How does recruitment agency makes money?

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Sorry for asking a stupid question, just wondering how they make money...

Once they get me a job, do they take a % off my pay?

Dave

 

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Some of them work in different ways

Some actually employ you and lease you to the company you are working for so to speak. So say you are getting £10 an hour your probably actually getting £18 pound and hour but the agency is taking the £8

Some charge you a fee if you find employment through them

Some charge the company through getting an employee for them for advertising their company

Some do a mixture of all this.

 

As GBL said, it varies. The one I worked with to get a job at Transcender 10 years ago received a percentage of my annual salary as their fee for "finding me" for the company.

 

Josh' experience mirrors 100% of mine, every recruitment agency I have gone through gets a cut of my first year salary, sometimes up to 3 months (netting them a pretty tidy sum)

i have never had to put up with the other ways, but the ones GBL lists do in fact exist, i'm generally wary of anything that costs ME money during the recruitment process..

 

It actually depends on whether it's perm or contract.

Pretty much spot on with what both Josh and Ryan have said for perm positions, for contract positions it's generally them charging you out at rate A, you getting rate B and them pocketing the difference (anywhere from 10 - 25%).

One thing to be aware of with a perm role is that if you leave that role within (usually 3 months but it can be 1 year for more senior roles) the agency don't get their fee, or perhaps only a % of it rather than the full rate.

As far as your pay is concerned, No, the fees 'should' be coming from the company and not you, after all the work was carried out on their behalf and not yours. Any agency that tries to take money from your salary for placing you in the role should be told to go f**k themselves.

 

The one I used charged my permanent-employer-to-be a fee. I'm not sure how that fee was calculated - whether it was a flat rate or a percentage of my annual salary. However, the employer paid it off in three monthly payments. When a customer decided to hire me away from my employer after 10 months, my employer charged the customer the fee to recoup their losses. I then worked for that customer for another 10 months.

 

Normally a flat fee for perm jobs, the basis of this is negotiated in advance with the agency before they carry out the search. The employer pays the fee, it should not affect your salary but there are exceptions, small companies may use money saved on recruiters to offer direct hires more.

Contract jobs normally add a percentage to your daily rate and they pocket this difference, it can be anything from 5-50% depending on how unscrupulous they are. Normally its in the 15-25% range for IT contracts.

50% can be common for manual labour jobs where you are filling a temp position for someone on leave.

 

It always amazes me that, despite the recession and people being made redundant left, right and centre - that half the jobs you see online are for recruitment consultants (did I get it right this time?)

It sort of makes me think that something is going wrong somewhere.

We know that most places aren't recruiting. Private sector is watching the pennies and the public sector has a recruitment freeze on while they prepare for cuts.

So what are they all doing, and why do agencies need so many of them?

Well, one thing they're doing is spamming me with jobs I don't want or aren't qualified for. Personally I'm more tempted by the $10 million left to me by that dead president than I am by the thought of working as a cheese administrator in Slough.

I suppose many agencies adopt the sales mentality. Place one applicant with a client each week or you're out sort of thing.

I've worked with some very professional agencies, and I've worked with some terrible ones. We had one try to place a guy with us (for 10% of his annual salary) and when he turned up, he didn't even know what the job was. Turned out he was completely unqualified and didn't want it anyway. Very embarassing all round.

 

Ah, let the Agency bashing begin once again.

Really, does it actually matter to you? So long as you are happy with the salary you are being provided, what does it matter how they make their money (excepting those occassions where they try to charge you for finding you work)

If the money is too little, barter for more or dont take the job.

For reference, they generally agree a markup with the employer - usually a percentage of annual salary for permanent positions, or a percentage of the rate for ongoing roles

Unscrupulousness doesnt come into it, the markup on any job is a contractual agreement between the employer and the agency. If the employer is happy to accept the presented markup, why is it unscrupulous? There are hundreds of agencies. Again if the employer isnt happy with the markup, they can go somewhere else.

Not really sure this is the agency's fault, its your responsibility as the employer to ensure that the candidate you accept is up to scratch for your requirements. If they turned up sight unseen, then its the employers fault for not actually making to effort to ensure that they are acceptable.

 

Partially.

Yes, obviously the employer has the final word in recruiting the candidate. However, the entire point of using an agency (and paying them for their services) is for them to do some preliminary sifting and to send you suitable candidates.

Just sending any old applicant without even discussing the role with them and matching them against the profile clearly is the agency's fault.

 

I take it you've never contracted then, take it from someone with experience of the contract market, employers often set a price limit, recruiters then try to fill the position, the candidate is blind to the employers offer price, its common for recruiters to try to 'widen the middle', they do not care for the employer or the candidate. They are salesmen and middlemen in the true sense of the word, they generally offer very little value add, they seem to exist purely due to HR departments spurning the recruitment responsibility. While a 15% percentage fee may be fair they will get as large a percentage as they can and people unused to the process will get fleeced. Do you think its fair for a person to only get 50% of their earnings because of a con trick ? Do you not see the situation as potentially fundamentally parasitic ? Why you think gangmasters are licensed ?

The better agencies will have a reasonably low set markup agreed with the employer often in return for sole supplier status, and that will be applied to your rate, good employers will also often enforce this to stop their employees getting screwed by agents.

Well it is when the fundamental pitch of the agency is to add value to the employer and the candidate in the search process. They are supposed to add value by providing sufficient preliminary screening. Many recruiters profess to being 'experts in IT recruitment' etc. In reality they generally offer little value add to either party but just add to costs. Unfortunately theres little you can do about it as most HR departments refuse to recruit any other way, in fact i've know HR people in bed with agencies in a kickback type of arrangement.

Its all part of maggies 'service economy' where nothing gets done and everything costs 300% more...

 

F*ck it, never mind.

 

Exactly this. When I asked my previous employer why he used a recruiter to fill the position rather than find someone on their own, he gave this exact reason.

 

This is great advice to anyone, regardless of whether they find a job on their own or through a recruiter.