Employers are paying direct hire recruiting agencies premium fees for top talent – sometimes as much as 30 percent of the first year’s salary or above.
Now, they’re getting smarter about who gets these fees. It’s no longer just about the position they need filled — hiring managers are now considering agency performance, business unit goals, and more when they’re strategically choosing a fee.
In our 2015 Interim Direct Hire Agency Benchmarking Report, we found that the frequency at which recruiters award premium fees, defined as 25 percent of a position’s salary or higher, isn’t increasing for a while. This is good, since a huge chunk of agency fees are premium.
Right now, out of the total amount of agency fees an organization pays a year, these fees make up about 35 percent of the pie.
That’s a lot of premium dough, and recruiters are starting to notice.
The market is evolving and recruiters are aware of the ever-changing landscape. A few years ago, when the recession ended and the job market kicked back into gear, recruiters needed to fill a lot of jobs in their expanding organizations fast.
As reported by PwC in 2011, the talent race was a problem, and it forced organizations to take drastic measures:
“The talent crisis is no longer a problem of the future. It is here and now and is threatening business growth and economic prosperity.”
As organizations needed their recruiters to fill positions fast, they were paying whatever they had to (sometimes too much), to fill positions and get the best talent in the door quickly.
Queue an agency spend nightmare for recruiting leaders.
Now, the job market is stabilizing and this talent race is coming to an end – meaning the frequency at which these fees are paid isn’t going to continue to rise. Recruiting leaders are getting smart and taking a look at the premium fees they’ve been paying, now that they’re no longer in as much of a rush to get talent in the door.
Below are three ways to take a deeper look at your agency spend and analyze your organization’s use of premium fees.
Know why you’re using a direct hire recruiting agency – “that’s how we’ve always done it,” shouldn’t be the reason.
Building relationships with agencies is very important to the success of a hiring manager – having those that consistently deliver quality candidates in a timely manner is crucial to the growth of an organization.
When relationships grow, jobs are sometimes sent to search based on something closer to tradition than strategy, and can cause problems to arise. To avoid this, there should always be a strategy behind your decision to use a direct hire recruiting agency.
If you know this is happening in your organization, it may be time to evaluate the strategy behind these agency relationships.
Evaluating your strategy also means evaluating their fee – are you consistently paying premium fees to direct hire recruiting agencies you’ve built relationships with over time?
Sometimes these fees are warranted, but not if the reasoning behind awarding them isn’t in line with both the goals of talent acquisition and the organization as a whole.
Know when you’re paying a premium fee, and know if you should.
Here at BountyJobs, we’ve found that a lot of the time, recruiting leaders and their recruiting teams aren’t aware that the fees they’re paying are considered premium.
In our latest report, we released data that outlines average direct hire recruiting agency fees as both a percentage and a dollar amount. It’s a good benchmark for determining whether or not your fees are considered premium.
After learning the benchmark fee for your industry, deciding whether or not to go above that benchmark can be tough.
You should pay a premium fee when the agency, strategy, and outcome aligns with your talent acquisition goals.
Instead of only looking at the open job position to determine if goals align, take into consideration the agency’s performance. Does the agency deserve a premium fee? Does their past work reflect success for your organization and good project management on their part?
Analyze different standards like time to fill, interview rate and quality of hire. If the agency delivers quality work, and the job is highly valuable to your organization, a premium fee may be warranted.
Know when you’ve done a good job, and apply this same standard to your agencies.
Analyzing data around the different standards mentioned above isn’t easy – even if you can collect those numbers, knowing a good agency relationship from a bad one is difficult if you don’t know what a good agency relationship looks like.
If you don’t have a stellar agency in your back pocket to use as a comparison in determining an agency’s value, think about how you evaluate your recruiting team internally.
Use the same standards to which you hold your internal recruiting team as benchmarks for your agencies. When you use the same standards to assess their success as you do your own, it allows you to be sure an agency’s performance fits both your goals as a recruiting leader and the goals of your organization.
This information can then be used definitively to determine whether or not you should be paying a premium fee – and whether or not an agency aligns with the goals of your organization.
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About the Author: Megan Morreale
