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Who Wins When a Recruitment Agency Charges Temps an Admin Fee?

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by Lisa Johnson

about 2 years ago

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I have written about this before, but this week we saw a candidate AND client go into meltdown over an admin charge that was being imposed on the temporary employee by an agency.  Basically, the temp had been working for almost a year and was being hit with a 2.5% charge on her pay for every hour that she worked.  She finally said, 'Enough!' and decided to leave the role because the agency refused to remove the charge.  The client even asked the agency to remove the charge to no avail. The good news for us is that we were able to find the candidate a new role almost instantly AND we managed to pick up new jobs from the client (and in fact they became a new client for us as a result of them deciding not to work with the other agency).  So I guess if we were looking for winners in this situation, people2people can take top spot on the podium. 

But there can never truly be winners when the actions of agencies affect both the clients' and candidates' perception of what we do and how we do it.  As an industry, there is already a pervasive view that we rip people off – and when agencies are charging admin fees to candidates for payroll, then I have to admit it: someone is definitely getting ripped off.  Including the recruitment consultant (more on that in a bit). Who is getting ripped off and why?

The candidate

This one is obvious.  For every hour that the candidate works, the agency is taking 2.5% of the value of the gross wages.  Dear God, I hope it's from the gross wages, because if they are taking 2.5% of the net wages, then I am even more horrified. The logic for this charge is that it covers the cost of administering the payroll. This would be fine if they were not already including the cost of administering the cost of payroll in the rates they charge the client.

The client

I wrongly assumed that the only time this 2.5% admin fee was charged was when agencies were working under ridiculously tiny margins and it was the only way of mitigating costs.  Silly me. In the example of the candidate I outlined above, the agency was working at above industry standard margins.  So the rate the client is paying very much includes a charge that covers administration and back office costs. The client is being ripped off because they are being charged a fee that includes a percentage that is already being paid for by the candidate.  The agency has double dipped.

The recruiter

I would HATE to be a recruitment consultant responsible for justifying this admin charge to a candidate.  A candidate they have worked hard to get across the line and introduce to a client.  To risk losing both candidate and client over this sneaky little fee.  And I would hate it even more when I realised that the money earned from this fee goes straight to the bottom line and is NOT included in my fees/margin and therefore I don't earn any commission from it.  I have to do all the hard work and negotiations, but my employer is taking all the profit.  Yeah, if I were THAT recruiter I would feel well ripped off. Look, I am the first person to stand up and say that agencies are entitled to make a profit.  

We are in it to make money and be commercially successful.  And it gets harder and harder every year.  The expenses are phenomenally high.  BUT this does not justify double dipping and ripping off your candidates and clients.  And do not even think of whingeing that the back office systems are expensive and you need to cover those costs somehow – those costs are part of doing this business. You need to find a way to ensure that your processes are robust, your staff are experienced and trained, and your systems are cost effective.  

That is YOUR job when you run a recruitment business.  If you can't do this without enforcing additional costs on your candidates and clients, then, quite frankly, you're not very good at your job. Because guess what? There are successful agencies out here who can do all that without ripping off our candidates and clients.

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