Recruitment Agency vs. DIY Hiring: Which is Best for UK SMEs in 2023
Posted on 5th September 2023 at 15:20
Hiring talent can be a make or break for a growing UK SME. Get it right, and your business could scale new heights. Get it wrong, and growth could screech to a halt. But recruiting is challenging - it requires ample time, extensive expertise, and access to the right networks and candidates. This presents small and mid-sized companies with a dilemma: Is it wiser to hand off hiring to an external recruitment agency or to keep the process in-house and do it yourself (DIY style)? The answer depends on several factors.
This article will explore the upsides and downsides of agencies versus DIY hiring. You'll discover situational factors to consider, from hiring volume to compliance risks and everything in between. We'll also provide tips on choosing the perfect agency partner if you go that route. Any SME looking to add top talent would be careful to consider this topic seriously. The stakes are high, but armed with the correct information, you can make a hiring decision that propels your organisation to new heights.
Benefits of Using a Recruitment Agency
Partnering with an experienced recruitment agency provides UK SMEs with access to hiring expertise, networks, and resources that would require more work to match internally. There are several key advantages agencies offer during the recruiting process.
1 - Expertise and Experience
Recruitment agencies specialise in the science and best practices of hiring. They research the latest trends in attracting top talent and use data-driven approaches to source, engage, assess, and onboard the best candidates. Years of operating in the recruiting space also build a significant experience that SMEs can leverage.
Agencies develop extensive networks and candidate pools tailored to different roles, skills, and industries over time. Rather than starting from scratch, SMEs immediately gain access to these pre-screened talent networks through a partner agency. This results in faster and more efficient hiring compared to internally focused efforts.
Many recruitment firms also build deep expertise within specific business sectors. This specialisation allows them to better understand the nuances of roles and identify harder-to-find candidates that are fit for the industry.
2 - Time Saving
Handling screening calls, interviews, assessments, and candidate communications requires significant time investment. Agencies take on much of this workload, saving SME hiring managers and staff dozens of hours per role. Rather than juggling recruiting on top of their regular workload, staff at SMEs can stay focused on core business operations.
By offloading the bulk of the hiring process to specialists, SMEs can dedicate their limited resources to business-driving activities. Agencies also can ramp up hiring volume as needed, while internal recruiters at SMEs are constrained. This agility is invaluable.
3 - Access to top talent
Experienced recruiters have finely-tuned skills in attracting, engaging, and assessing top-tier candidates. Their full-time focus on recruiting and extensive outreach capabilities enable agencies to connect with talent that an SME may need help to reach.
Many skilled professionals are not actively job-seeking but could be open to a new role if the opportunity is presented. Recruitment agencies excel at identifying and pitching these passive candidates. This gives SMEs access to talent that may have not been aware of or considered their company.
4 - Risk Mitigation
While cost reduction is often cited as a motivator for DIY recruiting, a bad hire can be exponentially more expensive than recruitment fees. The agencies' vetting, screening, and assessment capabilities help minimise hiring missteps.
Recruiters also undertake extensive reference and background checks to uncover any red flags. This provides a layer of protection and assurance for SMEs around candidate quality.
Relying solely on internal referrals or limited talent networks increases exposure. Partnering with recruitment experts mitigates overall hiring risk.
Downsides of DIY Hiring
While managing the recruiting process in-house may seem like an easy way for SMEs to reduce costs, undertaking hiring themselves has several drawbacks to consider carefully.
1 - Lack of Expertise and Bandwidth
Only some SMEs have hiring managers with the same recruiting expertise as an agency. HR staff or business owners will likely need to match specialist skills in sourcing, screening, and assessing top talent.
In-house recruiting also consumes substantial time for existing staff. Every hour spent posting listings, screening candidates, and conducting interviews detracts from focusing on core business priorities. This hidden cost of DIY hiring is immense.
2 - Candidate Sourcing Challenges
Limited networks and branding make it difficult for SMEs to reach and engage candidates, especially passive ones open to new roles but not actively applying. Recruiters dedicate significant effort to building candidate pipelines.
With increased competition for top talent, SMEs risk losing out on skilled candidates without the ability to get in front of them. Candidates often need to pay more attention to outreach from unknown companies.
3- No Specialisation
While recruitment specialists focus exclusively on hiring, SMEs must balance recruiting with their primary goals. This lack of role specialisation puts them at a disadvantage.
Understanding how to craft compelling employer branding and role positioning is only possible with specific expertise. SMEs are less likely to sell candidates on opportunities successfully.
4- Compliance Risks
Navigating employment laws and regulations is complex for businesses, especially SMEs with limited legal and HR experience. Agencies keep fully abreast of compliance issues.
Mistakes like inappropriate interview questions, biased screening, improper employment offers, and more carry legal exposure. Mitigating these risks requires specific expertise that SMEs often lack.
Relying on informal hiring practices is risky without the right advice and oversight. Agencies provide an added compliance safety net.
Key Factors to Consider
Determining the best hiring approach for your SME requires carefully weighing several essential factors. While the benefits of an agency partnership are compelling, only some companies's situations and needs align. Similarly, DIY hiring can work well in some scenarios but entail substantial risks in others. Some of the most crucial considerations include:
• Hiring Volume - For SMEs only making occasional hires, DIY may suffice. But those needing to fill high volumes of roles continuously benefit more from an agency partnership. Agencies have a greater capacity to scale hiring.
• Urgency - When new hires are urgently needed, agencies can activate their networks faster. Internally, it takes more time to post openings and source candidates. Timelines under 30 days favor agencies.
• Internal Bandwidth - If existing staff have minimal capacity, agencies prevent recruitment from becoming an overhead. But if SMEs have available HR staff, DIY is more feasible.
• Internal Skills - Even with bandwidth, lacking internal recruiting skills and expertise creates risks. Weigh the team's hiring capabilities and training requirements.
• Compliance Factors - Consider potential regulations, legal exposure areas, and other risks relative to the SME's size and sector. Agencies help mitigate compliance gaps.
• Agency Fees - Upfront costs may seem high but can pay dividends long-term. Weigh the ROI of quality hires against fee structures. Deep discounts may signal poor service.
• Quality Emphasis - For roles where hiring mistakes carry high risks, agencies lower risks. If minimizing costs is a priority, DIY is possible.
• Candidate Competition - Agencies provide an advantage for niche or highly sought-after talent. DIY works better for abundant candidate pools.
• Employer Branding - Agencies excel at promoting SME opportunities that candidates may overlook. Weaker branding favors agencies.
There are no absolute rules - the best approach depends on the SME's unique situation. Carefully analyzing the above factors clarifies risks, needs, and priorities to make the right hiring decision.
When Does It Make Sense to Use an Agency?
The most compelling situations for SMEs to engage a recruiting partner include:
• Frequent Hiring Needs - Ongoing high-volume roles favour an agency model. DIY works for occasional hiring.
• Niche Skill Needs - Accessing specialised talent with limited candidate pools is more accessible via agency networks.
• Fast Turnaround Required - Agencies can source and engage candidates much quicker than internal teams.
• Limited Internal Bandwidth - With capacity for recruiting, agencies can avoid hiring becoming an overhead.
• Limited Sourcing Reach - Agencies invest heavily in candidate pipelines and networks that SMEs need more.
• Highly Competitive Roles - Specialist firms are better equipped to win top talent with many options.
• Talent Scarcity - Rare or in-demand skills are challenging to find internally. Agencies have the advantage.
• Specialised Industry - Complex, regulated industries like healthcare favour agencies with specific expertise.
• Compliance Concerns - Reducing legal and regulatory exposure risks makes agencies advantageous.
• Urgent Hiring Need - When it's critical to get hiring right immediately, agencies provide insurance.
The above situations amplify the benefits of a recruitment agency partnership for SMEs. Assessing your organisation across these dimensions guides when to consider engaging an external recruiting provider.
How to Select the Right Recruitment Agency
Not all recruitment agencies are equal. Choosing the right partner tailored to your SME's needs is crucial. Follow this step-by-step approach:
Step 1 - Check Industry Specialisation - Look for agencies with depth in your specific sector and role types. Avoid generalists.
Step 2 - Vet Expertise & Process - Assess screening, assessment & hiring practices. Look for data-driven approaches.
Step 3 - Review Screening Standards - Understand how they evaluate candidates beyond resumes. Look for customisation
Step 4 - Validate Reach & Networks - Gauge access to candidate pipelines and ability to attract passive candidates.
Step 5 - Evaluate Experience Level - Seek firms focused on SMEs specifically, not just enterprises. Cultural fit is key.
Step 6 - Assess Culture Fit - The agency should reflect your employer brand. Ensure alignment.
Step 7 - Compare Fee Structures - Beware extreme low-cost providers. Understand payment terms.
Step 8 - Check Guarantees - Some firms offer guarantees around time-to-fill or hiring satisfaction.
Evaluating recruiters carefully ensures you choose the right partner for your SME's unique hiring needs and culture.
Finding and hiring top talent is a crucial activity for any scaling SME. However, internal recruiting can be challenging, given limited resources, expertise, and capacity. Partnering with a specialist recruitment agency provides compelling benefits - from access to pre-screened candidates, hiring process and workload assistance, and reduced compliance risks. Depending on specific needs and circumstances, DIY recruiting may work well for some SMEs. Carefully examining factors like hiring volume, costs, required speed, and internal capabilities makes clear when an agency is likely to deliver ROI versus managing the process in-house.
For SMEs that determine an external recruiting provider makes sense for their situation, following a thorough selection process ensures picking the right agency match. With a solid foundation around the pros, cons, considerations, and criteria, UK SMEs have the information to make intelligent, data-driven hiring decisions. For those recognising the potential value of specialist support, don't leave growth to chance. Partner with a trusted recruitment advisor and transform your hiring capabilities overnight.
• What typical fees do recruitment agencies charge?
Recruitment fees often range from 10-30% of the placed candidate's annual salary. Lower fees of around 15% are more common for mid-level roles, while senior hires may incur up to 30% fees. However, fees vary based on position, industry, agency level, and services included.
• How quickly can a recruitment agency fill a role compared to DIY hiring?
Agencies typically fill roles in 2 weeks-2 months depending on the complexity, while average DIY hiring takes closer to 3-4 months. Agencies have more resources dedicated full-time to sourcing candidates faster.
• Do recruitment agencies offer any hiring guarantees or insurance?
Some agencies offer guarantees around minimum candidate slates presented, time-to-fill for roles, or even refunds if a placed candidate leaves shortly after hiring. Guarantees assure the hiring outcome.
• What backgrounds do recruiters typically have?
Most recruiters have a background in human resources, talent acquisition, psychology, sales, customer service, coaching/mentoring, or a related field. Specialist recruiters often have experience in the industry they focus on.
• How can I ensure a recruitment agency understands my company's employer brand and culture?
Discuss your employer's brand positioning and values early on. Conducting the agency vetting process in person also helps assess culture fit. Meet prospective recruiters face-to-face.
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