Have you ever thought about what brings value to your business and saves time? In this extensive article, we will compare the time and costs of hiring inhouse or externally through an agency. Although the data used are older data (when the demand for people was enormous and the cost of wages not as high as at present), they are applicable in the long term, regardless of the current situation on the labor market.
It is not an agency like an agency. Most staffing agencies work with a fee for placing a candidate in a firm. You pay only after you sign a 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 when they use a staffing agency, they get more candidates, saving money and time. But have you ever analyzed the real costs associated with hiring staff from an agency?
Recruitmenttakes time.The administration involved in recruiting 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 job positions, managing applications from candidates, conducting pre-screenings, sending feedback to candidates, answering questions, tracking candidates in the process, inviting candidates for an interview, submitting bids, preparing by contracts, rejection/acceptance of candidates, etc. You spend hours doing this. Have you ever looked back on time spent like this? And how much did it cost you money?
Internal recruiter or staffing agency?What do you choose when hiring a new reinforcement to the team? Let's show you what these options look like reflected in the cost.
Example:
Company XY (from the manufacturing/engineering department) is looking for a “CAD Designer” with a salary of, for example, 1500 €/month. They have 12 similar recruits a year.
An example of the cost of interviewers:
— Recruiter — $11 per hour
— Senior Constructor — $13 per hour
— Head of Design — $17 per hour
Note: The salary information and all these figures come from the “Salary Survey 2015 — Czech Republic” of one large staffing agency. The exchange rate was 1 USD for 25 CZK.
Hiring with an internal recruiter
Keep in mind that even if you are going to use the services of an agency, your recruitment team will still do the same job, hiring all open positions, working on the “branch” of the company, taking care of referrals, etc. You still need to do a preliminary screening of candidates you get from sources other than agencies. Let's not dwell on the extra costs in this case, as they may vary depending on the hiring process of the company, etc.
Your time and cost (example):
— writing a job description,
— advertising (LinkedIn, job portals...),
— CV database,
— branding of the brand (leaflets, advertisements, etc.),
— Premium LinkedIn account.
Process (example):
— the preliminary selection of candidates,
— preliminary screening of candidates,
— sending profiles to the manager/recruitment team,
The first round of interviews,
The second round of interviews
— offers, rejections,
Communicating with the team and candidates.
Using the agency, you will get more candidates and at the same time reduce the time it takes to fill an open position. However, you will still need to create a job description, post the position on LinkedIn, and do the same as if the recruitment was done by you.
However, when you approach an agency, there are other costs to consider, such as your time and that of your team, which you have to spend with the agency and its interview candidates plus a fee in the event of the success of the agency in the form of an hired employee.
Costs of using the services of an unsuitable agency
If you use an agency that sends you a lot of resumes every week, it looks good in year-end statistics, but what is the reality of the actual costs in this case?
Example:
Your company, every month opens one position with the same profile, so you hire 12 people a year, using the services of two agencies:
Agency A— An agency in which recruiters have a quota to present at least five profiles per day to their clients. As one of the clients, you 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 per 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 varies between 1.5 — 3 times the applicant's monthly salary.
Cooperation with Agency A
This example shows what cooperation with Agency A could look like over a year. If you have 180 profiles, the recruiter will review them and share 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 invited by the recruiter for an on-site interview.
There will be 45 interviews in the first round.
There will be 15 interviews in the second round.
As a result, six tenders will be submitted.
The total financial and time costs of using the services of Agency A can be found in the following table:
It is very important to remember that a bad selection of personnel will always be more expensive for your company than hiring the right candidate. Therefore, think carefully about who you entrust this task to
Cooperation with Agency B
Quality Staffing Agenciesintroduce you to their best candidates who fit your specific needs. This process saves you time and money. Let's take an example of what it might look like to work with agency B for one year. If you have 36 profiles, the recruiter will check all of them and share feedback with the agency.
— The recruiter will carry out a preliminary check of 30 of them.
— 28 of them will go to the HR manager for feedback.
— 25 of them invite the HR worker for a personal interview.
There will be 12 interviews in the second round.
Six bids will be submitted.
Let's look at the time and funds spent in this case:
Appraisal
The financial difference between agency A and B is $2360. For large companies, this may be an insignificant amount, but if you use the services of six agencies, and four of them work as agency A, it is $9440 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 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 examples given. Try to analyze your recruitment costs, and you may be surprised by the amount you spend on the “free” cooperation of agencies.
In doing so, you can be inspired by the analysis carried out by Jean-Yves Le Louarn in 2008.
Nehľadáme klientov ale partnerov. Pomôžeme vám s obsadením aj špecifických pozícií. Napíšte nám
The method includes advertising costs (in magazines, newspapers and on the Internet); agency costs (fees paid to the agency); costs of persons recommending candidates, etc.
Indicators of the cost of hiring employees are presented in the table below.
Analysis of resume costs, time costs for accepting/rejecting resumes, costs for sending rejection letters/emails.
Indicators of the cost of pre-selection are presented in the table below.
Selection of the best candidates from the preliminary selection using the following techniques: interviews, assessment centers, medical examinations, reference checks (table below).
Internal recruiters add value to the employer in the field of salary consulting, market research, feedback from candidates, etc., while helping to build the company's reputation.
Recruitment agencies always have more resources Great headhunters have extensive networks in specialized markets and also have information about new companies entering these markets. If you choose your headhunters correctly, you will get internal information about current events. A really good headhunter thus becomes a huge asset to your company.
Before choosing and allowing entry into your company, you need to choose your recruitment partners wisely and invest time in interviewing them.
Agencies should be your partner in filling positions. Their goal is to save your time and find a candidate “as sewn” for you. They need to be a trusted partner who shares internal information and market feedback with you. So when you evaluate working with agencies, don't just look at the number of profiles they send you during the year, but think about how much money and time it actually costs you.
Many company managers make statistics that show them quantitatively that Agency A sent 100 candidates and Agency B sent only 10 candidates per year.As long as they focus only on the number of candidates, it may happen that they stop working with Agency B. However, the time behind these numbers must also be taken into account.
Therefore, when you make statistics on the effectiveness of your agencies at the end of the year, do not compare them only based on the number of profiles they have sent you. Also try to think about how much time and money it costs you and your team. Finding suitable candidates in any market requires skills, experience, time and a good recruiter. If you work in the field of recruitment, you know that finding a good candidate is always difficult, whether it is a favorable or unfavorable economic situation.
The time you spend choosing a suitable staffing agency will become a profitable investment, as you will save your time and money during mutual cooperation. Keep in mind that although most staffing agencies still work for free (they only receive 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 advantages of cooperation with a staffing agency will be especially evident in the long term, when the costs of the selection process decrease and the demands on your precious time are reduced.
We will be happy to provide you with our experience and prepare tailor-made recruitment. Contact us
Source: Linkedin.com
Processed by: TRIGON Consulting
