Why are recruitment fees so expensive?
I think we can all agree that it is no secret that the recruitment industry has a poor reputation for service and perceived value for money.
High fees, poor communication and badly screened CVs are some of the common complaints.
Fee levels, in particular, come in for criticism however the way we structure fee arrangements has not changed much, if at all in the 20 years that I have been recruiting.
The answer to the opening question is straightforward and is a combination of how employers choose to buy, and how recruitment companies choose to sell their recruitment services.
These issues are predominately the result of the contingency recruitment model, where multiple agencies are engaged, but only one can be successful.
If the risk is not shared, then it is difficult for both parties to achieve a fair deal.
It is widely agreed that agencies working with a multi-agency contingency model, probably have a c25% fill rate which means they have to register 4 vacancies in order to create one placement.
Let’s consider the following scenario!
You need your company accounts completed by an accountant. You speak with your accountant, agree on a price of £1000 and an invoice will be created for this amount.
They complete the accounts, and you pay them £1000. Seems a fair deal.
Now consider how the deal would look if we said to our accountant that we want them to prepare our accounts, but we are going to ask 3 others to do the same and then pay the one that comes up with the best result.
Well quite frankly, I doubt you would get any to do it and if you did, then the fee is going to be a great deal more than the £1000 first quoted.
And that my friends, is why recruitment fees are so expensive!
When you operate on a success-only contingency basis, every time you pay a recruitment fee, you are not only paying for the work the recruiter has done for you but also for the work they have undertaken elsewhere but not created any revenue.
There are much better ways of working and it is up to us all to investigate them.
Recruiters need to push exclusivity/retained and recruiting companies need to listen to the benefits.
Otherwise, you’re going to be on LinkedIn in 10 years’ time still debating how bad the recruitment sector is when actually you are a big part of the problem!