Have you ever thought about what brings value and saves time to your business? In this comprehensive article we will compare the time and cost of hiring inhouse resp. externally through an agency. Although the data used are older (when the demand for people was huge and wage costs were not as high as they are now), they are applicable in the long term, regardless of the current situation on the labour market.
There is no such thing as an agency. Most recruitment agencies work with a fee for placing a candidate in a company. You only pay after you sign the contract with the selected bidder. But have you ever thought about how much money your company spends on pre-screening and interviewing unsuitable candidates that agencies send you? Employers often believe that by using a recruitment agency they will get more candidates, saving money and time. However, have you ever analyzed the actual costs associated with hiring staff from an agency?
Do you have time?
Recruitment
grey requires time. The administration involved in recruitment can cost a huge amount of time and money. It doesn’t matter if you have a small or large company. It’s all about the time you spend in meetings, writing job descriptions, posting jobs, managing candidate applications, conducting pre-screenings, sending feedback to candidates, answering questions, following candidates through the process, inviting candidates for interviews, making offers, preparing contracts, rejecting/hiring candidates, etc. You spend hours on it. Have you ever tracked your time spent this way? And how much money did that cost you?
Costs to fill candidates
Internal recruiter or recruitment agency? What do you choose when hiring a new addition to your team? Let’s see what these options look like translated into costs.
Example:
Company XY (from manufacturing/engineering field) is looking for a “CAD Designer” with a salary of for example 1500€/month. They have 12 similar recruitments a year.
Example of interviewer costs:
– Recruiter – $11 per hour
– Senior Designer – $13 per hour
– Head of Design – $17 per hour
Note: Salary information and all these figures are from the “Salary Survey 2015 – Czech Republic” of a large recruitment agency. The exchange rate was 1 USD per 25 CZK.
Hiring with an internal recruiter
Keep in mind that even if you are going to use the services of an agency, your recruiting team will still be doing the same job, hiring all open positions, working on the company’s “brand,” taking care of referrals, etc. You must still pre-screen candidates you obtain from sources other than agencies. Let’s not deal with extra costs in this case, as they may vary depending on the company’s hiring process, etc.
Your time and costs (example):
– writing a job description,
– advertising (LinkedIn, job portals …),
– CV database,
– branding (leaflets, advertisements, etc.)
– a premium LinkedIn account.
Process (example):
– pre-selection of candidates,
– pre-screening of candidates,
– sending the profiles to the hiring manager/team,
– first round of interviews ,
– second round of interviews,
– offers, rejections,
– communication with the team and candidates.
Cooperation with a recruitment agency
When you use an agency, you get more candidates and at the same time reduce the time it takes to fill an open position. However, you’ll still need to create a job description, post the position on LinkedIn, and do the same as if you were doing the recruiting.
However, when you approach an agency, there are other costs to consider, such as your time and your team’s time to spend with the agency and its candidates for interviews, plus the agency’s success fee in the form of a hired employee.
Cost of using the services of an unsuitable agency
If you are using an agency that sends you a lot of CVs every week, it may look good in the year-end statistics, but what is the reality of the actual cost in this case?
Example:
Your company opens one position every month with the same profile, so you recruit 12 people a year, using the services of two agencies:
Agency A
– An agency where recruiters have a quota of at least five profiles per day to present to their clients. As one of the clients, you will get about 15 profiles per month. That’s 180 a year!
Agency B
– An agency where recruiters focus on quality, not quantity. So you get two to three profiles a month. That’s 36 profiles a year.
Costs common to both agencies:
Agency A and B – your time for pre-selection + Time for pre-screening + Time for interviews + Time for acceptance/rejection + Time for communication with agencies and candidates after the interview.
Agency fee – the placement fee depends on the starting salary;In the Slovak Republic, the fee ranges from 1.5 to 3 times the applicant’s monthly salary.
Cooperation with Agency A
This example shows what working with Agency A over the course of a year might look like. If you have 180 profiles, the recruiter will check them and share the feedback with the agency.
– The recruiter will carry out a preliminary check of 120 profiles.
– 80 of them will go to the HR manager with feedback.
– 45 of them will be interviewed on the spot by a recruiter.
– In the first round, 45 interviews will take place.
– In the second round, 15 interviews will take place.
– As a result, six bids will be submitted.
You can see the total financial and time costs of using the services of Agency A in the table below:
It is very important to remember that a bad recruitment choice will always be more expensive for your company than hiring the right candidate. Therefore, consider well to whom you entrust this task
Cooperation with Agency B
Quality recruitment agencies
will present you with their best candidates who match your specific needs. This process saves you time and money. Let’s use an example to show what working with Agency B over the course of a year might look like. If you have 36 profiles, the recruiter will check all of them and share the feedback with the agency.
– The recruiter will carry out a pre-screening of 30 of them.
– 28 of them will go to the HR manager for feedback.
– 25 of them will be invited by the HR officer for a personal interview.
– In the second round, 12 interviews will take place.
– Six bids will be submitted.
Let’s look at the time and money involved in this case:
Evaluation
The financial difference between Agency A and Agency B is $2,360. For a large company this may be a negligible amount, but if you use the services of six agencies and four of them work as Agency A, it’s $9,440 plus agency fees.
You also need to think about the time that the right agency will save you and your team. In this example we are talking about 150 hours. That’s the difference between working with Agency A and Agency B! And with four “A” agencies, your team will lose around 600 hours a year.
I know that some readers of this article will question the above examples. Try analysing your recruitment costs and you may be surprised at the amount you spend on “free” agency collaboration.
You can take inspiration from the analysis carried out by Jean-Yves Le Louarn in 2008.
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Recruitment costs
The method includes the cost of advertising (in magazines, newspapers and on the Internet); the cost of the agency (the fee paid to the agency); the cost of the persons who recommend candidates, etc.
The recruitment cost indicators are shown in the table below.
Cost of pre-selection
Cost analysis of resumes, time cost of accepting/rejecting resumes, cost of sending rejection letters/emails.
The cost indicators for pre-selection are shown in the table below.
Cost of collection
Selecting the best candidates from the pre-selection using the following techniques: interviews, assessment centres, medical examinations, reference checks (table below).
Internal recruitment vs. Recruitment agency
Internal recruiters add value to the employer in terms of salary advice, market research, candidate feedback, etc., while also helping to build the company’s reputation.
Recruitment agencies always have more resources Large headhunters have extensive networks in niche markets and also have information on new companies entering these markets. If you choose your headhunters correctly , you will get inside information about what is happening. A really good headhunter becomes a huge asset to your company.
You need to choose your recruitment partners wisely and invest the time to speak with them before selecting and allowing them to join your company.
Agencies should be your partner in filling positions. Their goal is to save you time and find a candidate “just right” for you. They must be a trusted partner who shares internal information and market feedback with you. So when you’re evaluating working with agencies, don’t just look at the number of profiles they send you over the course of a year, but think about how much money and time it’s realistically costing you.
Many company managers do a statistic that shows them quantitatively that Agency A sent 100 candidates and Agency B sent only 10 candidates in a year.If they focus only on the number of candidates, they may stop working with Agency B. However, the time behind these figures must also be taken into account.
Therefore, when you do year-end statistics on the effectiveness of your agencies, don’t just compare them based on the number of profiles they’ve sent you. Also try to think about how much time and money they are costing you and your team. Finding the right candidates in any market requires skill, experience, time and a good recruiter. If you work in recruitment, you know that finding a good candidate is always difficult , whether it is a favourable or unfavourable economic situation.
The time you spend choosing the right recruitment agency becomes a worthwhile investment because you save time and money when working with each other. Keep in mind that even though most staffing agencies still work for free (they only get a “success fee”), they will still cost your company money and time, so choose your agency wisely to help you build a successful company.
The benefits of working with a recruitment agency are especially evident in the long term, when the costs of the selection process are reduced and the demands on your valuable time are shortened.
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Source:
Linkedin.com
Processed by:
TRIGON Consulting
