Understanding the true costs of using a Recruitment Agency in the UK
- How recruitment agency fees are calculated.
- The average cost to recruit an employee in the UK.
- The payment model of recruitment agencies.
- The pros and cons of using a recruitment agency.
Let’s dive into the fascinating world of talent acquisition!
Calculating Recruitment Agency Fees
What does it cost to use a recruitment agency?
The costs of using a recruitment agency typically depend on the role’s complexity and seniority you’re looking to fill. Agencies generally charge a percentage of the candidate’s first-year salary, which ranges from 15% to 30% on average.
However, fees can climb to 50% for senior leadership or specialist roles. These percentages are typically negotiable, especially if you’re engaging in a high-volume hiring campaign or have a long-standing relationship with the agency.
Average Recruitment Costs in the UK
The average cost to hire an employee in the UK varies significantly based on the hiring method and the role’s nature. Using a recruitment agency might initially appear more expensive, but businesses need to consider the opportunity cost of an unfilled role or a bad hire. If you consider a position with an annual salary of £30,000 and use an average recruitment fee of 25% – that’s a cost of £7,500.
Why are recruitment fees so high?
The traditional recruitment model, dating back several decades, was largely built around servicing large corporations with substantial hiring needs and budgets. These legacy practices have, over time, become standard in the industry, leading to the high-fee model that prevails today.
In the past, the resource-intensive nature of recruitment justified these costs – extensive manual searching, paper-based applications, and limited candidate databases made the process time-consuming and expensive. Despite technology streamlining many of these tasks today, the pricing structure, still reflecting the older model, persists.
Recruitment Agency Fee Models
Recruitment agencies typically operate on a success-based payment model, which means they get paid upfront when they successfully place a candidate who accepts the job offer.
What happens if the person leaves?
Is there a rebate period?
Some recruitment agencies offer a scaling 3-month rebate period, which is a standard provision in the terms of business for most recruitment agencies. The rebate period typically only lasts for three months but can be negotiated between the recruitment agency and the client company.
During this time, if the placed candidate leaves the position or is terminated for reasons other than redundancy or restructuring, the agency will offer a partial refund of the placement fee or, in some cases, offer to find a replacement candidate at no extra charge.
Here’s how a scaling or sliding rebate period works:
- First Month: If the candidate leaves within the first month, the employer can receive a high percentage (usually 50-75%) of the placement fee as a refund.
- Second Month: If the candidate leaves during the second month, the refund amount decreases, typically to around 30-50% of the placement fee.
- Third Month: If the candidate leaves during the third month, the refund further decreases to around 25-30% of the placement fee.
After the rebate period ends, no refund is typically offered.
The Pros and Cons of Using a Recruitment Agency
Just like any other service, using a recruitment agency has its advantages and disadvantages.
Advantages of Using a Recruitment Agency
- Expertise: Recruitment agencies are professionals in talent searching and have vast networks of potential candidates, including those not actively looking for new jobs.
- Timesaving: Hiring processes can be lengthy and time-consuming. An agency can handle some of the upfront time consuming, mundane tasks like sifting through CVs, pre-vetting candidates etc., allowing the company to focus on their core business activities.
Disadvantages of Using a Recruitment Agency
- Cost: While recruitment agencies save time and effort, their services are expensive, especially for small businesses or start-ups.
- Lack of industry knowledge: Not all agencies specialise in every sector, and a lack of industry knowledge can lead to inappropriate candidate shortlists.
- Limited control: When outsourcing your recruitment, you might have less control over the process and the messaging potential candidates receive about your company.
- Risk of Candidate Leaving: If the candidate leaves after three you’ll have lost the placement fee, three months of salary and three months of time.
In the case of employers, it’s essential to choose a recruitment agency that has a solid reputation and a demonstrated history of ethical conduct. Like any industry, there can be practices within recruitment that raise questions about conflicts of interest.
Some recruitment agencies look to place candidates where they can get the highest fee, putting their short-term profits over the best interests of their candidates and clients, but it’s important to note that this is not representative of the industry as a whole.
In conclusion, recruitment agencies can be a valuable asset for businesses seeking to attract top talent but it’s worth weighing up all the options and looking at new technology providers who can source and connect candidates using advanced AI and sophisticated algorithms.
Comparing Recruitment Fees to AI Talent Matching Options
How much do recruitment agencies charge? Traditionally, businesses have had to set aside substantial funds for recruitment agency fees, often as high as 20% of the hired candidate’s first annual salary.
At Perspectv, we’ve flipped that model on its head. We operate on a clear, fair ‘Pay-per-Match’ system where you’re charged a flat fee of £35 for each candidate you wish to meet.
This model offers a far more cost-effective solution, giving you access to top talent without the hefty recruitment charges.
With Perspectv, you’re investing in value-driven talent matching, saving your resources for where they matter most – growing your business