offered for the vacancy. Once they have this information, they will then commence their search for candidates.
SECOND PART – SEARCH & SELECTION FEE
Once the search and selection recruiter has identified, contacted and interviewed potential applicants they will then compose a shortlist of candidates to present to the company. This will be when the second part of their fee is payable. The Hiring Manager can then review the candidate shortlist and arrange interviews via the search and selection agency.
THIRD PART – SEARCH & SELECTION FEE
The third and final part of the search and selection agency’s fee will only be payable once the Hiring Manager has hired one of the shortlisted candidates. If no placement has been made the third part of the fee does not have to be paid. However, the first and second part of the fee would not be refundable either, so it’s really important to carefully select a Search and Selection Agency that is chosen to identify suitable applicants.
RECRUITMENT AGENCY FEES – Upfront Payment or Not?
As mentioned earlier in this article, recruitment agency fees can vary from 15% to 25% and on some occasions can be as low as 10%. However, this can still work out very expensive. The recruitment agency fee can be based on either the basic salary paid to the new a hire, which is the cheaper option for the company paying the agency fee, or the recruitment agency fee can be based on the total salary package (including guaranteed bonuses, car allowance etc.) being offered to the applicant, which is the more expensive option for the company paying the agency fee. Because of this it’s really important for the hiring company to agree terms or business with the recruitment agency prior to instructing them to start the recruitment campaign, so there are no hidden surprises and even larger invoices to pay once a placement has been made.
RECRUITMENT AGENCY FEE EXAMPLE CALCULATIONS
A candidate is offered a new role paying a £35,000 annual salary and the agency fee is 20% of the candidate’s basic salary.
The fee would be calculated as £35,000 (candidate’s annual salary) x 20% (recruiters fee) = £7,000+vat (if applicable)
A candidate is offered a new role paying a £40,000 basic annual salary, plus the candidate will be paid a joining bonus of £5,000 and receive an annual car allowance of £5,400 and the agency fee is 25% of the candidate’s total remuneration.
The fee would be calculated as £50,400 (candidate’s total remuneration (£40,000 + £5,000 + £5,400)) x 25% (recruiters fee) = £12,600+vat (if applicable)
As you can see in the above examples it’s worth trying to negotiate the recruitment agency fee based on the candidate’s basic salary rather than the total remuneration.
NO PLACEMENT NO FEE
Recruitment agencies in general have a No Placement, No Fee policy, which is great for the Hiring Company as there is nothing to pay unless the recruiter finds an ideal candidate. However, like most things in life, nothing comes for free. If the recruiter does find an ideal candidate that is hired, then the fee can sometimes be eyewatering. One of the reasons why using recruitment agency fees are so expensive, and this is only an opinion, could be down to cost recovery. Even though every recruiter would like to think they can fill every job with a candidate, in reality this doesn’t happen. However, even with the non-placements, which can be down to a number of reasons such as, the recruiter not finding the right candidate, the company hiring internally or recruitment budgets pulled, there are costs involved for the recruitment agency. For instance the recruitment agency still needs to pay to advertise the role on the various different job boards they use, they need to pay the recruitment consultant’s basic salary, office costs, CV database access and recruitment software licence fees and all the other costs associated to running a business. Unfortunately, these costs need to get recovered somewhere, which is probably why recruitment agency fees can be quite high as the costs of the non-placements are effectively passed on to the hiring company that successfully recruits through the agency.
WHAT IS A RECRUITMENT AGENCY FEE REBATE PERIOD?
A recruitment agency fee rebate period is a period of time when the hiring company can receive a refund or reduction in the recruitment agency fee should the applicant not work out. The rebate period can vary from recruitment agency to recruitment agency and should be considered and possibly negotiated before instructing the recruiter to commence work on finding an applicant. Some rebate periods offered by agencies can provide a 100% refund should the candidate leave within the first one to two weeks on joining and will then reduce for each subsequent week. As an example, the agency may offer an 80% rebate should the candidate leave after four weeks, and 60% rebate should the candidate leave after six weeks and 10% rebate should the candidate leave after eight weeks. (This is just an example. Each recruitment agency will have their own rebate policies). Some recruiters may not even offer a fee reduction. Instead they may offer a free candidate replacement. Whichever, recruiter you hire you should always consider the rebate period in addition to the recruiter’s fee.
As you can see within this article companies now have more choice than ever when deciding the best way to fill their job vacancies. But they all come with a price, and how much you pay depends on a number of internal and external factors that only you can decide. Recruitment agencies and search and selection firms still have a place and offer a valued service. Although, there are now a number of cheaper alternatives that are just as effective for the majority of job vacancies being recruited for.
ABOUT AWD ONLINE
Established since 2006, AWD online provide a number of multi-job board advertising and CV sourcing packages, which allow companies to reach more candidates, reduce costs and hire directly.
Each advertising campaign is fully optimised with key words to ensure the job advert reaches the widest possible target audience and the packages have the flexibility to be tailored to fit into your recruitment processes.
The full range of multi-job board advertising and CV sourcing packages can be found HERE. or you can call the office on: 0330 088 1895