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Benefits and Types of “Outside” Recruiting Help

Question:

We recently had a few jobs to fill and decided to go “outside” our company for assistance. I was shocked at the cost and don’t know if I would look for outside help in the future. Was I overcharged?

Answer:

I hear this a lot – how expensive it is to recruit new employees. The bottom line is, it IS expensive and that’s why we encourage employers to do everything possible to make sure they are hiring the RIGHT candidate the first time around and then do what’s necessary to KEEP the employees they have so that they don’t have to replace them.

I think one of the biggest reasons companies believe using outside help to hire is so expensive is because at the end of the process they get an invoice and actually see all the costs that are involved: developing a job description, posting the job, screening the applicants, selecting and interviewing the candidates, performing background and reference checks, and proper follow up with candidates. Many companies don’t track the proper metrics to determine how much that new hire actually cost – so the true cost of a hire using internal resources is somewhat diluted by lack of data. Another factor is that when internal HR hires someone the costs can end up lumped together with other HR activities, which makes it difficult to get an accurate picture of the total cost. It can take between 2-5 minutes to properly screen a resume. Multiply that times the hundreds of resumes one job posting can generate and you have hours of time spent just reading resumes and selecting candidates to interview. This is an important step in the hiring process, but one that costs money.

But to your point, hiring is expensive. You didn’t mention the type of help you employed, but “outside” help can be typically defined three ways:

  • In a Retained Search a hiring agency is retained to fill a specific, usually hard-to-fill, position. In this model the agency gets the same fee regardless of how long it takes to fill a position. In many cases the estimated fee (usually based on the position’s salary) is typically (pre)paid in three 30-day installments. Retained searches are best used for senior-level management positions where there are fewer candidates in the market and/or when the search needs to be very confidential.
  • When using Contingency Placement the recruiter represents various candidates and presents them to the organization for consideration. Under this model the recruiter is only paid if one of their candidates is hired and their placement fee is typically 20-30% of the position’s salary. A contingency recruiter may have relationships with multiple companies, usually in the same industry, and will present their candidates to as many companies as possible.
  • With Outsourced Recruiting you engage a recruiter to work with your staff to fill your specific positions according to your needs on an hourly basis. This recruiter might only source and screen candidates, or they may be involved in interviewing and making the final offer. This model allows for an hourly rate to be paid for all recruitment activities and allows for the most flexibility. You only pay for the time the recruiter works for you.

If you have the time and expertise in-house to do the hiring in an efficient and legal manner, it may be more cost effective to use your own staff. However, if your needs seem to ebb and flow, you don’t have the internal resources, your position(s) are confidential, you have a large volume of open positions needing to be immediately filled or you aren’t sure you have the latest and greatest knowledge (both in terms of hiring expertise and the legalities of hiring), it may make sense to outsource your recruitment to save time, money, and even avoid potential legal risks. No matter what you decide, track your recruitment expenses so you are aware of your costs from one hire to the next and can determine if you are making the best decisions for recruitment AND retention.

And of course, strategic HR inc. knows that each hiring situation is unique, and offers a variety of hiring options to address hiring needs individually, including the three options above.