What are the costs of the recruitment process?

Although many companies still prefer to conduct recruitment independently for fear of high costs and loss of control over employees, using the services of recruitment agencies is becoming an increasingly common practice in today’s business world. This is a well-functioning solution both for companies looking for employees and for individuals seeking employment.

From this article, you will learn:

• What does a recruitment agency do?
• Who is the recruitment agency service intended for?
• What are the costs of recruitment?
• What are the components of recruitment agency costs?
• How much does a staffing agency take?
• Is a recruitment agency always effective?

For whom is a recruitment agency?

It might seem that recruiting a new employee is a simple matter. Those who have tried to tackle this task know that it is a demanding and often lengthy process. A recruitment agency is a solution not only for large corporations. It may be surprising that staffing agencies were primarily created with medium-sized companies in mind that do not have an internal HR department.

The services of a recruitment agency are also convenient for companies that need temporary workers – to cover for an absent employee or when a company has seasonal increases in orders. An advantage of this solution is also that the agency is responsible for the formalities related to employment – permits, contracts, taxes, or employment certificates.

Actions of a recruitment agency

The agency’s actions include the following steps:

1. Analysis of the client’s needs,
2. Creating the profile of the ideal candidate,
3. Candidate search,
4. Candidate selection,
5. Presentation of candidates,
6. Organizing interviews with the client,
7. Finalizing the recruitment process.

Recruitment costs – what constitutes its price?

Many employers still believe that using the services of staffing agencies is rather expensive. What is the reality? Taking into account all the costs of searching for an employee on your own, it may turn out to be quite a significant expense. Recruitment costs include: paid advertisements, time spent reviewing and verifying received CVs, contacting candidates, interviews, and of course, maintaining documentation generated during the recruitment process.

So what is the cost of a recruitment agency service? It is difficult to provide a specific amount because many factors influence the cost of this service, such as:

• The complexity level of the recruitment process for a given position: the more complex the recruitment process for a given position, the more work the agency will have to put in. The price of the service will be influenced by the number of recruitment stages, the industry, and the specialization required from candidates,
• Job market: supply and demand for specialists in a given industry. As competition grows, agencies may raise the prices of their services,
• Type of agreement and payment terms: agreement terms between the client and the recruitment agency, such as: payment method (e.g., fixed fee or commission from the candidate’s salary), employment guarantee period, can affect the final price of the service,
• Service content: undoubtedly, the price will be lower if the client only requests CVs from the database, evaluates candidates independently, and coordinates the recruitment process themselves; and will pay more for the service if they entrust the entire process to the recruitment agency, expecting thorough candidate evaluation or reports.

It happens that a client asks for the price list of recruitment agency services right away. However, it’s not that simple. Each client and their expectations are individual. There may be a situation where two clients at the same time, in the same city, will be looking for an employee for the same position, but their needs, requirements, and possibilities will be different. Only a detailed analysis of needs can provide an answer about the entire process and, consequently, the price. The cost of external recruitment also minimizes the risk of making a mistake in recruitment.

How much does a staffing agency take?

How much does a staffing agency earn for recruiting the right employee? Standard recruitment costs range from 10% to 20% of the candidate’s annual salary. Even up to 30% can be the remuneration for an employee in a high-level position. Is that a lot? Above all, what matters is what the agency offers for this commission, whether it provides high service standards, and whether the new employee will contribute to the company’s success.

Payment for Success

Among the three models of cooperation with a recruitment agency (success fee, semi-retainer, and retainer), the most professional seems to be the success fee model, which does not require an upfront payment. Success fee is associated with paying the agency 100% after the recruitment process is completed. The invoice is usually issued when the candidate accepts the offer of cooperation or on their first day of work. This model gives the client a guarantee of finding an employee while simultaneously not requiring financial investment at the beginning of the recruitment process. This is a safe solution for those clients who are not entirely convinced of the success of the process or the professionalism of the recruitment agency.

Success fee – how much percent?

Are the rates for success fee the same as in the other models? Of course, as we wrote above, everything depends on many factors, however, standard success fee rates can range from 10% to 30% of the candidate’s gross annual salary.

Is it worth cooperating with a recruitment agency?

There are several factors to consider when cooperating with an agency, thanks to which you can be sure that you are working with professionals:

• Agency’s previous experience in recruitment,
• Case studies and recommendations from previous clients,
• Availability and dynamic response,
• Determining how much time is needed to deliver the first CVs;
• Technical knowledge of recruiters,
• Fulfillment of obligations.