Three reasons why recruitment businesses struggle to get paid

There are over 9,000 recruitment agencies with an annual turnover of more than £250,000 operating in the UK. In total, the industry contributes a staggering £35.1 billion to the UK economy. Despite this enormous amount of money, more and more recruiters are involved in disputes with their clients refusing to pay.

How does recruitment work? 

Typically, a recruitment agency will have a list of both existing and prospect clients to engage for new business which usually involves filling one or more vacancies. It is then the recruiters’ job to search their database, find matching candidates or alternatively advertise for new applicants via several channels. This process takes countless hours, many cups of coffee and often taking calls off-peak as early as 7 am and as late as 9 pm to catch both clients and candidates. Once suitable individuals have been sourced, recruiters will send them through to the company for approval and arrange interviews. The average agency recruiter works on what is referred to as a 360-desk; their roles entail sales, account management, customer service, and even aspects of compliance and administration.

What are the benefits to a business?

Any business who opt for a recruitment agency to fill their vacancies can reap the rewards in multiple ways: firstly, they save time by not looking through hundreds of CV’s, application forms and carrying out reference checks. This frees up time for business-as-usual tasks, and time is money.  Other benefits are recruitment agencies usually have access to the both active (job seeking) and passive (not actively seeking) talent. Good recruitment companies are reputable and will have track records of successful hiring – do your research and pick as according to your sector and industry as there are specialist recruiters for almost every field.

Excellent recruiters invest considerable care and effort into finding candidates and as we all know; people management is very difficult. It may sound silly, but imagine working in a wholesale food environment where despite all efforts for clear and honest communication, ticked boxes and acute preparation, a sold box of twelve eggs turns up in the store with six missing, and two that aren’t really eggs at all. The point to this analogy is: job seekers (the ‘product’ of a recruitment agency) can change their motivation, most of the time innocently, and the recruitment consultancy will always be accountable.

The cost of a recruitment agency?

Now, according to the Recruitment and Employment Confederation, the average recruitment cost of filling a vacancy in the UK is £3,950. Agencies tend to charge a fee calculated as a percentage of the annual salary and high-end niche or specialist recruitment agencies consultants can charge 30% or more for jobs attracting six or seven-figure salaries. However, being paid isn’t always a smooth ride for recruiters. But why is this?

Why do recruiters struggle to have their invoices paid?

Three reasons for why a client may refuse to pay a recruiter are:

A temporary employee is given a permanent position: In this scenario, the employer doesn’t anticipate the fee or read the terms in depth.

The employer recruits the candidate for a position other than the one the CV was intended for.

The candidate leaves within the rebate period but the employer has breached the terms of business (usually by not paying the invoice in the agreed terms) negating their right to the rebate/replacement candidate.

In all these circumstances, the debtor refuses to pay which can leave recruitment agencies in a long-winded battle and in a position where the relationship between themselves and the client is fragile. No payment affects recruiters of all sizes, but particularly small agencies whose cash flow will be tied up, meaning they may not be able to grow, expand or even pay their consultants their salary.

Whether you are a small or large recruitment agency battling to get paid by clients, Creditreform provides complete debt collection to maximise the successful recovery of your money. We will endeavor to collect your outstanding debts without the need for expensive legal fees and our UK & International collection service is provided on a no win no fee basis. To find out more, please don’t hesitate to contact us.

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