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Recruitment Cost and Pricing Guide

What is the cost of recruitment?

We understand that recruiting a new member of staff is very important and deciding your method of recruitment is a huge decision both financially and strategically.

Our goal is to empower you with honest and reliable information to help you make the best decision for you and budget accordingly.

This pricing guide will help you set an initial budget and put together a suitable recruitment plan.

Costs of Recruitment – things to consider

There are 2 things to consider when researching the cost of recruitment.  You can either:

  1. Do It Yourself/In-house Recruitment; or
  2. Use the services of a Recruitment Agency/Consultancy

Firstly, let’s look at:

Do It Yourself/In-house Recruitment

The Do It Yourself or using your in-house recruitment team is by far your cheapest option.  The only costs associated with this approach are the costs of advertising which will be relatively small.  You can advertise on LinkedIn and certain job boards for free.  However, you may wish to factor in your time spent sifting through responses and CVs which can, at times, be extensive.  Your budget for this type of recruitment will be less than £1,000.

Now, let’s look at the second option:

External Recruitment Agencies and Consultancies

There are 3 types of recruitment agencies that provide permanent staffing solutions (as opposed to Temp agencies).  These are:

  1. Traditional high street agencies
  2. Executive Search Consultancies
  3. Niche specialist agencies

We will look at each of these in turn –

Traditional High Street Agencies

These agencies operate on a contingent (no placement, no fee) basis.  These agencies may offer you a fixed fee payable on the candidate’s start date.  These fees will vary from agency to agency and could be as low as £2,000 for a fixed fee and in the range of 10% to 25% of the starting salary of the candidate so in the case of a candidate on £30,000 per annum, the fee could be between £3,000 and £7,500.  The Agency offers no guarantees that they will find a candidate for you.  There will be rebates in place which will vary in length and amounts in the event that the candidate leaves within a certain timescale (typically between 0-12 weeks but can be as high as 26 weeks).

Executive Search Consultancies

These consultancies can either operate on a contingency basis as above or on a retained basis.  The percentage fee range is likely to be slightly higher than that of the high street recruiter and the starting salary is also likely to be higher because they usually operate at higher end of the market.  You are looking at fees from around 20% - 30% and on a salary of £50,000 will range from £10,000 to £15,000.  Similar rebates will be in place as outlined above but in some cases agencies offer a free replacement guarantee.

Paul Harper Search & Selection is an Executive Search Consultancy.

The Consultancies who work on a retained basis will still charge a percentage of the starting salary and this is likely to be in the range of 25% to 33%.  The main difference is that with retained search, the agency will charge one-third of the fee before commencement of the assignment, one-third on presentation of a suitable shortlist and balance on the offer, acceptance and resignation of the successful candidate.  So dependent on the % fee payable on a salary of £100,000 you are looking at a fee range of £25,000 and £33,000, payable in 3 instalments.  An example for a £25,000 fee would be:

On appointment                                                 £8,333

On Shortlist presentation                                 £8,333

On Offer, Acceptance and Resignation          £8,333

The first and second stages are usually not refundable, if no one is appointed following interviews by the clients then the Search Consultancy will re-visit the market and draw up a further shortlist of candidates.

It is unlikely that a Retained Executive Search Consultancy would work on a role paying less than £60,000 per annum (£12,500 fee).

It is important to understand why there is an upfront cost involved with a retained search.  Unlike contingent recruitment the Consultancy is working solely for you, using their skills and experience to will identify a long-list of potential candidates who meet your requirements.  This will involve a search including online research and networking.   If the Search Consultancy does not have an in-house research team, the initial research and telephone approaches will be carried out by an external researcher on a day rate around £700-£1,000.  Several days will be required.

These companies may negotiate for an ongoing relationship and volume deal.

Niche specialist consultancies

These consultancies are specialists in particular fields, for example IT or Financial Services.  They will operate on the same terms as Executive Search Consultancies on both contingent and retained terms.     

Cost of a Bad Hire

When considering costs it is important to acknowledge that the cost of a bad hire is estimated to be around 2.5 times annual salary of the individual so if we consider comparing a candidate on £100,000 per annum with a contingent recruitment fee of 25%, ie. £25,000 and a retained recruitment fee of 33%, ie.,  £33,000, it is worth investing in the recruitment process as this chart shows: