Sticker Shock When it Comes to Recruiting Costs (even in this economy)

About a month ago, a customer called us at SayHired, stating that he needed help with filling some of his commission-only sales positions. He wanted to find out what our recruiting services entailed and how much they cost. I explained to him that we focus solely on the sorting of resumes and phone screening of candidates, and that the prices ranged from $45 to $75 per phone screen. He let me know that he didn't need help with sorting through resumes or calling candidates, but instead needed help in sourcing (finding) new candidates.

When I let him know that the types of services he was requesting are what traditional contingency recruiting agencies charge anywhere from $10,000-$30,000 per position to fill, he couldn't believe it. "How can recruiting be so expensive?" he asked me.

This question conjured up memories of my recruiting agency days when I would get this same, astonished reaction when I would tell clients how much our full life-cycle recruiting services cost. They just couldn't believe how expensive it was to use a recruiting agency. Even companies that prefer to bring recruiting in-house by using a contract recruiter generally end up shelling out anywhere from $70-$100 per hour for a solid recruiter to work on anywhere from 8-12 positions at a time. These are the prices of hiring a high-flying IT consultant, not a recruiter, right?

Wrong. The biggest reason for the expensive costs associated with recruiting is that because the recruiting industry is very cyclical (i.e. companies are generally on either big hiring sprees or big lay-off sprees, but rarely in the middle), recruiters need to be able to make all of their money in the narrow window when companies are actually hiring. Also along these lines, you almost always see a spiked demand for recruiters by companies all at the same time (during periods of economic growth and hiring), which of course leads to an imbalance in supply and demand, and thus driving costs up.

Secondly, with specific reference to contingency staffing firms, recruiters there only get paid for positions that they actually fill. They could end up working on 10 positions and only fill 2 of them (through no fault of their own). So if they didn't charge high fees for the ones that they filled, they wouldn't make much money. In other words, there's a premium that a customer needs to pay for not having to pay unless a position actually gets filled. And given the uncertainty around the boom/bust cycles that recruiters go through, there needs to be some payoff at the end to make it worthwhile for professionals to stay in this industry.

There are of course many other reasons behind the fees charged by recruiters and recruiting agencies, but hopefully this is a good starting point for understanding what's baked into typical recruiting pricing.