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What is a recruitment agency?

What are recruitment agencies? A step-by-step manual for SMEs

Did you know that there are as many temporary agency workers – 1.3 million – as there are gig workers (between 1.1 and 1.3 million) and NHS workers (1.2 million) in the UK!

With more than 25,000 recruitment agencies in the UK employing over 100,000 people themselves, the UK is the second largest agency market in the world after the US, and one of the most flexible market in the world

So, if you’re hesitant about using a recruitment agency to hire extra staff, or if you want to learn more about recruitment agencies in the UK:

  • what they are and how they can help you
  • how they’re regulated
  • how they make money (and therefore how much you should expect to be charged!)
  • and, last but not least, how to find good recruitment agencies in the UK…

… you’ve landed in the right place – let’s go!

What is a recruitment agency?

Recruitment agencies are businesses who help:

  • companies looking to hire employees fill their job vacancies
  • job-seekers find a permanent role or a temporary position

They’re described by the UK government as “employment intermediaries” – “businesses who make arrangements for someone to work for a third person”.

Ever wondered whether there’s any difference between a “recruitment agency”, a “placement agency”, a “staffing agency” or an “employment agency”?

The answer is no – it’s just different ways to describe the same businesses, depending on where you’re coming from.

  • Job-seekers typically use words such as “placement agencies”, “employment agencies” or even “job agencies”, as agencies help place them into open positions.
  • Companies looking to hire generally call agencies “recruitment agencies” as they’re looking to recruit into open positions.

And what about “headhunters“or “executive search agencies”?

Well, their role is pretty much the same as “normal” recruitment agencies! The only difference is that they focus on highly qualified roles, such as executive roles or senior managerial positions, for example Chief Executive Officers (CEOs), or Chief Technology Officers (CTO), and they might contact “passive candidates”, i.e., people employed not actively looking for a new position.

How many recruitment agencies are there in the UK?

The UK agency market is massive – it’s the second biggest market in terms of agency work after the US according to the World Employment Confederation, with a total of revenue of £32.2bn from temporary and permanent placements in 2016/17.

The Office for National Statistics data shows that there were 26,779 recruitment agencies in the UK in 2016:

  • 11,114 temporary employment agencies
  • 25,665 permanent employment agencies

Recruitment agencies are either generalists or they specialise in a niche, often a specific sector or industry, in a certain geographical location.

They might either be independent or part of bigger groups – you might have seen the big names such as Hays, Adecco, Reed or Manpower on the high street.

Did you actually know that, according to the Recruitment and Employment Confederation Industry Trends 2015/2016, 97% of the recruitment agencies in the UK have less than 250 employees, and the majority (56%) are “micro” agencies with less than 5 employees?

Split of temporary recruitment agencies by size of business based on the number of employees in 2016 (100% = 10,835 agencies)
Source: Recruitment Industry Trends 2015/16 – REC

Why use a recruitment agency?

Speed – you can recruit faster

As agencies have an existing pool of candidates looking for open positions, they can place candidates very fast. This can be very useful for companies with immediate needs, or looking to recruit for roles for which there are skills shortages.

At the time when 40% of the employers report talent shortages, agencies can be very useful in helping you find talent quickly!

Efficiency – you don’t waste your time filtering CVs

Did you know that companies on average receive 250 CVs for each open position?

Recruitment agencies are there to filter the CVs and only send the most relevant ones. They also have (in the majority of cases) already interviewed the candidate at the minimum once.

They might also have placed them in other positions, which gives them a good sense of their suitability for a role.

Simplicity – you don’t have to bear the administrative burden of having the ‘temps’ on your payroll

You only have to sign the candidate’s booking and the agency’s terms and conditions, and time-sheets once a week. No employment contract required. No payroll headaches!

Peace of mind – you don’t have to vet the candidates, it’s done for you

As described in Code of Conduct of Employment Agencies 2003, an agency can’t put a candidate forward for a placement unless it has confirmed:

a) the identity of the candidate,

b) the required qualifications, training, experience and any other authorisation expected by law or a professional body for the vacancy,

c) that the candidate is willing to work in the position advertised.

That’s a big responsibility! And it can save you a lot of time if it’s done on your behalf.

Flexibility – adapt to the variability of your needs

Using temporary staff allows you to adapt to the seasonality or volatility of your activity, and to cover staff absences.

Why recruiters are using temporary agency workers

Main reasons for employing temporary agency workers: covering staff absences and adapting to the seasonality in the demand

In the Jobs Outlook survey realised by REC / ComRes Global in December 2017, companies explained that they use temporary agency workers primarily to ‘cover short term staff leave or absence’, followed by ‘meeting peaks in demand at certain times of the year (seasonality)’.

Source: Jobs Outlook survey REC / ComRes Global Dec 2017

How do recruitment agencies make money?

Recruitment agencies involved in temporary recruitment have two ways they make money:

  • they charge hiring managers a commission, also called agency margin or agency mark-up, whey they place a candidate temporarily
  • they charge hiring managers a temp-to-perm fee, also called transfer fee if the hiring manager decides to hire the temporary worker permanently.

According to the REC, the majority (73%) of temporary recruitment agencies have margins of less than 20%.

Split of temporary recruitment agencies based on their margins: 31% achieve margins of 15 to 19% according to the Recruitment Employment Confederation
Source: REC press release

How much does it cost to use a recruitment agency?

For temporary recruitment, agencies’ margins are typically around 15-20%, with a median at 16.5% according to REC Recruitment Industry Trends in 2015/16.

The agencies’ margins depends on a number of variables such as the location of the job, the sector, the exclusivity given to the agency…

Some agencies will transparently disclose their margins, other won’t.

I recommend you always ask the agency to itemise your bill to avoid surprises!

How to find a good recruitment agency in the UK?

No simple way to find a good recruitment agency…

Well, you have different options.

You can:

  • Ask colleagues and friends for recommendations
  • Go on Google and check the reviews candidates left on the recruitment agencies
  • Check different recruitment agencies’ websites
  • Call the recruitment agencies you’ve shortlisted, check if they are responsive, listen to your needs and ask for references
  • Go on the REC or APSCo member directories – these are the two major professional bodies for recruitment
  • Check if the recruitment agencies have received any industry awards

This can be pretty time consuming and is still very much perception based.

Apologies if I blow my own trumpet – this is where TempaGoGo can help (and why it was born)!

TempaGoGo helps you find the recruitment agencies that have expertise in your location and industry, and thanks to their ratings, our platform helps you chose the best with confidence, fast!

To conclude…

There are plenty of recruitment agencies in the UK that can help you cover staff absences or help you adapt to the seasonality in the demand, and the Agency Workers legislation is there to protect you.

The key is to find good ones with whom you can recruit with confidence, and fast!

Is there anything else you’d like to know about recruitment agencies, or an experience you’d like to share?

I’d love to hear from you!

Caroline


Find good recruitment agencies today

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