Recruitment fees are often a considerable expense for businesses, so they usually try to avoid hiring through recruitment agencies to save cash. However, this can wind up taking more of their time, which of course, costs money. The issue is a question of time vs money: so is it worth wasting your time on recruitment?
The answer may not be as clear-cut as you may first think. Not only that, but your internal hiring process may be costing you more than you imagine. In this article, we explore the hidden costs of recruitment that many business owners often overlook.
Time VS Money
Many companies implement a policy not to pay agency recruitment fees, which may seem like a no-brainer to whoever controls the finances. However, accountants often overlook how much time hiring managers spend recruiting candidates if the company decides to go it alone.
Internal recruitment departments often lack the skills and capabilities of an agency. Therefore, it can take much longer for them to hire someone for a role. At the same time, the long duration of the recruitment process could mean that it costs more money overall.
In short, it can be more cost-effective for the company to invest in a reputable IT recruitment consultant. Keep reading for a more detailed explanation of why in-house recruitment can be such a money pit.
How Much Do Recruitment Agency Fees Cost?
The answer to this question is a bit like how long is a piece of string. Typically, agency placement fees can be between 15% and 40% of an employee’s salary. However, many variables might influence how much an agency charges, such as:
- How well known the agency is: As a rule of thumb, the more prominent name, the higher the fee.
- The demand for the candidate’s skills: The scarcer the skills are, the more work a consultant will have to do to find someone. So it follows that they are likely to charge a higher percentage fee.
- The time constraints: If a company demands they need an individual with a rare skill set within seven days, an agency may have to put several consultants on the case. In this scenario, they may charge a higher fee percentage.
Visible Costs of Internal Recruitment
There are many apparent costs in the recruitment process. Below are the costs your company probably already considers when calculating how much it costs to hire someone:
- Job board subscription fees
- Recruitment team salaries
- Training costs for your recruitment and HR personnel
- Time of extra team members involved in the recruitment process
- Cost of recruitment software
- Bonus payments for referral fees
The Hidden Costs of Internal Recruitment
In addition to the above, companies tend to overlook many other hidden recruitment costs. Below are just a few:
- The cost of downtime spent by hiring managers writing job descriptions, posting ads on job boards, reading CVs and shortlisting candidates, telephone screening, interviewing and considering the most suitable candidates.
- How much does it cost to have meeting room space to interview candidates? Firstly, the cleaning and maintenance costs of keeping these rooms available. Companies might also consider how much this space might earn the business if working desks occupied it.
- Cost of bad hires, attrition and turnover.
- How much does it cost to train managers to become good hiring managers? Or how much it could cost your company reputation if you don’t invest in such training.
How Recruitment Agencies Can Save You Money
Of course, recruitment agencies charge fees for what they do, but this fee often far outweighs the cost of in-house recruitment.
Reduced Time to Hire
Working with a recruitment agency can lower the average time to hire new candidates. Agencies can often hire so much quicker than a business because they already have access to recruitment software, a CV database, multiple job boards, an existing talent pool, an extensive professional network and maybe even an in-house marketing team.
So, where businesses usually rely solely on applications submitted in response to their job adverts, agencies source candidates via multiple sources. Therefore, they will likely pinpoint ideal candidates in your field much quicker than your in-house team.
Instead of waiting for people to come to you, a recruitment agency can quickly create a shortlist of candidates. This speeds up the hiring process meaning you spend less time with an unfulfilled role.
Why is this important? According to a recent Oxford Economics and Unum study, it takes around 29 weeks for an IT professional to get up to speed in their role. During that time, tech firms can expect to lose approximately £31,000.
Therefore, hiring someone as quickly as possible through a recruitment agency can minimise that loss.
Less Time Recruiting
The above statement sounds like an overstatement of the obvious, but many people don’t realise what recruitment companies do. Every company has a unique way of doing things, but generally, the recruitment process looks something like this:
- Write a job description
- Place an advert on a job board
- Receive very few applications
- Realise you need to headhunt your ideal candidate
- Spend days networking/cold calling until you find a shortlist of potential candidates
- Telephone screening
- Face-to-face interviewing
- Decision making
As we pointed out at the beginning of this article, companies think it’s a waste of time to hire an agency because it costs a lot of money. But look at it this way, the first six steps of the recruitment process are the most time-consuming and, therefore, the most costly. Hiring a recruitment consultant can free up a lot of your time, meaning you only need to complete the last four steps.
Reduce Your Hiring Manager’s Downtime
How much time do you think your hiring managers spend working on recruiting a new employee? Naturally, they will want to fill the position and hand someone a job offer as soon as possible. So, they’re likely to devote many hours per day to drafting job descriptions, advertising the role, perusing applications etc.
Your managers could (and should) spend this time working on your business. Meanwhile, recruitment agencies have expert knowledge and skills in the job market, so they can find you the best candidates much faster. This frees your people to focus on what they do best; running your business.
A Few Final Thoughts on Whether It’s Worth Wasting Your Time On Recruitment
Ultimately, avoiding recruitment agencies may seem like a money-saving stroke of genius, but it can be a false economy. When you calculate the actual cost of hiring an employee vs the time it takes an agency to do the same job; the agency solution is often the cheapest.
After reading this article, we hope you have a better idea of whether or not it’s worth wasting your time on recruitment. Our consultants are available to discuss your requirements if you’re looking to save money by outsourcing your recruitment processes. An exploratory chat costs nothing.