An interview with Brett Hay, the recruitment specialist of Expense Reduction Analysts – Asia Pacific team. Having joined Expense Reduction Analysts in 2002, Brett brought a wealth of experience in senior general management roles with companies including Mobil Oil, Mitre 10, and BDS Recruit, a national recruitment firm. With superior consulting and strategic skills, Brett has a solid understanding of the operational needs and constraints of Enterprise, Corporate, and SME clients.
“Over the past 12 months, we have seen a marked increase in employers demanding better new-hire retention rates from recruiters on their preferred supplier panels”, says Mr Brett Hay, ERA’s category specialist in Employment Services. “It comes down to one question: how recruiters can help employees stick around?”
What are the key employment risks for employers at the moment?
Many employers regard their greatest risk to be the hidden cost of losing staff, and so are seeing the lowering of staff turnover as the key to reducing risk. This is due to a shift in perception – businesses are recognising that a thorough initial recruitment process, even with upfront costs, is a better strategy in the long term than the high price of replacing employees.
Quality of hire and staff retention concerns are particularly acute for mid-level manager roles, even more so in organisations with 500–1,000 employees. Repeated hiring incurs the cost of onboarding, training, and the opportunity cost of mentors supporting the new hire.
This has led to a demand for more extended guarantee periods, which now feature heavily in recruitment contracts. Currently, the standard guarantee is for three months, but for a role earning $100–250k pa, it takes at least three months for that person to become effective (if at all).
For executive positions, six- or twelve-month guarantees are more common, which covers this learning time. However middle management roles are in need of a solution.
What are the indirect costs of staff turnover?
These are often the invisible costs. For a recruit to be trained and mentored for an initial period of 3 months, the indirect cost is the loss of productivity from not only the departed employee but also that of the mentor/trainer during the training period. Also, the loss of team cohesion and tacit corporate knowledge from the departing employee can have an unmeasurable impact on the bottom line.
Payments for temporary-to-permanent conversions are under pressure as well. Previously, conversions after three months would attract a fee of 60% of the recruitment fee, and four-to-six months would be 25%, however now clients are pushing back, and fees use much lower ratios earlier in the relationship.
Practical advice for employers:
Understanding the way your company works, as well as the way recruiters do business help you get the best value for money.
How can employers reduce their risks of cost blowouts?
- Understand your business cycles
Many small businesses experience seasonal fluctuations so casual and temporary staff can get you through the peaks without full-time staff commitments. When engaging recruitment agencies, here are some questions you should ask yourself when it comes time to review the cost and the value for money proposition.
- How effective is your current recruiter in attracting quality staff you can retain?
- Have you got full transparency of your recruiters’ pricing to know you are receiving value for money?
- Are you receiving adequate support from them with minimal time expended?
- Do you engage the minimum number of recruitment firms while maintaining the maximum level of coverage for all positions?
- Recruit the Right Recruiter
The recruitment industry has a high staff turnover. Take time to select the right agency who listens to your needs, has a high level of integrity, shows a sense of urgency to assist and has excellent people skills.
- Plan Ahead
Engage an agency that can assist in the strategic planning process to get you through the peaks ahead of schedule. Be realistic with the deadlines you place on the agency.
- Clearly specify what you want
Be very specific with the agency. Detail the list of roles you need to fill, provide a clear job description, complete with skill sets, competencies, and personality type.
- Communicate your Company Culture
Finding the right technically qualified person is only half the job – they have to fit in. Explain the elements of your culture to the agency, so they find you the right person.
How can you find the biggest opportunities for savings?
- Negotiate your Needs
Agencies charge a fee for the service based on the amount of work. Do you want them to do “the lot”, i.e., advertise, recruit, interview, induct, and payroll or do you want to take a modular approach, and complete some tasks yourself? Ask for the fee for both permanent part-time as well as full time.
- Ask about Add-ons
If, after a while, you wish to transfer a casual employee to permanent, know the applicable fees payable. On the flip side, if the employee is unsuitable, ask about the conditions of replacement. For permanent staff, most agencies will recruit a replacement at no charge during the first three months. Should you wish to have the agency to simply payroll a staff member, make sure, you request this service upfront before you appoint the agency.
What’s happening in the recruitment industry?