What can you expect to pay a recruitment agency for finding you the perfect new staff for your business? As industry insiders, we provide the answer here.
Have you ever considered using a recruitment agency to find new staff for your business but have been concerned about the costs? Maybe you’ve heard rumours that agencies charge high fixed fees or that they don’t make financial sense for some roles. In this article, we’ll explain the different ways that agencies charge their clients and how much you can expect to pay.
Percentage based
Most agencies – including us here at Anne Corder Recruitment – use a percentage based ‘no results – no fee’ pricing model.
This means the agency only gets paid if they successfully find a suitable candidate for their client, regardless of how much time and effort they put into running a recruitment campaign, filtering and dealing with candidates, and everything else involved in the selection and recruitment process.
The actual fee charged is a percentage of the starting annual salary of the new starter, regardless of what this is.
But the percentages charged by agencies can vary greatly, although most are in the range of between 15% and 20% of the base salary of the new employee.
However, some agencies charge as much as 30% (or more), particularly if they specialise in finding staff for hard to fill or top level executive roles.
This means that an agency charging 15% would be paid £4,500 by the client for finding the right candidate for a £30,000 per year position, whilst an agency charging 30% would be paid £9,000 for putting forward the same candidate.
It is important to note though that like most service providers, percentage based recruitment companies should not be simply selected because of the fee they charge, but instead on the value and quality they provide.
An agency could look appealing because they charge a low percentage fee, however, may lack the experience, skills, resources, and contacts to find high calibre candidates for your business. This may mean you end up with ‘any candidate’ rather than the ‘right candidate’.
And similarly, an agency may charge a high percentage fee which may give the impression they are brilliant at what they do, only for you to find they don’t share your values or work in a transparent and ethical way.
Due to this, it’s always worth speaking to a number of agencies before selecting the one to use, and look beyond just their percentage fee. Remember that the agency is representing your business, so you want them to share your ethos and values too.
Fixed fee
In recent years, there has been a rise in the number of recruitment agencies that charge a fixed fee instead of a percentage of the candidate’s starting salary.
Some of these companies don’t provide the complete end-to-end service that you would expect to get from an established full service agency, but instead may just focus on advertising your vacancies and/or simply passing on applications for roles.
Others may provide more, however, because these agencies typically charge less than percentage based companies, they generally are focused on securing lots of clients and filling vacancies fast.
This can mean the quality of the candidates they put forward is overlooked. Whereas a more consultative based full service agency should spend the time getting to know the best candidates well, as well as understanding the client’s philosophies and culture, most fixed fees services don’t work this way.
Their focus is largely on volume (the quantity of clients and candidates) rather than ensuring exactly the right candidate is matched to exactly the right role.
But this approach can work for businesses that are looking to fill a high number of vacancies, for example, for a factory or a warehouse where just having staff in the roles is more important than ensuring they are a perfect fit.
Fixed fee agencies typically charge anything from a few hundred pounds to over £1,000 depending on the services they offer.
These can include simply compiling a shortlist of candidates for the employer to consider, with the agency sometimes being paid based on the number of names on the list. And many will rely heavily on technology to source and filter candidates, rather than experienced recruitment professionals who are experts in finding the right staff for businesses.
In addition, some fixed fee services don’t offer any guarantees about the effectiveness of their approach, and importantly don’t offer a money-back guarantee should a candidate they source not work out.
By comparison, most high quality full service agencies will.
Due to this, it’s important to check a fixed fee agency’s terms and conditions to understand their rules about rebates if a candidate you hire isn’t successful.
Retained
Some recruitment agencies work on a retainer basis where the client pays a partial fee up front for the company to source one or several candidates for them.
Unlike fixed fee services, the fee charged is usually a percentage of the candidate’s starting salary but is typically much higher than that charged by a full service agency. In most cases, it is 33% of the salary (but it can be up to 50%), with a third of this paid to the agency before they start work, a third paid on delivery of a shortlist of candidates, and the final third paid when a successful candidate starts in the job.
However, retained agencies are generally used to recruit top level executives or staff with specialist skills and experience that are often hard to find and are usually paid more than £50,000 per year.
The agency typically undertakes in-depth research identifying ideal candidates for roles, many of whom are not actively looking for a new position and need to be contacted directly and discreetly to see if they are interested in the new opportunity.
Like the best full service agencies, they also don’t just rely on advertising roles on job boards and on social media. In fact, many retained agencies don’t use these methods at all to find the perfect candidates for their clients.
Companies sometimes choose to use a retained agency if more traditional means of finding the right staff have failed or if they are looking for specific highly experienced people who need to be lured away from their current employer.
For this reason, retained agencies and staff are sometimes called ‘executive headhunters’.
Preferential rates
Some full service agencies are happy to reduce the percentage fee they charge if they are used on an exclusive basis by a client, rather than them choosing to use multiple agencies to find the staff they need.
This reflects the fact that the agency knows they are not competing with others to find the right candidates and should at some point be able to charge the client for sourcing those they employ (as opposed to potentially making nothing if another agency finds candidates that are hired).
Agencies such as Anne Corder Recruitment are also open to discussing adjusted fee structures for companies that use preferred supplier lists and agreements.
Conclusion
Although charges to use a recruitment service may seem to vary greatly, you generally get what you pay for.
For this reason, its vital to think carefully about what’s important to your business and remember that the right agency should become a long-term trusted partner for your future growth.
