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“I’ve spoken to two other agencies who do exactly the same thing as you, and both are considerably cheaper. Now can you either sharpen the pencil, or explain what magic you do that justifies that kind of margin?”.

And so goes my Thursday morning. Now I could have firstly explained that there are not two other agencies that do exactly what I do. There isn’t even one. Not to boast, but there is no one who has specialised in recruiting internal recruiters in New Zealand for over a decade. Not like I have. No one else is that stupid. I could have explained how the ability to source a senior Internal Recruitment contractor with the requisite skills in less than one hour represents the tip of the iceberg. Being able to deliver like this comes from years of hard grind, countless meetings, coffees, wines, events (that we pay for), and half a lifetime on the phone. I could have explained my operating costs – the website, the ads, the office, the staff member who jumped on the phone to check the contractor’s availability, payroll, the tech platform (which we built) that offers seamless timesheeting and invoicing. I could have used my recruitment 101 and explained the value that this Contractor would add to the organisation, and how that at $100/hr, they would save multiples of this in agency fees or lost opportunity.

I did none of the above.

I lost most of my desk time last week after my daughter was admitted to hospital. Don’t worry – she’s fine. This, coupled with an already exceptionally busy week this week, has meant that 15 minutes is 15 minutes I don’t actually have. And if I did, I was not in the mindset to “sing for my supper” as it were. Instead, my response was closer to what Ross Clennett would tell you to never say:

“The margin is the margin because I decide the margin. If you can get better for cheaper, than I suggest you go for it.”

I have been a particularly grumpy bastard of late.

This, perhaps surprisingly, hasn’t seemed to scupper the deal. It would appear that the other providers perhaps can’t deliver the same for less. It’s as if some Agencies have taken to over promising and under delivering. Well I f*cking never. It also got me thinking; Recruitment Contractor margins are one of the most scrutinised figures in business. Most of you have recently been tendering to destroy your soul by recruiting for Government agencies. This panel will be decided, no matter what they tell us, on how low little us agencies will charge. A number that we have to state up front with total transparency. Take any PSA – it comes down to two figures; what percentage we charge for perm placements, and what percentage margin we slap on contractors. Margins are scrutinised so much these days, that I don’t even bother to conceal them from clients or candidates. They both find out regardless, so let’s all just do $20/hr on anything under $100, and 20% for anything above and get on with our day. And this scrutiny seems totally acceptable in a world where other types of scrutiny seem totally unacceptable. Adding to my recent woes, I had an electrician round recently to fix all my security lights (I need security in case Cassie Roma tries to post her twisted knickers through my letterbox). He charged me for the lights, and added labour. Am I to believe that as an employee, he sees 100% of his hourly rate. Do I question how much he sees? No I don’t. I pay the invoice and think that $1,423.90 is a fair amount to keep angry lesbians off my porch. I, like most middle aged men, buy all my clothes from the same shop. Not once have the folks at AS Colour told me how much my t-shirt cost to make and how much profit is in their fantastic “4 Items for $150” deal. I just like a t-shirt which lasts 2 years for less than forty bucks.

Recruitment margin does not need to be the big deal that is has become. It’s actually pretty simple. A client has the need for a contractor. I have one for $100/hr. If they can add that value to the business, hire them. If another supplier can provide the same calibre of candidate for $90/hr, hire them instead. Then leave the market to sort itself out. If a firm is charging too much, they won’t make placements. If a firm isn’t paying the contractor enough, the contractor will ask for more, or leave the job. All this without having to apologetically justify why we need to run a profitable business.

Anyway, I feel much better now, so thanks for indulging me.


One Comment

  • Jon Brooks says:

    Great post Sean. Clients don’t say “We only work with lawyers at £200 per hour”, so why should they tell us what our rates should be?

    Of course that does put the pressure on the recruiter to be confident in their fee, and be able to justify it to their client when needed. Which is a challenge if the answer is basically that they ‘borrowed’ their terms from their previous company…