May 07 2019
A low unemployment rate means different things for various businesses. The common denominator is that there is increased competition in finding suitable candidates. This could be one of the reasons why there has been an increase of recruiting agencies in the last five years, by 56%.
It seems that more businesses are turning to recruitment or employment agencies to help them source and recruit the most qualified candidates. As the process of finding the best talent is becoming increasingly difficult, companies need to look for both active and passive candidates.
To reach passive job candidates, posting notices on free or paid job boards no longer provide the best people to interview. Using a recruiting agency can help to source and hire the right candidates. However, there are benefits and disadvantages to using recruiting agencies.
Should you use a recruiting agency or not?
Before going into the positives and negatives of using a recruiting agency, keep in mind the following questions when making the best decision for your business.
- Can you recruit all the candidates you need by using an in-house team of hiring managers and other staff members?
- Do you need to make any improvements in personnel and educate your current hiring team with the requisite knowledge?
- What are your recruitment needs? Do you need a quick burst of hiring or do you have a long-term strategy to recruit employees into your company?
What are the benefits of using a recruitment agency?
There are several benefits to using a recruitment agency. These recruitment agency benefits include:
- Immediate access to a larger candidate pool.
- Save time. Rather than you and your internal team doing the recruiting, your recruitment agency are the ones that do the work for you.
- Industry knowledge and expertise. A recruiting agency will have more experience finding high quality hires in your industry. You can tap into this expertise and it can help shorten the hiring cycle [Read More: Hiring Process Step].
- In depth knowledge of recruiting. Recruiting agencies will have built-in processes, set procedures, and the know-how to find and recruit the best candidates. This recruiting knowledge will set them apart because they’ll have a structured process that improves time-to-hire and facilitates hiring top employees.
- Less risk. Depending on how you pay your recruiting agency, working on contingency, can help lessen your risk. With a pay for each hire model, you can get the work without the cost. Placing more responsibility on the recruiting agency to help you find better employees.
Do you have to pay recruitment agencies?
Depending on their business model, how you pay recruitment agencies for their costs and fees can differ significantly. Below are the three main types of recruitment agency cost models, and their standard guarantees.
- Retained – With retained recruiting firms, you’ll usually give them exclusivity to fill the role. Retained firms are usually used for hard-to-fill jobs, and senior roles. The costs are typically 10% of the hires annual salary at the start of recruiting and again when the role has been filled. Retained recruiting firms tend to have a 6 month guarantee on the hires they make for your company.
- Contingency – Contingency recruiting firms are paid 10-20% of the annual salary after the hire has been made with a 60 day guarantee on the hire.
- Temp Staffing – Temp staffing agencies specialize in finding temporary employees for your business. You’ll usually pay them 20-50% of the hourly salary, with a 90-120 buyout on the temp or employee if you want to take them on fulltime.
Why you should use a recruiting agency
There are a number of reasons why you should use a recruiting agency. In fact, using recruiting agencies has become more of a norm for mid-sized to large enterprises. This is in large part due to the large scale hiring and frequency/infrequency of those hires. It can often be more cost-effective to hire a recruiting firm, rather than having an entire internal recruiting staff. However, for small businesses and startups, you may or may not choose to, depending on your level of funding and if you have team members that can help manage the process as well.
Below you’ll find several reasons why you should use a recruiting agency.
1. Faster hiring of candidates is a reason why you should use a recruiting agency.
The hiring process can be quite lengthy for most businesses. Using recruitment agencies could reduce the time to hire the right candidates. For example, if the typical time is eight weeks, a recruiting agency can cut it down to three.
You save time and effort with a recruiting agency because you will not have to source and attract prospects on your own. You can eliminate sifting through profiles and stacks of applications to determine which one is the best for your needs.
It is pertinent to point out that while recruiting agencies only provide you with a list of top candidates, the time needed to make a decision is greatly reduced.
Using recruiting agencies normally provide you with a pool of candidates who are qualified for your job. After all, they recruit for a living, so they will have names and contact details of professionals who are a good fit on hand. They can contact them straight away without a prior application. Going to a potential candidate directly without having them make an application will greatly reduce the time it takes to finalize a hire.
2. Using recruitment agencies provides the appearance of professionalism
If your company is a small business or a startup, you may not have a dedicated recruiter in-house or a hiring manager. Therefore, your company may lack the experience and resources to find the best candidates, which is a good reason why you should use a recruiting agency.
Recruiting or employment agencies provide an air of professionalism that appeals to the best candidates. They know the ropes and how to put your company in the best light. If you do not have someone with experience in the full hiring life cycle, it may be best to leave the recruiting to an agency.
3. Hire the best and the most qualified candidates using a recruitment agency
The quality of candidates can be increased by using a recruiting agency. This is because most recruiting agencies are specialists in one or two areas or industries.
As recruiting agencies hire people for a living, they may have already made contact with the most suitable people for your position. It is likely that they would have prior interaction with the candidate and know whether or not he or she would be a good fit for your company.
Recruiting agents use their expertise and experience to make a professional assessment of candidates’ skills. They have developed best practices over time and can distinguish between appropriate and inappropriate candidates.
Companies can also benefit from a recruiting agency’s experience in asking questions on an interview about background and qualifications. They can uncover positives and negatives.
4. New hire retention is another reason why you should use a recruiting agency
Most recruitment companies or top agencies provide a guarantee period for new hires. They assume that the new hire will remain with your company for a specified period of time — normally three to six months. If your new hire is terminated or leaves the job during the guarantee period, the recruiting agency will provide a full refund or may offer a new placement with a different candidate, without charging a fee.
This type of guarantee is a good buffer to help companies keep their new hires and could reduce your turnover rate over the long term. It is your responsibility during the guarantee period to provide the best onboarding process and encourage your new hire to stay with your company by helping them fit into the workplace culture.
5. Using recruiting agency has specialist’s knowledge
A recruitment or employment agency offers expertise and knowledge of particular fields and professions such as, engineering or human resources. Unless you have an in-house team well versed in your industry, they will not have the same level of expertise as a hiring agency.
A deep understanding of a targeted job gives the recruiting agency an edge because they know exactly what they are looking for. They have seen hundreds or even thousands of candidates and are able to make a more solid judgement. They will give you their insight and advice as to the type of candidates you should choose.
The following are some disadvantages of using recruiting agencies:
1. You will pay more in fees using recruiting agencies
Typically, a recruiting agency will charge a company around 15 to 20% of a new candidate’s first year salary. This can add up to quite a significant amount. Some agency fees even go up to as much as 30% of the employee’s annual salary. The recruitment cost would increase even further if the position you are looking for is hard to fill.
No matter what agency is used, you will need to pay a fee every single time you need a candidate. Instead of using a recruiter, you can save the fees by investing in an in-house expert or team who will learn the best methods of recruiting for your industry. This way, rather than providing an outside agency with funds, you can invest it within your business, allocating the same budget to hiring and training new staff, which will build your talent pool.
One of the investments you should consider is modern hiring software to enable your hiring managers to recruit in a more streamlined way. Fountain provides an easy-to-use and simple hiring solution that helps staff manage the recruitment process on an end-to-end basis. This enables you to source and recruit your candidates at a fraction of the agency cost.
2. Lack of value when using recruitment agencies
Although a recruiting agency can take up to 30% or more in commission based on your new hire’s salary, in essence, it normally only takes the agency a few days or weeks to find the best candidates. For example, if you pay a recruiting agency 15% of a total salary of $30,000, their commission totals $4,500. If they have filled this role in two days, it means that you are paying them around $2,000 a day.
Although you have secured a candidate, you need to decide whether this is a good way to spend your company’s money and if this approach offers the optimum value. This is especially the case if you have to fill a high number of vacancies. If so, consider using Fountain’s Boost.
The Boost feature helps you recruit many qualified candidates within your stated budget. You simply let us know how many candidates you need. We suggest a budget and then we post the position to free job boards and paid platforms to find you the best people. All you have to do is to go through the application in one easy-to-use portal to decide which candidates you want to progress through the hiring stages.
Sign up for a free trial of Fountain to find out how you can hire as many quality candidates you need, fast.
3. Recruiting agencies sometimes have a bad reputation
Most recruitment or employment agencies have a bad reputation for not having much interest in the companies they are working for, only wanting to make the sale. This means that they will try to persuade their clients to choose someone, even the wrong person. This type of attitude can prove costly for your business if you have to waste resources interviewing unsuitable candidates.
4. Lack of cultural fit is a reason why you should not use recruiting agencies
Recruiting agencies are not in a position to ensure a person is a good cultural fit for a company. The candidate may appear to be the best fit on paper but the agency has no way of assessing the actual cultural fit. Therefore, you have to take extra steps to ascertain the fit for your team and your corporate culture.
Some recruiting agencies will make it their mission to understand your company’s goals, values and vision. However, this is normally typical of only the best agencies because it takes staff time and effort otherwise spent on sourcing new candidates. No matter how much of an understanding an agency has, they will never have the knowledge and the experience of your hiring manager or whoever is doing the recruiting in-house.
5. Most recruitment companies use LinkedIn
LinkedIn is one of the most used tools for recruiting agencies. While hiring agencies spend time going through different profiles and contacting those they feel are the right candidate, this is something you or someone in your company can do.
You can reach out to your network or even take out a sponsored ad to publicize your job. A simple message like “We’re hiring” in your LinkedIn bio can help attract the right candidates.
6. Failure to boost your brand is a reason to not use recruiting agencies
When recruiting in-house, you can take the opportunity to boost your brand and grow your reputation.If you use social media, provide employee stories and other useful information to give candidates reasons to choose your company. But, if you use a hiring agency, they have control over how your company comes across.
A recruiting agent, in effect, sells your brand to a candidate, so you need to have full confidence that they will present your company in the best light possible. If not, in such a competitive market, potential candidates will be put off and move on.
7. Stealing employees
Unfortunately, there are recruiting agencies that work in underhanded ways. They try to steal the best employees they have placed within a company. This could mean that even if they provide a three-month guarantee, six or nine months later, they contact the very same person placed to find out whether they would be interested in working with another company for more pay. Therefore, when using a recruitment or employment company, you need to ensure they do not use these underhanded tactics to place an employee and then try to entice him or her away later on.
Conclusion: Why you should use recruiting agencies
When deciding whether to use a recruiting agency, you need to know the long-term hiring requirements for your business. For example, if you need to fill senior management roles or highly specialized jobs, you can use an agency. However, for more junior positions, contingent or hourly workers can be filled using modern hiring software to cut out the middleman.
Even if you want to use an agency to hire employees at scale, find out before you engage their services if they are using the best software known to find the best people faster.
A recruiting agency who has made the decision to source and hire the best candidates is the The Turas Group. They use Fountain’s modern hiring software to help manage more than 2,000 candidates per recruiter.
Whether you choose an agency or prefer to do your recruiting in-house, you can ensure the process is being supported by the best tools available.
Fountain provides seamless candidate sourcing management and onboarding with integrations to the most important recruiting functions like background checking, for both agencies and in-house teams.
