5 ways recruitment agencies make money

In this blog, we’ll explore the different ways recruitment agencies generate revenue. From more traditional fee based approaches to on-demand services, whereby each approach can make recruitment businesses a considerable amount of money.

Read on to learn more.

1. Temporary placements

Agencies usually charge a percentage of the candidate's hourly or daily rate for temporary placements.

This fee structure allows agencies to earn a commission based on the duration and frequency of the candidate's work, providing a flexible revenue model that aligns with the fluctuating nature of temporary employment.

The percentage charged can vary depending on factors such as the industry, the demand for specific skills, and the length of the assignment. By charging a percentage of the candidate's rate, agencies can ensure they are compensated for their efforts in sourcing, vetting, and placing candidates in roles that meet the needs of both the employer and the employee. This approach not only incentivises agencies to find the best possible match for temporary positions but also allows them to build long-term relationships with both clients and candidates.

2. Permanent placements

Agencies typically take a commission ranging from 10% to 30% of the candidate's base salary.

This commission is a fee charged to the hiring agency for successfully placing a candidate in a permanent position.

The exact percentage can vary based on several factors, including the industry, the level of the position being filled and market demand. For instance, roles that require highly specialised skills or are at an executive level might command a higher commission due to the complexity and effort involved in finding suitable candidates. 

3. Value adding additional revenue streams

These are additional services that go beyond sourcing candidates, offering greater value to your clients and boosting earning potential, they can encompass the following:

a. Applicant screening

Pre-screening candidates to save clients' time, including checking references, verifying credentials, and conducting phone interviews.

b. Competency testing

Emphasising the essential skills required for the position. For technical roles, this might involve coding challenges, design tasks, or other role-specific evaluations; for soft skills, it could include personality and aptitude assessments, finding the most suitable candidates for your clients.

c. Recruitment development training 

Conducting workshops on subjects such as creating effective job advertisements, leveraging social media for recruitment, and executing engaging interviews could position you and your agency as an industry authority.

d. Ongoing retainer agreements

For certain clients, think about providing a retainer agreement with a set monthly or quarterly fee for a specified number of hires or recruitment service hours. This arrangement guarantees steady income for your agency and prioritised service for the client. However, be aware that retainer fees typically offer a discount compared to your usual placement fees.

4. Building a Network

Achieving success in recruitment relies heavily on building strong relationships. Expanding a wide network of contacts across different industries not only boosts your likelihood of making successful placements but also bolsters your standing in the sector.

This network serves as a valuable asset, offering ongoing opportunities to connect clients and candidates, which is crucial for achieving financial success.

5. Leveraging Technology

In today's digital age, technology is your indispensable ally, changing the way recruitment agencies operate. Technological advancements have introduced a suite of powerful tools designed to streamline recruitment processes, making them more efficient and effective than ever before.

By automating repetitive tasks, recruitment software frees up valuable time for recruiters to focus on building relationships and strategic planning. Additionally, the use of data analytics provides insights into hiring trends and candidate behaviours, enabling agencies to make more informed decisions.

As a result, these developments not only help you operate more efficiently but also significantly reduce overhead costs by minimising manual labour and errors. Ultimately, by embracing these advancements, you can boost your bottom line, ensuring your agency remains competitive and profitable.

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In summary - do recruiters actually make a lot of money?

Recruiters have the potential to earn a significant income, but the actual amount varies based on several factors, including:

• Commission-based earnings: Recruiters often receive a percentage fee based on the candidate’s salary, which can result in substantial earnings for successful placements.

• High-demand industries: Certain industries, for example technology, finance, and healthcare, often require specialised talent, leading to higher fees for recruiters who can source and place qualified candidates.

• Executive search and niche markets: Recruiting for executive-level positions or specialised niches can command higher fees due to the expertise and effort required.

• Repeat business: Establishing solid relationships with clients through networking can lead to repeat business and referrals, increasing the number of placements and potential earnings.

• Contract and temporary placements: Recruiters specialising in contract or temporary placements can benefit from continuous placements and repeat opportunities.

Ready to embark on this journey for yourself? Our team is here to guide you every step of the way. Contact us today to learn more about setting up your temporary recruitment business and tapping into this lucrative market.