There is a lot of confusion among businesses about the real value of recruitment agencies. Recruitment agencies notoriously charge high fees to secure candidates, often 15-20% and sometimes even as high as 50%. Most businesses have little knowledge of the level of effort the agencies have undertaken, which is why they are often bemused about the fees. Clients often expect that high agency fees transfer to a premium service but often, this is not true and there is no transparency between a difficult and simple hire. The fees are the same across the board, regardless of the type of role.
Active vs Passive
There are two ways a recruitment agency will find candidates; active sourcing and passive sourcing. You would expect active sourcing for hard to fill roles; those that require specific skills. A good recruiter will understand the complexity of a role, as soon as they get the job spec. With active roles, recruiters will need to headhunt the candidates and persuade them to apply. There is a lot more work and effort involved in active recruitment. With passive sourcing, recruiters will usually select candidates from their database or advertise the role on a job board. There is a lot less work involved in passive sourcing, therefore, the agency fee should be reflective of this. However, with most agencies, there is no difference. They charge the same fee, regardless of the effort required.
At a time where businesses are trying to make cost savings, agency recruitment fees often seem a little excessive, especially for roles which only require passive sourcing. A better strategy may be to analyse the job description and determine costs based on this and the type of sourcing required. This is a more realistic and transparent approach to resourcing and it can also save businesses money. If a recruitment agency already has a database with suitable candidates, why should they be charging the same as a role which will take hours days or weeks to fill? It’s not only businesses who suffer, candidates also end up with less in their pocket too.
The transactional approach to contingent labour hiring often involves clients farming out the same resource requirement to multiple agencies. None have any guarantee of getting the work. The search costs incurred by an agency can only be recouped if they win the business. In conditions like this, who wants to bet that the competing agencies will deploy active strategies? There is a lot of value in associating yourself with a reliable and collaborative professional services provider on an exclusive basis. Someone who has the ability to flex between passive and active strategies dependent on the complexity of the hire. More importantly, the margins should reflect the anticipated complexity of hires over the life of the specific IT programme.
At Mindful Contract Solutions, we provide managed professional services for clients on an exclusive basis for a business unit or an IT programme. Where we have to tap into contingent labour talent to fulfil your requirements – we will deploy sourcing strategies to the extent necessary to provide you with suitable choices. Our margins are a blend of the level of active and passive recruitment we are likely to undertake based on our understanding of your needs and the availability of relevant skills in the job market. Overall, you receive a more personalised and continuously improving service at an incredibly low margin. If you are sold, contact us now!