Recruitment Agencies: Everything HR Should Know - Eddy

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HR EncyclopediaRecruitment AgencyHave you wondered if you should use a recruiting agency for your open jobs? Read on to find out what you should know about when and how to work with agencies to find the job candidates you need.

Brian Fleming

What Is a Recruitment Agency?

A recruitment agency might go by a few other terms, depending on who you talk to (talent agency, staffing firm, placement firm, etc.), but they all refer to companies that take on the task of recruiting candidates for your open jobs. They advertise your jobs, search for qualified candidates, screen, interview, and in some cases handle payroll or other administrative services. They do this for a fee, so it is important to understand what services make the most sense for your company’s situation.

Why Work With a Recruitment Agency?

Although it’s best for a company to handle its own recruiting if at all possible, it is entirely up to management to weigh the costs and benefits of using an agency. These are the most common reasons to get an agency involved:

A company doesn’t have the resources or scale to hire their own recruiting staff. Let’s say your firm has under 50 employees, or you only have a small handful of open positions at any given time. If this is the case, it is probably more cost effective to partner with an external agency rather than maintain an internal recruiting staff.
Internal recruiting efforts need more help. Despite their best efforts, your in-house recruiters may face challenges that are too difficult to handle on their own. You may want to consider enlisting an agency if:
Turnover is high. In some positions (such as hourly production workers), people resign so frequently that the company needs extra help to find people in higher volume.
The recruiting needs are urgent. In-house recruiters often have many demands competing for their time. So if a position is especially critical to fill, an agency can often help find someone more quickly.
Open positions need a specific skill set. It is common for in-house recruiters to have a broad area of jobs to fill rather than specialize in one niche skill set. Agencies have the resources to focus on technical roles (such as engineers) and are familiar with the nuances and jargon of that role.

Types of Recruitment Agencies

There are many different types of recruiting agencies, and they offer different services. Many agencies handle payroll for their placements in addition to the recruiting process. Smaller agencies may have a reach limited to one geographic area, while others have the resources to find candidates throughout the whole country. You will also want to keep in mind the job type and length of the positions you need to fill. Here are the main types of recruitment agencies.

1. Temporary (Temp) Staffing

Plenty of jobs are seasonal or only need people for a short amount of time—for example, laborers, production workers, or data-entry clerks. The time commitment may only be a few months, weeks, or even days! For projects like these, temp agencies are the best option because they can often supply candidates in a matter of hours, if needed. Your company can specify if the job is temp-to-hire, meaning the candidate could potentially be hired long-term if they perform well. There is typically no guarantee of a permanent job after the project is done, but that depends on the company’s situation.

2. Direct/Permanent Placement

A much more common arrangement is for agencies to supply you with a permanent employee. The agency's recruiting process should not be much different than if it were being handled by you or your company’s internal recruiting team. The new hire interviews with the same people and receives the same salary and benefits as if you were hiring them directly. The only difference is that you are paying the agency a premium for putting in the work to find that new hire.

3. Executive Search

As the name implies, these search firms specialize in finding executives at the senior level. They typically take more time than other jobs due to the importance of finding the right person and experience. This is especially true because the agency needs to consider a candidate’s commitment to high-profile ventures and the timing of any bonuses they may be expecting.

How Does a Recruitment Agency Work?

Recruiting agencies essentially function as any recruiting team does. However, rather than supporting a variety of hiring managers within the same company, they recruit for many different companies (often across various industries and geographic areas).

Step 1: Kick-off with the Agency

Top-rated agencies can be found in practically any area through a quick Google search. Or even better, someone in your professional network may be able to refer you to one. The agency will need to enter into a formal service agreement with your company (but this does not mean they need to be your exclusive talent partner). As any recruiter would do, they will then meet with HR or other stakeholders to gather the job qualifications, salary range, and other important details to begin their search.

Step 2: Search and Interview Process

Agencies often have their own database from previous contacts to help find qualified candidates for you. The more experienced firms have connections to relevant associations, advertising tools, and experience with online recruiting solutions such as LinkedIn or Indeed. A word of caution, though: the tools at an agency’s disposal may not be much different from your own, so don’t be too surprised if they have similar difficulties with their search. The agency should be the main point of contact for any candidates they find. Since they are taking on your company’s recruiting efforts, it is their responsibility to represent the job accurately. They should also schedule interviews.

Step 3: Offer and Onboarding

Once your company has identified the candidate you will offer the position to, the agency makes the offer and does any negotiating up until the offer is accepted. However, when it comes to pre-employment checks (background checks, drug tests, etc.), it may make more sense for you to handle that. Unless the agency is keeping the new hire on their payroll, they are done with the process once he or she starts work.

Payment Options

There are generally two types of arrangements for paying a recruiting agency. In a retained search, the agency is paid up front at the beginning of the search, usually because your company intends to use them exclusively. The more common type is a contingent search, in which the agency only earns their commission after their placement is hired. Fees usually average around 20% of the new hire’s annual salary, but this depends on the agency, location, and job type.

Tips on How to Work With a Recruitment Agency

It can be tricky knowing how to navigate working with a talent agency, especially if it’s your first time, so keep these tips in mind.

Tip 1: Set Expectations and Communicate Clearly

It is vital to be clear with the agency what exactly you need in a new hire so they don’t waste time with people who ultimately won’t be a fit. As they provide you candidates to review, make sure to give them feedback as quickly as possible. Timing is crucial in today’s job market, so quick and clear communication will help keep things moving. It is better to communicate too much rather than too little.

Tip 2: Enter Agency Candidates into Your ATS

While agencies can always email a batch of resumes to you, it is even better if they can submit those directly to your company’s applicant tracking system (ATS). It will depend if your ATS has the option to give agencies user access. But if that’s possible, it will help to keep their profiles in your system for record-keeping and compliance reasons.

Tip 3: Form Positive Working Relationships

Remember that agency reps are normal people just like your own co-workers, so treat them like it! Having friendly conversations and sending them holiday gifts can go a long way to building trust and forming good long-term relationships.TopicsHiringRecruiting

Brian Fleming

I hold a Bachelor's degree in Psychology from BYU and have four years of professional experience in HR and Recruiting. I am also currently pursuing my MBA. No matter the field or setting I've been involved in at work or school, I've always really enjoyed writing in a way that makes the subject at hand relatable to the reader.View author pageFrequently asked questions

What is a disadvantage of using a recruitment agency?

Besides the extra cost, an agency rep may not have the same personal investment in keeping your company staffed as you do.

Who pays the recruitment agency?

This depends on the company, but usually the department that the new hire ends up working for is responsible for paying the agency’s fee.Other Related TermsAI RecruitingAmbassador ProgramBenchmark JobsBillboard RecruitingCampus RecruitmentCandidate CorrespondenceCandidate DispositionCandidate EngagementCandidate Feedback SurveyCandidate Net Promoter ScoreCandidate NurturingCareers PageCo-EmploymentCo-Op ProgramCold Calling in RecruitmentContingency RecruitingEmployee AdvocacyEmployee PoachingEmployee Referral Program (ERP)Employee Social Media TakeoverEmployer Information SessionExternal RecruitingFacebook RecruitingGhostingGlassdoor RecruitingHidden Job MarketHiring StatisticsHiring with ZipRecruiterInbound RecruitingIndeed RecruitingInstagram RecruitingInternal Job PostingInternal RecruitmentInternal Transfer PolicyInternship ProgramJob AdsJob FairLabor MarketLateral HireLinkedIn RecruitingMobile RecruitingOnline Job ApplicationOutplacement FirmPay-Per-ApplicantPost & PrayPromoting TalentPurple SquirrelRecruitingRecruiting FunnelRecruiting OperationsRecruitment FeesRecruitment MarketingRecruitment Process Outsourcing (RPO)Recruitment SEOReferral BonusRenegingResume ParsingRetained SearchReverse RecruitingSocial Media RecruitingSourcingSponsored Job PostingStaffingState Employment AgencyStrategic RecruitmentTV RecruitingTalent AcquisitionTalent.com RecruitingText RecruitingTikTok RecruitingTwitter RecruitingUniversity Career ServicesVideo Job DescriptionVirtual Job FairWorkplace TourEddy's HR NewsletterSign up for our email newsletter for helpful HR advice and ideas.Sign up for freeThanks for signing up! Payroll

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Brian Fleming

What Is a Recruitment Agency?

Why Work With a Recruitment Agency?

A company doesn’t have the resources or scale to hire their own recruiting staff. Let’s say your firm has under 50 employees, or you only have a small handful of open positions at any given time. If this is the case, it is probably more cost effective to partner with an external agency rather than maintain an internal recruiting staff.
Internal recruiting efforts need more help. Despite their best efforts, your in-house recruiters may face challenges that are too difficult to handle on their own. You may want to consider enlisting an agency if:
Turnover is high. In some positions (such as hourly production workers), people resign so frequently that the company needs extra help to find people in higher volume.
The recruiting needs are urgent. In-house recruiters often have many demands competing for their time. So if a position is especially critical to fill, an agency can often help find someone more quickly.
Open positions need a specific skill set. It is common for in-house recruiters to have a broad area of jobs to fill rather than specialize in one niche skill set. Agencies have the resources to focus on technical roles (such as engineers) and are familiar with the nuances and jargon of that role.