Hiring directly will usually have the lower upfront cost. The question is whether it remains cheaper once time-to-hire, internal resource and the cost of leaving the role vacant are included.
One of the most common objections to using a recruitment agency is also one of the most understandable. Why pay a recruitment fee when you can advertise the role, search LinkedIn and hire someone yourself?
In some cases, that is absolutely the right decision. If you have a strong internal talent function, an existing pipeline of relevant candidates and enough time internally to manage the search properly, hiring directly can be considerably cheaper. Recruitment agencies cost money, and there is no point pretending otherwise.
The bit that is much harder to see is what happens when the role does not get filled quickly, or when the internal search ends up taking far more time and resource than expected.
The agency fee is easy to see
Recruitment agency costs are normally very clear from the beginning. There is a percentage attached to the successful hire and, in most contingent recruitment models, that fee only becomes payable if somebody is appointed. That makes it an incredibly easy cost to challenge.
If a business is hiring somebody on a £100,000 salary and the recruitment fee is 20%, there is a very obvious £20,000 invoice attached to that decision. Compare that with posting a job yourself and, on the surface, hiring directly looks far cheaper.
But that comparison only really works if both routes get you to the same result in the same amount of time. Often, they do not.
What does an open role actually cost?
This becomes particularly important when the person being hired is expected to generate revenue, protect revenue or make a meaningful contribution to growth.
Take a salesperson with a significant annual target. If that seat remains empty for two or three months, it would be too simplistic to say that the business has automatically lost exactly two or three months of quota. Sales cycles do not work like that. Existing team members may cover accounts, opportunities may simply move later in the year and a new hire will still need time to ramp up after joining.
It would be equally unrealistic, though, to say there is no commercial impact at all. Prospects may not be contacted, opportunities may progress more slowly, existing customers may receive less attention and other members of the team may be covering a territory or workload that was never supposed to be theirs. The longer the role remains open, the more those things begin to matter.
Hiring directly is not free either
This is another cost that is easy to underestimate because there is rarely a single invoice attached to it. Somebody still has to write the brief, advertise the role, review applications, source candidates, make approaches, conduct screening calls, arrange interviews, manage feedback and negotiate the eventual offer.
For businesses with an established internal recruitment team, that is part of the function they are there to provide. For others, that work ends up sitting with a founder, hiring manager, HR team or commercial leader alongside everything else they are supposed to be doing.
A couple of hours here and there may not feel significant, but stretch that across several weeks and multiple stakeholders and the internal cost starts to become much more meaningful. That does not mean using an agency automatically becomes cheaper, but it does mean the true comparison should include more than the cost of placing an advert.
More applications do not necessarily mean an easier hire
There is also a temptation to assume that a challenging hiring market should make direct recruitment straightforward. There may be more candidates looking for work, but that often results in more applications rather than more suitable applications.
This is particularly true in specialist markets, where finding somebody with the right experience, a strong track record, the right salary expectations and a genuine reason to join your business can still take time. The strongest candidates may also be speaking to several companies at once, whether the wider market is busy or not.
Having 300 applications is not necessarily more useful than having 30 if the person you need is not among them.
So, are recruitment agencies more expensive?
Sometimes, yes. There will always be situations where a company advertises a role, finds an excellent candidate quickly and hires them without paying an agency fee. In that situation, using a recruiter may well have been the more expensive option, and recruitment businesses should be comfortable acknowledging that.
The argument for using a specialist recruiter should not be that businesses are incapable of hiring somebody themselves. It is that there are circumstances where dedicated search time, market knowledge, an established network and somebody managing the process from beginning to end can reduce the amount of time an important position remains open.
For some roles, that difference may be relatively insignificant. For others, particularly commercially important or specialist hires, it can be substantial.
The cost of the vacancy matters too
When budgets are under pressure, scrutinising recruitment spend is completely reasonable. If you are going to pay £10,000, £15,000 or £20,000 to a recruitment partner, you should understand what you are getting for that money.
The same level of scrutiny should also be applied to the alternative. How long do you realistically expect the role to remain open if you recruit internally? How much productivity or potential revenue is attached to the position? How many hours will people across the business spend trying to fill it? How long will the new hire take to become fully productive once they start?
None of those questions has a perfectly precise answer, but they are still worth asking if you want a realistic view of what the hire is costing.
Why we built our Recruitment Cost Calculator
That is the reason we created our Recruitment Cost Calculator.
Most businesses can tell you almost immediately what a recruitment agency will cost them. It is much harder to put a number against the cost of an unfilled role, the internal time spent on recruitment, advertising costs or the potential impact of making the wrong hire.
The calculator brings those elements together so businesses can compare the two routes more realistically. You can enter the salary, sales quota where relevant, expected ramp-up period, internal time to hire and the amount of resource your team would spend managing the search. You can then compare that with the expected cost and timeframe of working with Ultimate Asset.
Importantly, the assumptions can be changed. If your internal team regularly fills specialist positions quickly, put that into the calculator. If your expected time to hire is longer, change it. If the role is not revenue generating, use the numbers that make sense for your business.
The aim is not to produce an answer that always says you should use a recruitment agency. If hiring directly is genuinely the more cost-effective route, the numbers should be allowed to show that.
The recruitment fee may not be the biggest cost
Ultimately, this is less about recruitment agencies versus internal hiring teams and more about understanding what an open position is actually costing the business.
If you can find the right person directly, quickly and confidently, you should. But if an important role has already been open for several weeks, the team is struggling to find the right people and there is a meaningful commercial or operational impact attached to leaving that seat empty, the calculation may start to look very different.
That is the conversation we wanted the calculator to encourage. Put your own numbers into our Recruitment Cost Calculator and see how the two routes compare.
You may find that hiring directly is still the right answer. You may also find that the recruitment fee was never the biggest cost in the first place.
