Employment Agencies: The Lean Way to Staff Up

Business.com / Hiring / Last Modified: February 22, 2017

For small businesses, employment agencies can save precious time and money. This article reviews what you can expect.

These days, it’s hard to argue against outsourcing just about everything but your core competencies. Functions that were once considered part and parcel of any business operation -- human resources, for instance -- are now affordable as an outsourced service.

Filling a job opening takes time and money, and a considerable amount of grunt work. It's not just a matter of finding the right person for a job, but in properly “onboarding” the new employee, i.e., processing and approving all the necessary employment paperwork, setting up payroll and benefits, and even providing training in some cases. For small- and mid-sized businesses, particularly startups, this can be a distraction and a strain on limited resources.

Citing statistics from the American Staffing Association, Jill Jaracz notes “hiring a worker can cost 7 to 20 percent of that position’s salary and take 35 to 40 days." Worse is the cost of hiring the wrong person for the job. Inc. Magazine contributing editor John Brandon provides and example:

[...] the total cost of recruiting the wrong employee includes hiring, total compensation, eventual severance pay, and other factors like legal fees and totals more like $840,000 when you factor in all of these costs. (This is based on hiring a mid-level manager who works 2.5 years and is then terminated and replaced.)

Even a low-skilled employee making $8 an hour can end up costing a company about $3,500 in turnover costs, according to Investopedia writer Annie Mueller.

How Employment Agencies Function

An employment agency is an intermediary between job seekers and job providers. Also called recruiters or staffing agencies, employment agencies relieve the employer of the legal requirements associated with directly hiring employees. The pitch for employment agencies is:

1. They take the hassle out of the recruitment process
2. They help ensure the right person for the job
3. They reduce overall hiring and retention expenses
4. You can try a temp and only hire them if they work out

Employment agencies have a variety of ways of charging for their services. The industry norm is to charge placement fees for permanent placement, and a percentage of an employee’s wages for temporary placement. In the case of temporary workers, you'll want to know what wages and benefits they offer their contractors; the better the pay package, the higher the overall caliber of recruits they'll send you.

How to Evaluate an Employment Agency

Most established recruiting and staffing agencies have been around for as long as they have because this is what they know how to do. In fact, that’s one important thing you -- the employer – should look at when considering an employment agency: how long have they been around and do they live up their reputation?

Here are some key considerations when evaluating employment agencies:

  • Do they understand your industry? Do they have a track record in providing quality people for the positions you need to fill? Agencies that specialize in certain industries and job competencies may attract more highly qualified candidates than general staffing firms.
  • Does the agency actually spend time recruiting? Or does it just collect resumes? The Internet is literally crawling with job boards, so there are a lot of possibilities an agency can throw at an employer. Just throwing resumes at you isn’t what you want, though. When an employment agency presents candidates, it should be a result of careful selection and qualification, not because of a keyword search on a bunch of resumes. Fortunately, it doesn’t take long to figure out which route an employment agency is taking. If they're taking a quantity-over-quality approach, it won't cost much to find another employment agency.
  • What is their screening process? You don't want to receive an inbox full of resumes that have not been reviewed first. Does the agency provide you with a shortlist and checklist, or some other method of ranking the applicants? What are the criteria for making the grade -- and are those criteria ruling out people who would have been good candidates in your eyes?
  • Interview the agency. Just as you would interview top applicants for a position, try to communicate directly with the person who will be handling your account for the agency. Quiz them about state employment laws and their practices. This person is likely to be your pipeline to qualified staff; if he or she does not understand your business or your goals, it could be difficult to get what you need from that agency.

In one way, hiring an employment agency is just like hiring an employee -- you need the right fit for your business. The good news is there’s a lot less work and expense in finding an effective go-between than there is in doing all the legwork yourself.

 

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