In this revealing post, we’ll delve into the world of recruitment agencies, uncovering their revenue sources, fee structures, and average earnings. You’ll better understand how these agencies operate and the factors influencing their profits. Whether you’re considering starting a recruitment agency or simply curious about their earning potential, this comprehensive guide has all the info you need. So, let’s pull back the curtain as we answer the question: “How much do recruitment agencies make?”
How Much Does a Recruitment Agency Charge? (Short Answer)
Recruiters’ commission in the UK is typically around 15–30% of their candidate’s salary in the first year. Similarly, the salary of a recruiter is around £32,500 per year on average. However, you can significantly earn more as a franchise recruiter with Recruiter Startup. Our franchisees have the potential of making about £40K to £100K per year working conveniently from the comfort of their home — all without the hassle of incorporating a business.
Read on to learn more about the employment agency fees and structure. But before then, let’s understand how recruitment agencies work:
How Do Recruitment Agencies Work?
The recruitment agency industry is vital to the job market, connecting employers with potential candidates. These agencies act as intermediaries, sourcing and matching suitable candidates for available job positions. They provide valuable services to employers and job candidates, streamlining the hiring process and ensuring that the right talent gets the right roles. Additionally, recruitment agencies often specialise in specific industries or job types, allowing them to develop expertise and networks within those sectors.
Recruitment agency fees in the UK are generated through various means. If you join this important industry, you’ll be among the diverse set of people who play a crucial role in the employment landscape while profiting from it. Let’s explore their financial operations to shed light on their overall impact on the job market.
How Do Recruitment Agencies Make Money?
Recruitment agencies derive their revenue from various sources, with the primary income streams coming from fees charged to employers and job seekers.
Here are 4 main ways recruitment agencies make money, and how you can too, as a Recruiter Startup franchise:
- Placement Fees: When an agency successfully places a candidate with an employer, they typically receive a fee based on a percentage of the candidate’s first-year salary. This fee, known as a placement fee, can range from 20% to 30% of the candidate’s annual salary and is often paid by the hiring company. Franchise recruiters with Recruiter Startup get to keep as much as 80–90% of this placement fee.
- Retained Search Services: Recruitment agencies may offer retained search services for executive or specialised positions where the client pays an upfront fee to secure the agency’s exclusive commitment to filling the position.
- Temporary or Contract Placements: Agencies also earn revenue by providing temporary staffing solutions to clients. How much recruitment agencies charge for temps in the UK depends on the agreement with clients. They may charge the client an hourly rate for the temporary employee’s services and pay the employee a portion of that rate as their wages. Similarly, recruitment agencies can place candidates in contract positions that earn revenue by charging the client a markup on the contractor’s hourly rate.
- Additional Services: Some agencies offer value-added services such as background checks, skills assessments, and training programs for candidates, which allows them to generate additional revenue streams. As a franchise recruiter with Recruiter Startup, you may charge job seekers for CV writing, interview coaching, or career counselling. These fees contribute to the overall revenue you derive from your business.
Are Recruitment Agencies Profitable?
Recruiters’ pay is influenced by various factors, including:
- The overall demand for talent in the job market
- The competitiveness of the recruitment industry
- The agency’s ability to attract and retain clients
In times of economic growth and low unemployment, the demand for recruitment services tends to be higher, leading to increased profitability for agencies. Conversely, during economic downturns or high unemployment—as with the COVID-19 pandemic—the demand for recruitment services may decrease, impacting agencies’ earnings.
Additionally, how much recruitment agencies charge is largely influenced by their reputation and track record. Agencies consistently delivering high-quality candidates and exceptional service are more likely to attract repeat business from satisfied clients, leading to a more stable and predictable revenue stream.
On the other hand, agencies that struggle to meet client expectations or provide subpar candidates may find it challenging to maintain and grow their earnings over time. So, if you’re looking to start your own recruitment desk, improving your reputation should be a priority, and Recruiter Startup is structured to help you achieve this.
Do Recruitment Agencies Take a Cut of Your Salary in the UK?
No, recruitment agencies don’t typically take a cut of a job seeker’s salary. Instead, their earnings come from the fees employers charge for successfully placing candidates in positions. The agency’s role is to facilitate the matching process and ensure a successful placement, for which they receive a commission-based fee from the employer.
How Much Do Recruiters Make?
The average earnings of recruitment agencies can vary widely based on factors such as:
- Geographic Location
- Industry Focus
- Client Base
Based on our industry reports and market analyses, recruitment agencies typically earn an average gross margin of 17.5% across all sectors, though some sectors may slightly make higher than others. In the UK, this translates into an annual salary of £32,500 per recruiter.
Larger agencies with a national or international presence may have higher revenue potential due to their broader reach and ability to serve diverse clients and job markets. Additionally, agencies specialising in high-demand industries or niche sectors may command higher service fees, contributing to increased earnings.
At Recruiter Startup, most of our franchise recruiters earn an average of £40K–£100k per year with about 2–5 placements per month.
How Much Do Recruitment Agencies Charge per Hour?
Recruitment agencies may charge hourly rates for specific services, especially for temporary staffing or contract placements.
The hourly recruitment agent fees can vary based on factors such as the job role, industry, and the level of expertise required for the position. In the first year, agencies typically charge 15–20%, but this can go as high as 30% for more demanding positions. For example, if the average wage for a position is £38,000 per year, the recruitment fees could range from £5,700 to £7,600.
Temporary staffing agencies, in particular, may charge clients an hourly markup on the wages paid to the temporary workers they place. This form of recruiting agency fees covers the agency’s operational costs, overheads, and profit margin for facilitating the temporary staffing arrangement.
Frequently Asked Questions
Do recruiters get commission?
Yes, recruiters always get commission and can earn a good income, typically making up 15–30% of what they bill annually, including their basic salary. The average salary for a recruiter in the United Kingdom is about £32,500 per year. However, fees for recruitment agencies can vary based on factors such as the business they work for and the salary brackets of the candidates they place.
Is it difficult to start a recruitment agency?
Starting a recruitment agency can be challenging, especially for those without prior experience.
The process involves the following steps:
- Determining a niche
- Understanding legal and licensing considerations
- Assessing financial requirements
- Navigating insurance needs
- Marketing your agency’s services
It’s advisable to seek legal assistance and practical advice when venturing into this field. On the bright side, you can take advantage of our franchise recruiter program to quickly kick-start your career as a recruiter. The program offers you flexible options to earn income while working from home.
Do you need a licence to run a recruitment agency?
Starting a recruitment agency in the UK doesn’t typically require a licence. Still, there are exceptions for specific sectors—such as agriculture and food processing/packaging—for which agencies need to be licensed by the Gangmasters and Labour Abuse Authority (GLAA).
Is recruitment a stressful job?
Recruiters can experience stress due to the competitive nature of their careers, but the financial rewards can compensate for it. Depending on the agency and candidates placed, recruiters in the UK have the potential to earn a decent income, making it an appealing career choice.
How much recruitment agencies make is derived from a combination of placement fees and supplementary offerings to employers. The industry operates on a commission-based model, where agencies earn revenue by successfully matching candidates with job opportunities and facilitating the hiring process for employers. Get in touch with us if you’re interested in exploring our associate program to earn a good income as a franchise recruiter while working from the comfort of your home.