Agency Fees Explained
Even when both client and recruitment consultant have positive and good intentions, hardworking and have a good relationships, valuable working partnerships can dissolve into confusion and disagreement over the subject of cost. We work with our clients to provide a full breakdown of our costs and transparent in the process so you have full details prior to any temporary worker or permanent candidate being placed.
Temporary Workers Fees
When hiring a temporary worker, typically, the amount you pay comprises of the worker's basic salary plus a percentage on top of this that is paid to the agency itself, this is known as the margin. the percentage on top covers candidate holiday pay, NI and pension contributions, SMP, SSP and payroll processing costs.
Temporary Worker Salary
Remember that the agency is responsible for paying the worker at least the legal minimum wage and, for the most skilled areas, much more than that to attract workers of the appropriate calibre. Your agency should be able to advise you of typical salary rates for workers at the level you are seeking. Remember that the worker's salary needs to be charged at a rate that will include holiday pay, and make provision for other mandatory worker benefits, such as statutory sick pay. pension contributions and so on. Although you do not have to pay the worker while taking holiday time, the agency does, for this reason you may find that the agency calculates on the basis of a salary somewhat higher than the base salary excluding holidays.
Typically a percentage will be applied on top of the worker's salary to both cover the agents costs to allow them to make a profit. Margins vary widely depending upon the sector, part of the country and the type of contract you have with your agency.
Sometimes it is possible to negotiate a lower margin, if you have a good relationship with the agency and you can guarantee a steady supply of business, however we would warn you that this is not always a good business strategy. Recruitment is not a business that allows for volume discounts - the cost of filling one position is roughly the same as the cost of filling 100 positions. If you are being offered a discount you will often find that the agency is having to reduce their level of service to remain commercially effective. This means that the costs actually increase, as you are forced to take on more responsibility and potentially wind up with less appropriate candidates.
Temp to Perm Fees
When an agency places a temporary worker with you initially on a temporary basis, you may elect to the hire that Candidate in a permanent capacity. In this case, since it was the agency that made the introduction of the worker, the agency is entitled to charge you a temp to perm fee to compensate them for the loss of the worker's value. The amount of fee will vary, and you should clarify with your agency up front what their standard perm fee is.
If you would prefer to pay a flat rate, by law, the agency must offer you the alternative of an extended Period of Hire - this means that the worker will continue to be employed on a temporary contract paid by the agency for a further fixed period of time, at which point they will transfer to your permanent employ. The legislation states only that this period of time must be reasonable - typically this will be a time during which fees make up similar amount to the lost temp to perm fee.
Permanent Placement Fees Retainer
If you are specifically seeking to hire one or more permanent candidates, especially for senior level positions, it is quite common to contract an agency on a retainer basis. Under this system, you pay a fixed fee for the placement and the agency and manage a recruitment strategy for you.
Normally, this fee is payable in thirds: 1/3 up front when the work is commissioned 1/3 on production of a viable shortlist. 1/3 on successful offer, acceptance and ( if applicable) resignation of the candidate from the previous post.
In some cases an agency may offer a rebate of the permanent placement fee if the candidate leaves soon after being hired. You should check the agency's Terms very carefully for this, since it is common condition of the rebate that you pay your invoice within a fixed period of time.
Any further costs associated with the recruitment process are also payable by you and should be factored into your budgeting and considered when conducting your strategy planning. For instance, if you instruct the agency to conduct an advertising campaign in a national newspaper be prepared for the cost of running such adverts.
Some costs of permanent placements include meeting venues and research costs. Make sure you clarify up front with your consultant what the estimated costs are likely to be.