What should you be spending on recruitment?

By Paul Breton, marketing executive at Blue Octopus Recruitment

Every organisation has to spend money to make money, and this also applies in the field of recruitment. When you do recruit new team members, you’re betting that they’ll contribute to the business and improve your profits – so any amount that you spend bringing them on board will turn out to be worth it.

This may turn out to be the case, and when you manage your organisation’s funds well, you will find more often than not that you make back the cost of recruitment quite quickly.

But this doesn’t justify being charged over the odds for your online recruitment needs when that doesn’t have to be the cost.

The standard rate for a recruitment agency is usually upwards of 15% of their yearly salary, topping out at about 30% for one-off or highly-paid hires. Headhunting firms can charge even more – between a third and a half of the starting salary.

This means if a company hires 10 people per year at an average salary of £25,000, they could expect to pay around £50,000 to agencies who act essentially as middlemen.

Again, this is commonly accepted as just another of the costs of doing business. If the new hires generate profit for the business, why not pay out these high costs?

But just because this is how recruitment agencies operate as standard, that doesn’t mean it’s the best way, or that better alternatives don’t exist.

For example, we can question if it is really necessary to charge fees at a percentage of an employee’s salary.

To do this implies that agencies put more effort into recruiting quality staff at a higher level. But maintaining a higher calibre of candidates is vital at all levels – including lower-paid staff who make up the core of the business.

Added to this is the fact that a few organisations may be reluctant to pay their staff more as a higher salary would be reflected in the recruitment fees for each position. Lowering salaries to ensure cheaper recruitment might save cash in the short term but doesn’t work out well for anyone involved.

A flat-fee model for online recruitment makes more sense as a low cost for advertising is maintained while still ensuring an excellent standard of candidates. Using all the same techniques as an agency, but without tying rates to salaries, costs become clearer and more affordable.

With an online recruitment company charging a flat fee, you could expect to pay only a few hundred pounds per vacancy, depending on volume. Even for fewer hires you would still pay significantly below agency rates – again, a figure in the hundreds rather than thousands, whether the position is that of a director or a cleaner.

Whether you recruit in high volumes or not, savings in this area can result in huge sums of money saved, and when you don’t have to compromise on quality, there really are no arguments for spending more.

Paul Breton is a marketing executive with Blue Octopus Recruitment in Otley, Leeds, UK

One thought on “What should you be spending on recruitment?

  1. Paul, I tend to agree with your comments. Having worked at a Senior level within recruitment for 12 years, I became disillusioned with Board level reluctance to negotiate rates and fees with key clients. Unfortunately some Consultants concentrated on interviewing higher paid candidates in order to boost their targets and ultimately their commission. Having set up my own Agency, I have reviewed my scale of fees and streamlined them, offering more affordable rates. I have found clients more responsive and therefore willing to partner up for volume or long term business rather than the one off hit.
    Smaller fees do not equal decreased quality, but rather I feel it offers a more bespoke and tailored service, really understanding the Client and their business needs.

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