Flat-fee recruitment: good news or a cheap trick?

Jo Faragher

Phil Roebuck, webrecruit

From political speeches to national newspaper headlines, the word ‘austerity’ has become a frequent feature in our day-to-day lives. And despite some indications that job creation is slowly creeping into positive rather than negative figures, there’s still a distinct mood of employers tightening their belts.

In the same way that the economic climate has led consumers to become more keenly focused on low prices and special offers, recruitment departments and HR professionals have been seeking out lower-cost modes of bringing staff into their organisations. In the last Resourcing and Talent Planning survey from the Chartered Institute of Personnel and Development, half of the organizations surveyed said that the economy has had a negative impact on their resourcing budgets.

Not surprisingly, the popularity of flat- or fixed-rate recruitment services, where a (low) price per hire is guaranteed rather than paying an agency a commission fee upon successful hire, has grown. The offers from these companies vary, but some advertise placements from as low as £199, while others boast a money-back guarantee if the hiring company does not make a placement.  Some also offer a sliding scale of fees, depending on how exclusive the employer is with the agency and how much communication is expected with the candidates. Compared to the traditional, agency fee model of around 20% of salary, or the steep engagement fees charged by executive search companies, these flat-fee companies appear to offer an attractive saving.

Affordable recruiting

Geoff Newman, chief executive of flat-fee recruitment provider RecruitmentGenius.com, explains why he decided to move into this area three years ago – bang in the middle of the current recession. “I felt that if recruiting became so affordable that it was a non-budget item, it would encourage people to take on more staff, and indirectly achieve our aim of getting people into work. We wanted to make it so cheap that no-one would ever think, ‘we can’t afford this’.”

RecruitmentGenius.com claims to be able to help anyone who is hiring – from a sole trader looking to take on his or her first member of staff, to a household name filling 15,000 roles a year. Because one or two clients recruit in volume using the company, everyone can enjoy a discounted rate, according to Newman.

The company has even recruited a financial director, for just £199. The hiring company had already paid a headhunter a first-stage fee of £16,000, but this yielded no candidates for its shortlist. It ended up interviewing three of RecruitmentGenius.com’s candidates and two internal possibilities, finally recruiting one of the people sourced by RecruitmentGenius.com. “I found out about this while speaking at a CIPD conference about our recruitment model, when the HR director of the company interrupted me to say ‘you just placed my FD for just £199’,” laughs Newman.

The advantage a low- or fixed-cost recruitment approach can provide, according to the companies that offer it, is that employers can effectively ‘dip their toes’ into the jobs market without taking on too great a financial risk. Underpinning the whole process is sophisticated search and tracking technology, which makes the sifting and selection process much quicker and allows the flat-fee providers to shortlist candidates at a lower rate than ‘traditional’ recruitment agencies.

Phil Roebuck, founder of fixed-rate recruiter webrecruit, argues that even before the economy started to struggle, the emergence of online recruitment and job board technology had shaken up how employers would use agencies. He says: “When I started my company I thought that recruitment could be done in a much simpler and less expensive fashion. Now that social media has increased in use, we’re seeing things shift once again. There are some very good recruiters out there, but for the ‘spray and pray’ recruiters I don’t see how they can justify a client spending 4,000 or 5,000 to place someone when all they’ve done is put an ad online.”

Where’s the value-add? 

But with many recruitment forecasters predicting that agencies will need to offer a higher-value relationship with clients, rather than a low-cost, no-frills approach, what can these companies bring to the hiring process? Gary Franklin, co-founder of the Forum of In-house Recruitment Managers, points to a recent discussion on the forum’s LinkedIn group around this. “The consensus seems that these types of recruitment companies work well in volume if a number of the same types of candidates are being sought at lower grades, but they don’t work so well for more experienced roles,” he says.

Claire McCartney, resourcing adviser at the CIPD, agrees: “Using flat-rate recruitment companies can help organisations test things out, but they tend to be one of an armoury of tools they can use, combining them with using traditional agencies and their own in-house recruitment methods,” she says. “But it tends to work better for less difficult to source, less senior candidates.”

She adds that some HR professionals may be cautious about using a recruitment process where there is a lot of automation and less physical contact with the candidate, as it could have a negative impact on their employer brand. “When [clients are] working with a traditional agency, they will have built up a relationship over time where that agency knows where they’re coming from – arguably you don’t have that with this type of recruitment,” she says.

Newman at Recruitment Genius concedes that the flat-rate model works well in a climate like this one – where candidates are in abundance and the key role of their recruitment system is to match relevant candidates with the right roles. “At the moment we’re enjoying success because there are lots of candidates available. The only challenge we face is filtering them. In the future, there may come a stage when it’s harder to find candidates, and that’s where the agencies and headhunters will be able to command those fees again.”

At webrecruit, around half of its hires are for the IT industry, where some areas are already experiencing skills shortages. Consequently, the company has had to evolve to offer its clients a range of levels of commitment, some of which push up its price.  “The prices do go up but so does the level of contact and service – up to the point where webrecruit will guarantee to fill a role,” explains Roebuck. “We’ve evolved in as much as we’re driven by the skills in the market, rather than a one-size-fits-all approach any more.”

Over the coming months and years, employment trends may be the deciding factor in the fortunes of flat-rate recruitment companies. But for the growing number offering this service to cash-strapped HR departments right now, they offer a valuable addition to their recruitment arsenal.