For closing in on 2 decades in the Recruitment sector, cost has always been the number 1 reason to not use Recruitment Agencies for businesses. We will certainly explore why Recruitment agencies are not valued as much as other consultancy services. 

In this blog, I will focus on the Recruitment process from conception of the role to when the employee starts. (excluding onboarding, equipment etc – you must pay for that anyway, right?)

Here are 4 key areas of the sourcing process.

  1. You decide you need to hire, let’s say a Java Engineer (ill focus on IT jobs market for now) is what you want to hire. Basically, how easy is this skillset to find? A quick search on LinkedIn will tell you, there is a lot of open jobs in my area, so competition will be high. Let’s get an advert you might say. So that will run you a couple of hundred, (Maybe into the Thousands) if its less than that chances of success will be difficult, but not impossible.
  2. Next you need a job specification. Have the Hiring manager write one up, add the requirements and responsibilities. Perhaps a little research on how to frame the wording etc. Can take an hour. Some people will simply copy and paste from old specs (let’s remember, that time costs money and it will add up) never hurt anyone.
  3. Now we have the content, lets add it to the chosen job advert platform, Linkedin.com, Monster.com, Computerjobs.com whatever you decide. You might be surprised with the amount of people that apply that simply don’t have the skillset. In some cases, you might get 20 applications in the first week and zero are relevant.
  4. Someone needs to review those CV to make the above assessment (Once again time, let’s say another hour, possibly 2 hours).

What now? Well hop onto LinkedIn and see if I can find some old associates and network a little. “I remember Jerry, he was an excellent Java Engineer” – I am connected with him, lets find out what he is up to”. Now your Java Engineer Manager/Software Development Manager is Recruiting, there is of course an argument that should be part of his job anyway. Well, if he is Recruiting, who is managing the Software?

Before the Manager knows it, he has haemorrhaging time, might be 10-15 hours of messaging, searching and chatting with old colleagues, looking for new people to network etc. Most of the time you will fine, no one is available, (well maybe they got lucky). So, after a week where are we? We might have a few candidates (maybe 1-2 hours of Managers time a day and that’s pretty conservative). Let’s presume we have 3 Java people they can interview in a 10–14-day period. As Interviewing is something that must be done with or without the help of a Recruiter let’s not bring these costs into this article.

As you have identified maybe 3-5 people, let’s say you hire one of them. Is there compromised on quality of the skillset? How much training is needed? Some added Engineers time maybe to have them ramped up. We are into the unknown here, so let’s ignore those important steps for the sake of assessing the cost of a hire, the above might be more a cost in keeping the person.

To summarise, here are 4 costs associated with hiring someone.  

  1. Time: Let’s say your Software Engineering Manager earns €110,000 per year (the average according to PayScale and Glassdoor in 2022) – when breaking down the salary to hourly (around €52 per hour * 20 hours = €1,057), each participant needs a call/interview on multiple occasions. Even putting in the above time, you still might not even have one candidate.
  2. Advertising: Job boards don’t come cheap; a one-off job can cost in excess of €500.
  3. Opportunity Cost: Harder to measure, but I presume those in a Software Department will notice a few things during the period.
  4. Risk: If you don’t get your hire in, in a timely manner. What happens? Does your client suffer, will your project suffer, is someone leaving? Can there be a handover or knowledge transfer.

Recruiters will do the above all day every day, well the best Recruiters will, there time adds up too. When you consider the cost of using a Recruitment Consultancy, most of a Recruitment businesses expense is their people. Like any profession, the more experienced and better the Recruiter the higher their salary. An excellent Recruiter could easily earn well over 6 figures.

The cost to hire could be as high as €14,000 when you consider the time it takes to bring in the talent. For more information on the cost of an employee please see this link.

What do a Recruitment Agencies cost?

Recruitment fee’s range hugely. I have had the privilege to have worked on both sides of the business. BaBoth as an In-house Recruiter and as an Agency Recruiter. Mainly filling IT jobs, but have also worked in Construction, Engineering and Sales & Marketing. A Recruitment Agencies fees do range from 15% – 20% of an annual salary. In some cases 30% could be the fee, especially with executive search firms.

If you take the average salary in Ireland within the Tech sector, its around €80,000 according to the CSO in 2020. In the last 2 years we have seen wage inflation in some cases over 15%. Let’s just be cautious and say the average salary in Ireland today within the IT sector is €85,000. That would mean the average agency fee would be €12,750.

Recruitment Fee’s are even higher in the US with an average of 22% across the states. The average fee is north of $20,000. Just as a comparison. The UK is like Ireland, only the difference would be the foreign exchange.

Wages increasing for IT jobs

5 Reasons why so many companies feel its too expensive to use a Recruitment Agency?

  1. The cost, businesses feel they can do a better job themselves.
  2. Cultural mis-fit,
  3. Lack of employer branding awareness
  4. Technical mis-fit often.
  5. Candidates don’t stay.

A lot of SME’s do not have enough of a hiring need to hire a Recruiter, if a business is going to hire over 10 people, hiring a Recruiter makes sense. Do keep an eye on future blogs where I will discuss this in more detail.

Elwood Roberts is starting to develop a lower cost Recruitment model, where a company can log their interest in a certain skillset or profession and join a mailing list. The mailing list is sent out with a Recruitment Fee assigned to each profession. Typically the fee will be 5-8% which is a dramatic reduction in recruitment fee’s. You can sign up for that mail list here, just be sure to log your requested skillsets.