Recruitment agency commission can be a rip off! Why?
Shweta Krishnan
Entrepreneur| SheEO Activator| Startmate Coach| Left & Right brain thinker
External recruitment agencies charge anywhere between 15-30% depending on the role you’re recruiting for and geography.
This is an acceptable percentage because of legacy which has also become a norm passed on by agencies with the “Black Book approach”.
Eons ago, recruiters would have a little ‘Black book’ full of contacts which was their biggest asset for placing candidates as they had Exclusive reach. This surely has changed with the introduction of professional social networks like Linkedin & job boards however the commission percentage still remains unchanged. Network no longer remains a differentiating factor!
Wondered why it is still so expensive?
From an Agency’s point of view, let’s look at the factors that would typically influence a costing model:
Fixed & Variable Costs
You might be helping them pay for their fancy offices in prime locations which is fine but what about the variable cost which is also built into your fee?
- Most companies advertise online themselves so why are agencies duplicating your effort eventually costing you money? Essentially you’re paying for it twice. How about head-hunting passive candidates?
- Meeting every candidate and client over a coffee/drink/ meal and frequent travel has become a thing of the past. Also, the lavish company trips aka high biller club add to the cost. Companies are running lean and passing on the cost-benefit to clients
Time
A fundamental principle is time=money in every business. After doing a lot of second-hand research and further recording our process, we have figured out that the average time taken to fill a role is 30 working hours.
Let’s say you have engaged an agency for a Sales role offering a $100k package, 15% commission would mean $15k which means the rate/hour works out to $500/ hour.
What does the service entail?
- Taking your Job Description and repurposing it by inserting a different logo to advertise on job boards
- Screening candidates and sending through their CVs (with agency logo) after taking out the contact details
- Randomly send unsolicited emails with multiple candidates (almost all who don’t suit your profile) in order to claim an introduction on the off chance one may suit is a part of the service
- Email back and forth to schedule interviews
- Postman services of relaying messages from one party to another if at all
- Being pushy and overselling every candidate
- Maybe a poor candidate experience that might damage your Employer brand, something you’d never know of
- We also know of a few who wait until employees move out of their “guarantee” period, at which time they “check-in” to see if they can churn the candidate to a new employer and pick up another commission.
The process is very manual, hence more time-intensive which defines their price tag!
Probability
Recruitment agencies play the numbers game to ensure “billing” sees an upward trend. Placing as many candidates as possible to meet the billing target is what recruitment consultants (unfortunately) focus on rather than helping candidates and clients find the right match.
Also, some clients have reported to us that they had young Account managers in their early 20s recruiting for them who had no idea about the brief or recruitment, very hands-off. Age is not the concern here however inexperienced consultants for a high commission fee.
Because of bad service and lack of understanding, the conversion % is usually quite low and hence they have a mindset to churn a huge volume. The reason why recruitment agencies enjoy a bad reputation!
Now it is not all bad news, there are good agencies out there!
In summary, vet an agency before engaging in an obnoxious commission agreement and ensure they offer an adequate return on Investment as their fee is an Investment from your end to hire the best talent there is!
External agencies, if engaged in the right way CAN SAVE YOU MONEY!
About RedBeard Talent
As a hiring manager, do you feel the pain of recruitment agencies sending you irrelevant candidates AND charging you a fortune for it?
When we were in your shoes, as hiring managers, we certainly did.
We were frustrated by recruitment agencies inconsistent, slow and way too often dishonest, overly expensive, approach. Sending irrelevant profiles, hoping for the best. To all agencies out there: Network isn't a differentiating factor anymore - start to innovate!!
Three years later, what sets us apart is:
1. Speed through automation (shortlist of three within 7 days, end-to-end of 15 days)
2. Recruiting through storytelling to target the most passive candidates
Our team in Australia, New Zealand and Sweden focuses on startup recruitment for companies such as OTA Insight (data analytics), Mad Paws (marketplace), Urban Company (marketplace), Forage (virtual student internship platform), Smokeball and more. All market-leading startups in their area. Companies either use us as a head-hunting agency or in-house department, streamlining their recruitment. Ask us about our different commercial model.
We've recruited successfully in 21 countries since, including impossible markets such as Japan and the split of roles is 50% Sales/AM/CS, 30% Product/Design, 20% Tech.
It'd be great to learn more about your needs regardless of where you are and explore opportunities to partner for a pilot.
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