The True Cost of Not Using a Third-Party Recruiter

One of the frequent comments we hear from prospective clients is that they desperately need help filling roles, but did not budget for recruiter fees. They often feel stuck because as much as they need to fill the job, they cannot seem to justify the expense to cover the cost. My question to you is how much revenue are you losing by not having the person in the job functioning at 100%?

From my personal experience, I would say the standard cost to replace a mid-level manager staff member is 25-30% of the base salary. For a role making $100,000, the replacement costs would fall between $25,000-30,000.

Dave Lane, CEO of Inventiv, states reviewing resumes, screening candidates, and conducting interviews all take time and effort from your team. In most cases, this time displaces other valuable work. Typically, hiring managers already have a full schedule, which is why they need to hire in the first place. Carving out time for hours of screening and interview activity every week is difficult. While the search for an appropriate hire continues, the hiring manager’s typical work is likely going to suffer. There is also a learning curve and time for someone not doing the job full-time to ramp up. The nature of the skills being targeted can likewise effect the time to hire (the more specialized – like biotech, mobile or digital content development – the more time it will take to qualify).

According to Karlyn Borysenko with TLNT (Talent Management and HR), when you consider all of the costs associated with employee turnover, here’s what it really costs an organization:

  • For entry-level employees, it costs between 30-50 percent of their annual salary to replace them.

Mid-level to management roles are much higher due to the support to other staff and leadership responsibilities. Josh Bersin of Bersin, Deloitte Consulting LLP, believes the cost of losing an employee can range from tens of thousands of dollars to 1.5–2.0x the employee’s annual salary. In addition to the prior discussed costs, he includes ramp time to peak productivity, the loss of engagement from others due to high turnover, higher business error rates, and general culture impacts. Employees, Bersin explains, are appreciating assets that produce more and more value to the organization over time, which helps explain why losing them is so costly.

The typical 3rd party recruiting firm will charge a placement fee, which, on average, falls anywhere from 15-30% of the base salary. For that fee, the firm works with the client in capacities that include, but are not limited to:

  • Daily and weekly status updates
  • Posting and networking through job boards, if necessary
  • Conducting strategic research
  • Candidate prescreens and preliminary interviews
  • Providing candidate summaries and scheduling interviews with client.
  • Counseling both candidate and client through the process
  • Performing and administering assessment tests for certain skills
  • Conducting reference checks and background, education or drugs screens, as required.

There is also some type of replacement guarantee included in that price. We all know you get what you pay for in life. Generally, the higher the fee, the more enhanced the service level will be.

Our team at Chaloner is ALWAYS interviewing great talent. We are specialists who understand the job market and the skills we place. There is little to no ramp up and we work quickly to get the best talent available on your team. This is what we do and our 40-year track record in business sets us apart from the competition. With unemployment for college degreed professionals below 3%, the person you want to hire is already employed. He/she may not even be thinking about making a move until we present them with your amazing opportunity. These people must be pursued. They will not likely come rushing to you.

We are here and ready to bring you the talent!