Recruiting Software vs. Employment Agencies: Which is More Cost-Effective

Many companies struggle with the decision about whether to recruit employees themselves, using recruitment software or other tools, or whether to simply hire an employment agency to do the work for them.  Let’s look at some of the factors that come into play.

1. Time to Hire:  Recruitment Software vs. Employment Agency

Winner – Employment Agency

The perception of most hiring managers is that the fastest way to a hire is through an employment agency. This may or may not be true. Employment agencies are incentivized to fill a role as quickly as possible, while your own HR team rarely receives the same monetary rewards.  If there is a strong business case to fill a position quickly, an employment agency may be your quickest route to a hire, but remember, the cost of agency hires can quickly add up.  Agencies look to get the highest rates possible for their candidates, and their own markups can go as high as 75%.

2. Candidate Quality: Recruitment Software vs. Employment Agency

Winner – Even

While in theory, an employment agency takes great care to vet potential candidates, modern economics are bringing that theory more into question. Employment agencies are more likely to be clamoring for your business than more job candidates—and they’re likely using their own recruitment software to get them. Many employment agencies put out a cattle call any time a job opening appears, force candidates to make their case for the job, and then spam resumes to your hiring manager or HR team.  While it might be nice to quickly have a dozen resumes on your desk, the candidate quality may not be any higher than if you’d done the search yourself.


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Transition from Offer to Onboard: Recruiting Software vs. Employment Agency

Winner – Recruitment Software

Many companies that use an employment agency to speed up their hire time lose that time during the onboarding process.  If you’ve made a hire in-house, you’ve already collected resumes, job history, and other data that your HR team will need to complete the hire and get your employee transitioned.  If you’re working with an agency, though, you’re starting from scratch.  To make matters worse, you now have a middleman you need to work through—whose work is now done after they’ve made the “sale” —which often unexpectedly delays a start date.  And of course, your team has to finalize the contract with the employment agency—a more complex transaction than a direct hire.

4. Overall Cost: Recruiting Software vs. Employment Agency

Winner – Recruitment Software

Consider for a moment the overall cost of hiring employees through employee agencies vs. purchasing recruiting software.  While agency markups vary, an average markup of 40% is not uncommon.  Let’s say your company hires 10 new employees in a year, at an average salary of $60,000.  The additional cost of hiring those employees through an agency is $240,000/year.

The cost of even the highest-end recruitment software falls far short of that yearly figure.  While you might have to grow your in-house team slightly to handle the additional demands of  recruiting—the software itself softens that load through social media recruitment features, automatic job board posting, digital data gathering, pre-screening, and workflow systems that guide employees through the onboarding process.

None of this means you should never use a staffing agency, but adding an applicant tracking system to your HR suite is almost always a worthwhile investment, and gives you the control.

myStaffingPro is a best-of-class applicant tracking system backed by Paychex, a 3 billion-dollar company. Our software is cloud-based, which means it’s constantly being updated and improved.

Contact us today to find out more, see a demo, or request a quote.

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