There are over 40,000 recruitment consultants working in the UK at this present time. I recently read an article where it said that the recruitment market in the UK is one of the most developed in the world, with other companies less likely to use agencies for permanent work than companies in the UK. Agencies cover just about every walk of life, be it a librarian, a lorry driver, shop assistant or even a solicitor. The reason they have sprung up in such numbers is because of the tax advantages of using one. The entire bill is tax deductible and it means that advertising, time spent dealing with applications by staff, administration costs can all be factored into one fee by handing over assignments to recruitment agencies.
Obviously there are good, bad and horrible recruitment agencies, and some truly dreadful ones. The whole industry has a trade body called the Recruitment Employers Confederation (REC) and there are a couple of smaller rival trade bodies as well.
The sort of fee that you could expect to be paying a recruitment agent can range from 10% up to 45%, depending on the assignment and level of candidate you are looking for.
If you are looking for a lorry driver or a shop assistant on a permanent basis, most agencies charge about ten percent if not less for the placement. If you are looking for a solicitor earning £45,000 a year with partnership prospects, then most agencies will be looking to charge in the region of 25 to 30 percent of the first year’s salary for finding that candidate. If you are looking for a sole supplier to headhunt or source you a chief executive, then it is possible that you would be looking at a bill in the region of about 40 percent of the first year’s salary, if not more.
So why are the fees so expensive?
Firstly, they do not have to be. Coming onto the market now are new providers, such as www.ten-percent.co.uk who charge a standard fee across the board, with Ten Percent, for example, charging 18 percent standard fees (and donating ten percent to charity, hence the name - you can read our full fee explanation on our website - we publish them in full here). A shameless plug but why not...
The larger companies working on the high street or in office blocks have to charge higher rates because of the overheads of running a conventional recruitment agency.
Time after time I have been in business, I get informed by the owner of a company that all I have done to place a candidate is send them a CV, and he or she has had to do all the other work. He or she is unable to see that the recruitment agency has had to find the candidates in the first place to send to the company, something the company may have struggled with.
Employers cannot see the hours of processing the candidate and sending through vacancies, for sometimes up to five or six years before they find the right post, and neither can they see all the abortive interviews that have gone before for that candidate.
A lot of work goes on behind the scenes at recruitment consultancies that companies and firms are unable to see or to quantify in terms of cost. The fees charged reflect these overheads, but also a good profit margin on top of this. A recruitment agent charging 25 percent fees is probably looking at about 60 percent profit margin on that fee. Obviously if an agency is charging less, but not dealing in bulk, then their profit margins are much lower.
On the temporary side, where the agency employs the worker, there is usually a margin charged by the hour. I have heard it said that the usual rate is between 12.5 and 25 percent margin on the hourly rate being paid to the employee.
Jonathan Fagan is Managing Director of Ten Percent (www.ten-percent.co.uk), legal recruitment consultants in the UK charging a range of fees, all very competitive of course! You can email Jonathan at firstname.lastname@example.org. Always happy to give comments to the press.