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Why is Recruitment Expensive?

If you are growing a business, or even juts managing a business at its current levels there’s an inevitability that you will have to hire new people to your team.

So, why is recruitment so expensive?

Well relatively speaking what is a great new employee worth? Worth their weight in gold is what you strive for.

So why begrudge paying someone who finds you that person?

It all comes down to Perceived Value.

You see, most employers and hiring managers have little appreciation of what a recruiter actually does. Their perception is that they have just typed a few key phrases into a database (their own or a database owned by a job-board), loosely match some CVs to the job description you provided and forwarded them on to you and for that they want to charge you 15% or 20% of the salary.

Sounds like money for old rope?

Well, it’s not quite like that but I fully understand why employers may think that. It’s a bit like the proverbial Iceberg – you only see the part above the water.

Let’s break it down to understand what you might be paying for.

Firstly, let’s look at the two types of recruitment service:

1. Contingent Supply; or

2. Retained Recruitment

1. Contingent Supply is often the most common service that employers have become familiar with through the plethora of recruitment agencies offering this type of service – essentially, it’s a “no-win no-fee” basis where the employer briefs the recruiter(s) and asks them to supply a range of CVs of candidates that meet the pre-determined criteria, usually this means Knowledge, Skills and Experience.

Recruitment Agencies have spent years building their databases so that they can provide employers with a super-fast response of candidates that match based on the criteria entered. The recruiter is effectively in a race to supply this candidate CV to the employer before another recruiter does.

There’s an inevitability that on occasion there will be short cuts taken in that the CV submitted may not have been thoroughly evaluated or assessed for its veracity. Due to the pressure often exerted by employers to ‘find someone fast’ they have become complicit in this type of pf practice because the recruitment agency that does invest time in assessing and evaluating their candidate database is often penalised for being too slow in providing the CV as another, less considerate, recruitment agency will just send the CV without checks.

Fees for Contingent supply range from 12.5% to 20% depending on the recruitment agency, it’s geographic location and the availability of specific skills in the market sector being covered by the recruitment agency.

For many employers this type of service is sufficient, particularly for filling high volume, multiple vacancy roles. The recruitment agencies role in this type of service is primarily to provide a shortlist of candidate CVs and the employer is responsible for assessing and evaluating the candidate to ensure that they will be the right fit for their vacancy.

2. Retained Recruitment is a more thorough recruitment process, when executed professionally. It is not merely the supply of a candidate CV but care and attention has been taken to carefully assess each candidate’s abilities to perform the role after thorough consultation with the employer.

Consultative recruiters will spend the time with the employer to identify the reason for hiring and the key success criteria for the role. You should expect a service that is focused on your needs and your expectation should be to hire EXACTLY the right person based on those wants and needs for your business.

A retained search is not just a database search of available candidates but a full search of the market, often referred to as Market Mapping and should leave no stone unturned.

You should expect a full assessment service whereby candidates are personally screened and assessed against key criteria, video introductions, psychometric or behavioural assessment and cultural alignment are also some of the services that you should receive.

A retained search is not necessarily a slower service than Contingent Supply because the failure rate of a retained search is often less than 10% of that of a Contingent Supply – so the likelihood of a re-hire is significantly reduced.

A Retained Search is for those employers that value and appreciate a high touch service where they have obligation from their recruiter and trust in them to deliver an exceptional shortlist. Fees for this service will often be between 25% and 35% of the first-year annual salary package but often come with extended replacement policies of a free replacement for up to 12 months or more.

So, the original question was “Why is Recruitment so Expensive?” and I hope that this article has helped explain the difference between Cost and Value. A 30% recruitment service can sound expensive but if you weigh up the pro’s and con’s it may not be as expensive as you think if you believe that this type of service will better serve your needs.

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