Contractors often view agencies as adversaries. Those who wonder what their agency does to earn its margin may not be aware of all the functions a recruiter performs, and the resulting costs to the recruiter’s business.
In fact, recruiters fulfil a vital role in the contracting supply chain. And in some sectors, such as IT contracting, are responsible for placing over 90% of IT contractors in contracts.
According to Mark Dexter, managing director of specialist information management recruiters KDR Recruitment, the relationship between recruiters and contractors is symbiotic, and both parties should be benefitting from the arrangement.
“Without contractors, we wouldn’t have a business model, and without recruiters, many contractors would struggle to find contracts direct with clients,” explains Dexter. “Good, long-term relationships are essential.”
Dexter has identified ten key areas where a typical recruiter works on behalf of their contractors to match them with suitable clients and contracts. He also highlights the costs associated, which contractors rarely see.
So, next time you wonder what your agent does to earn their margin, think about these ten things that recruiters do to win you contracts:
1. Sales/lead generation
“Without clients, recruiters and contractors would be unemployed,” jokes Dexter. “I’d typically visit at least one client each week, typically seeing about fifty a year. On top of that, most recruiters have at least one consultant, often an entire team, working on lead generation. To build a new area of recruitment, it takes a consultant sat at a desk hitting the phones eight hours a day for fifty days talking to contractor candidates and clients.”
Securing a place on a client’s preferred supplier list (PSL) is also a major investment, particularly for mid-sized and smaller agencies without a dedicated bids and tenders team. “We usually spend four to five days of a director and consultant’s time for each PSL presentation,” says Dexter. And even if the agency ‘wins’, there is no guarantee of a return. That’s because the agency only gets paid when they place a contractor and they may be up against several other agencies also on the client’s roster
However, the benefits to the contractor are clear: once an agency is on the list, it can deliver contractors a stream of high quality contract opportunities.
2. Database creation and management
Having found a client who needs contractors, the recruiter’s next step is to find the contractors to fill the roles, although in practice Dexter says that they already have potential candidates in the database when taking assignments from clients.
“A high quality candidate database is what defines a recruitment agency, and they are expensive to create and maintain,” continues Dexter. “We have a full time dedicated candidate database administrator, plus we license powerful cloud-based database software to ensure we get the best results for each client.”
3. Marketing, advertising and website
Dexter explains that an accessible, informative and content rich website, a customer relationship management system, access to job boards and databases and advertising are all required to ensure contractors and clients are matched efficiently.
“A contractor placement can cost £1,000 in advertising and database searching,” he notes. “On top of that, we have full time marketers working in-house alongside our database administrator, a part-time marketing consultant plus an IT manager, software licensing and web hosting costs.”
4. Training and seminars
“Good recruiters will train their consultants to become experts on the industry sector in which they work,” says Dexter. “That way, consultants can better understand differences between contractors’ skill sets and what is required to meet each client’s specific skills requirements.”
Without contractors, we wouldn't have a business model, and without recruiters, many contractors would struggle to find contracts direct with clients
Mark Dexter, KDR Recruitment
This may involve attending formal training, attending industry-related seminars and events, and being mentored by senior colleagues. “The objective is not to waste anyone’s time putting forward contractors for contracts they are not ideally suited to,” he adds.
As a recruiter who understands the implications of IR35 for contractors his agency places, Dexter believes that contracts are of vital importance: “Investing in high quality, well structured and robust contracts from the outset saves costs and hassle in the future. We regularly review our contracts to ensure they take account of industry standards and changes in IR35 best practice.”
In addition to initial and ongoing solicitor’s fees, recruiters also incur the costs of joining membership organisations such as the Association of Professional Staffing Organisations (APSCo) to ensure there is expert advice on hand if needed. And some larger agencies have dedicated teams who focus purely on contracts and contract-related issues.
6. Vetting and references
The vast majority of clients require at least a basic reference before hiring a contractor. Some clients, particularly financial institutions and those working in sensitive areas, require more in-depth positive vetting. The responsibility for securing references and conducting some vetting usually falls to the agent.
“There is a time cost associated with recruiters contacting a contractor’s references and having a short confirmation call, then perhaps asking for a follow-up in writing,” explains Dexter. “When an external agency is asked to conduct a more in-depth investigation, the cost is often borne by the agency.”
7. Payment and invoicing
Dexter believes that a good agency should pay its contractors promptly: “The time difference between us paying the contractor and being paid by the client is an average of 38 days. We pay contractor invoices within seven days and get paid by clients on average after 45 days. That’s a hefty chunk of interest on a rolling basis.”
On several occasions, Dexter has known a contractor who has been offered the opportunity to contract directly with the client. On every occasion, the contractor turned it down and requested to contract via an agency because of late payment fears, and the hassle of having to chase corporates for money.
Alongside contracts, Dexter points out that all recruitment agencies must become and remain compliant with a huge range of recruitment industry specific legislation, such as the Agency Workers Regulations (AWR), the Conduct Regulations and employment legislation.
Not only do the agencies have to comply; it is often the individual consultant who has to be trained to comply as well. As with contracts, a larger agency will have an entire team dedicated to staying compliant.
“To protect their contractors’ interests, proactive agencies will call the client at least 30 days before the end of a contract, if not earlier, to confirm the client’s future intentions regarding a contract renewal.”
If there is no renewal planned, being proactive means the agency can have another contract lined up for their contractor as soon as they finish their current assignment, if that’s what they want. And if there is an opportunity to secure an increased rate for their contractor client, an agent will take it.
10. Reputation and established network
Dexter suggests that one of the most intangible yet most important benefits a recruiter brings to the table is their reputation and established network. He explains: “Alongside those fifty client meetings I have each year, I will be spending time in maintaining and developing my networks.
“Over the years, this has led to exciting new areas opening up with opportunities for both clients and contractors. It is often those contacts made years in the past and carefully nurtured that can lead to the most interesting and lucrative opportunities for contractors down the line. You can’t put a price on that.”