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What do recruitment agencies charge?

Two of the most common questions we get asked by prospective clients are, how much do you charge and how is it calculated. So, we thought we would get this out in the open and put together a helpful guide to explain the most common types of recruitment processes, fees and how the introduction fees are calculated.

Before we go into the nitty gritty of it all, it will be helpful to make two useful distinctions. Broadly speaking, recruitment across Scotland and the rest of the UK falls into two categories:

1. Contingency recruitment 

Within contingency recruitment, companies engaging the services of recruitment agencies are (depending on if they’re recruitment permanent staff of temporary staff) being supplied by two separate units.

For example, a recruitment agency supplying permanent staff, with the introduction fee to be paid for by the client, is acting as an employment agency. Whereas a recruitment agency supplying temporary staff is acting as an employment agency.

2. Assured Delivery Package 

the client pays the introduction fee in four equal parts; the first part being paid upfront to commence the assignment, contributing towards advertising spends and tailored candidate attraction strategies.

Temporary Recruitment:

This is where an employment agency engages a worker under a contract who then works under the supervision of another individual (the client). This can vary in length from just a few days, to an indefinite period or it could be with the view of the temporary worker becoming a permanent employee after a certain time period. This recruitment option is used widely across all sectors and disciplines, as it allows the employer and employee a large amount flexibility.

When would you as an employer use a temporary worker?

Organisations may employ temporary staff on a seasonal basis during busy period to deal with an increased workload, after a major contract/project win, an unforeseen event, during holiday periods when they find themselves short-staffed or to cover employee sickness.

More so than ever before, organisations are opting to recruit on a temporary-to-permanent basis, which means the person in question is likely to be employed on a permanent contract at the end of the temporary assignment.

Top 5 advantages of using a temporary worker:

Practically speaking, the use of temporary workers improves cash flow for the business and allows them to navigate internal headcount freezes.

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Immediate impact

Temporary workers are used to joining organisations for a short period of time and have the ability to add value instantly to your organisation.

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Fresh perspectives

Now and then, it just takes another set of eyes to completely change the way an organisation runs. The more temporary workers you hire, the more unique perspectives you’ll get.

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Cost effective

Temporary workers are by definition a ‘temporary solution’ and do not require a fixed annual salary or some of the costs that comes with a permanent member of staff – you only pay for the hours that the temporary worker works. 

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Shorter recruitment process

The process for appointing temporary workers is traditionally much quicker. This is because you’re hiring for technical abilities, rather than a long-term organisational fit. 

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Flexibility

Temporary workers allow you to respond quickly to the market’s demands.

Top 3 disadvantages of using a temporary worker

Cost

As in any other industry, the cost of hiring an experienced/technical resource is more expensive than outright ownership on a £ for £ basis.

Possible lack of commitment

An issue with only the small minority of temporary workers. They may not seem as committed to the business objectives as permanent employees.

Temp-to-perm fees

If you decide that you’ve found the perfect fit with a temporary worker and you want to keep them on as a permanent member of staff, some agencies will charge a fee to take them on a permanent basis – this amount will depend on the salary offered
Who employs the temporary worker?

The temporary worker is employed by the employment agency on contract for the services. If the temporary worker is recruited into a permanent role, their employment status and contract changes as they become a permanent employee and receive a permanent contract.

How do temporary charges work?

If you’re unsure on how your employment agency has arrived at the figure they’re charging you, here is a fairly simple formula you can use to work it out:

Temporary worker hourly rate + holiday pay + National Insurance contributions + mark-up/margin = Total charge rate + VAT.

Holiday Pay = 12.07% of basic pay (calculated on 20 days holiday + 8 bank holidays).

Employer National Insurance Pay = 13.8% (of basic pay + holiday pay).

 

Candidate hourly pay rate

£10.00

Employers National Insurance

£0.89

Holiday pay

£1.21

Employer pension cost

£0.23

Apprenticeship levy

£0.06

Total cost to employment agency

£12.39

When does the client pay the employment agency?
For the supply of temporary workers, you will typically receive invoices 1 week in arrears and have 7 – 14 days to pay.

Permanent Recruitment

How are permanent recruitment introductory fees calculated?

Permanent recruitment fees are normally based on an agreed percentage of the candidate’s annual basic salary. This percentage usually rises as the seniority of the role increases – as highly skilled roles tend to be more difficult to fill and involved a lengthier recruitment process.

In contingency recruitment, you should not be expected to pay anything to the recruitment agency until a successful appointment. Please see below for an illustration:

 

Basic salary

£30,000

Introduction fee %age

15%

Total on successful appointment

£4,500 + VAT

Please see below for an illustration via an Assured Delivery Package:

 

Basic salary

£40,000

Introduction fee %age

15%

1st instalment: inception of assignment & contribution to advert spends

£1,500

2nd instalment: interview stage

£1,500

3rd instalment: start date of successful candidate

£1,500

4th instalment: 1 month after start date of successful candidate

£1,500

Total amount payable

£6,000 + VAT

When do I Pay?
Typically, you will pay the total invoice within 14 days of the successful appointment’s start date. It is normally required to settle the invoice in a timely manner to receive the guarantee the recruitment agency offers.
What if the person I hire doesn’t work out?

The vast majority of recruitment agencies offer a rebate period – usually around 3 months.

At AJ Connect we do things a differently. The success and growth of your business is as important to us as ours is. That’s why if we place a candidate in your business and they leave within the first 12 months or they do not pass probation, we will provide a FREE replacement – guaranteed!

Candidate Poaching:

Another common question and industry fear when engaging with a recruitment agency is ‘what if they pinch my top performers?’ It’s no secret that this does happen within our industry. The agent highlights that dream candidate to you, and not before long they are pinching your top talent out the back door for another vacancy, with another client or even your direct competition!

At AJ Connect, we do not operate like this. That’s why if you partner with us, our promise to you is that we will never have you company in one of our search campaigns or actively approach ANY of your staff for our vacancies!

So, what happens if someone in your business approaches us, I hear you say? We would refer the individual to one of our competitor agencies. We are not interested in pinching your staff in any way, shape or form – we want you to be able to trust us!

It’s our ambition to become your preferred recruitment partner, the right hand to your search and selection process – a brand ambassador if you will. We are committed to attracting, matching and delivering the top passive talent who is dedicated to help improve your business’ performance.

Contract Recruitment:

When employed on a contract the employee is an employee of the company and not the employment agency who introduced them. A common example of this is when a candidate is employed to cover a period of maternity.

If you are employing someone on a contract of less than 12 months, the introduction fee would usually be calculated on a pro-rata basis of the annual salary. If the client then decides to extend the contract, additional introduction fees will be incurred up to and including month 12.

Please see below for an illustration:

 

Basic salary: full time equivalent £40,000
Pro-rata salary: 9-month fixed term contract (FTC) £30,000
Introduction fee %age 15%
Total amount payable (based on pro-rata salary) £4,500 + VAT

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