While only 1 in 10 positions are hired through recruitment agencies, agency spend is often the largest part of a company’s recruiting budget.
As part of their effort to manage recruitment agency spend, it’s critical for companies to understand average recruitment agency fees so they can adjust their budget and spend accordingly. Negotiating agency fees below average could cost companies qualified candidates, while overpaying may be an unnecessary waste of their budget.
Recruitment agency fees are typically offered as a percentage of a candidate’s first year’s salary, and are only paid if the company hires the agency’s candidate.
Jobs filled this way are typically:
- Highly skilled/specialty jobs
- Critical to company success
- High priority jobs that need to be filled immediately
- Offering a salary of $100,000 or more per year
- Jobs which in-house recruiters are not familiar with
- Jobs for whom competitive passive candidates are most desirable
In short, companies turn to recruitment agencies when it will be difficult to find a premium candidate on their own, and within their desired timeframe. Combine this with the fact that direct hire agencies are only paid if the company hires their candidate, and it’s no surprise that agency spend is the largest part of a company’s recruiting budget.
Candidates found through direct hire agencies will cost more than those found through other mediums because they’re in high-demand, making them difficult to find and hire.
In fact, The 2015 Direct Hire Agency Benchmarking Report found that the average recruitment agency fee in 2014 was $22,113, a 6.3 percent increase over 2013. This increase was driven largely by stronger salaries, due to increased competition for premium candidates. As a percentage of salary, the average recruitment agency fee was 21.2 percent of a candidate’s first year’s salary.
The report also found that over one third of fees were 25 percent or more of the candidate’s first year’s salary – which has also increased since last year.
As competition for premium candidates becomes more fierce, recruiting them carries more risk for direct hire agencies, which will have to work harder to recruit qualified candidates, but will not be paid if their candidate isn’t hired. Companies in particularly competitive industries, or with competitive jobs, may increase their fees to 25 percent or more to entice agencies to take that risk.
To see the average recruitment agency fees for your industry and job functions, as well as other insights into the direct hire marketplace, download our free report: The 2015 Direct Hire Agency Benchmarking Report.