How much would you pay to fill a job vacancy?
And why recruitment fees feel like a rip off
Disclaimer. My entire professional experience has been in tech startups and as such this article reflects my observations within this sector. I also want to preface that I do not hate recruiters. Despite the tone that this article may present I have had many positive experiences with recruiters as both a candidate and employer and I believe they play an invaluable role within our industry today.
Recruiters, much like estate agents, often get a bad rap.
On the surface, the reason why feels pretty obvious - at a cost of 10-30% of a permanent employee's first year salary - recruitment fees can be damn expensive.
But is that all? Sure, the cost is high but there are dozens of services businesses engage with which can cost significantly more - SEO and Consulting services to name a couple.
What is it then about recruiters that make the cost of their service so hard to accept? Why do so many companies only use recruiters reluctantly and begrudgingly?
The answer, I feel, lies is our perceived sense of value. Whenever we purchase something, we accept the cost if we feel the value of the service is justified. It follows that many companies feel that the value of the service provided by recruiters does not justify the cost.
Whether or not the efforts undergone by recruiters justify the cost is a contentious topic and not one I will delve into in this article. I am more interested in the why - why is it that we feel that the value recruiters are providing does not justify the cost.
The simplest answer, in my opinion, is that we commonly equate value to difficulty. We think a service is worth more if it is difficult to perform and inversely - services which are easy to perform should be cheaper. Furthermore, many people - myself included - judge difficulty by whether or not they feel like they can perform the service themselves. How many times have you thought;
“Hey, that’s not that hard, I could do that myself”.
My answer for why recruitment fees feel like a rip off is that many people feel like anyone can do it.
There is an inherent fallacy in this in that it totally ignores the value of time. Let’s say I wanted to hire someone for a difficult to fill position. I am sure I can find that person myself however the following is also true:
- It would take me time (and cost)
- It would take me longer than a recruiter who has an existing network of candidates
- Every day I do not have that person is a cost
Taking into account the cost of time makes the cost of using recruiters more palatable. And it explains why, even if used as a last resort, many companies will still use a recruitment agency. After all, an expensive hire is often preferable to no hire.
But we are not quite finished yet.
There is another reason I would suggest is at the heart of why many companies view recruiters in a less than favourable light.
Let’s say I decided to not use a recruiter - the most widely used alternative service are job boards.
What happens when you post a job on a job board?
You get bombarded with emails from recruiters. In many cases - the number of recruiters contacting you about the role will vastly outweigh the number of applicants.
On the flip side - look on any job board and you will often see only job postings by recruiters.
Recruiters have effectively made job boards an unviable way to seek candidates or apply directly to jobs. By breaking this system they have made their own service more valuable. For many companies - the frustration with recruiters is that they can't hire in any other way - and the reason for that is the direct result of the actions of recruiters.
There is that old saying - “everything is worth what the purchaser is willing to pay”. As long as there is no viable cheaper alternative the recruitment agency will continue to thrive.
This does raise an interesting question though, what if recruiters did not dictate the price of their services but instead companies said how much they were willing to pay and recruiters could choose whether or not a role was worth engaging in.
This was the central idea behind Coopful - the job board where you offer a finder’s fee. With Coopful:
- You post a job and offer a finder's fee
- Anyone can see the job and recommend someone for that role
- If you hire that person, you pay the finder’s fee to the person who made the recommendation
- You pay nothing if no hire was made and there is no upfront cost
How much should you pay to fill a vacancy?
Well, that’s a question whose answer is fundamentally different depending on the scenario. Instead of a standardised cost of service - companies should be able to decide for themselves how much they are prepared to pay to find the right candidate. You can take control of the cost based on the circumstance and engage multiple recruiters and referrers in parallel to guarantee your best odds of finding the right candidate.
And if it doesn't work? Recruiters aren’t going anywhere soon.