Recruitment agency numbers explained
A recruitment agency can post a record month of fees and still struggle to pay its people, because a fee is not a margin and an invoice is not cash. This guide is for owners and managers of recruitment and staffing agencies, and for independent recruiters who run their own desk. Every number comes from your own records: your applicant tracking system, timesheets, payroll, your terms of business and the fee ledger. Your tax rules, employment law and contract terms decide what applies to you; the calculators simply apply the figures you enter.
1. Know what a recruiter desk costs before you judge a fee
A desk is one recruiter and everything needed to keep them billing. Before you call a fee good or bad, know what that desk costs to run for a year. Take salary and benefits from payroll, the cost of job boards, your applicant tracking system and other tools from your supplier invoices, and a share of rent and admin from your accounts. Then take the number of placements the desk made last year from the fee ledger, together with the net fee per placement. A placement is one candidate starting work with a client through your agency. The recruiter desk cost calculator returns the desk cost, the cost per placement, the desk profit and the number of placements the desk needs to break even. If you are pricing a new hire, the employee cost calculator shows the full cost of the salary you plan to offer.
2. A permanent placement is a margin, not a fee
The fee on the invoice is the start of the sum. If you share the job order with another agency or a second recruiter, part of that fee leaves through the split. A job order is a client's request to fill a specific role, recorded in your applicant tracking system. Then come the hours your recruiter spent sourcing, screening and managing interviews, and any advertising you paid for that role. Take the salary and fee percentage from the signed terms of business, the split from your split agreement, hours from your timesheets or activity log, and advertising from supplier invoices. The placement fee calculator returns the gross and net fee, the delivery cost, the margin on the placement and the effective hourly rate the work earned. If recruiters earn commission on that fee, run it through the commission calculator so you see what the agency keeps.
3. Temp margin: markup on pay is not margin on bill
Temporary and contract work earns money by the hour, and two percentages get mixed up. Markup is what you add on top of the pay rate. Margin is what is left of the bill rate after every cost of the worker. The gap between them is on-costs: the employer taxes, insurance and statutory costs you carry on each hour paid, such as holiday pay and pension contributions where they apply. Take the pay rate from the assignment schedule, on-costs from payroll, the bill rate or markup from the client's terms of business, and hours and weeks from timesheets. The temp staffing margin calculator returns the bill rate, the loaded cost per hour, margin per hour and as a percentage, margin per week and per assignment. To see how a markup converts into margin on any price, the markup and margin calculator shows both side by side.
4. Read the funnel from your own system
Fees arrive at the end of a long funnel, and the funnel tells you where effort is wasted. Pull the job orders received and filled, the dates each was opened and filled, the number of candidates submitted to clients and the interviews held, all from your applicant tracking system. The fill rate calculator returns your fill rate, your days to fill and the ratios between submittals, interviews and placements. Run it per recruiter, per client and per type of role. A client whose job orders you rarely fill is costing desk time with little return, and the cost per placement from the recruiter desk cost calculator shows what that time is worth. If your recruiters are stretched, the client capacity calculator helps you decide how many open job orders each desk can carry.
5. Guarantees are a liability, so reserve for them
If your permanent terms of business promise a free replacement or a rebate if the candidate leaves within a set period, then until that period ends part of each fee may still go back to the client. Take the guarantee period and the rebate scale from your terms of business, and count the placements that fell off inside the guarantee from your fee ledger and applicant tracking system. Use your own fall-off rate from that record, not a guess. The guarantee rebate reserve calculator returns the expected rebate per placement, the reserve as a share of each fee, the annual reserve and your net fees after it. Hold that reserve back before you count the month as profit, and before you pay commission on fees still inside their guarantee.
6. Watch the cash gap between invoices and payroll
A permanent fee is invoiced when the candidate starts and paid on your client's terms, while temps are paid weekly from your payroll, often long before the client pays your invoice for those hours. The gap between the two is cash you must fund. Take start dates and invoice dates from the fee ledger, client payment terms from your terms of business, and weekly temp payroll from payroll records. Set clear due dates with the invoice due date calculator, apply any late payment charge your terms allow with the late fee calculator, and check the margin per week from the temp staffing margin calculator against what you pay out each week. The cash runway calculator shows how long you can cover payroll and overhead while client money is still on its way.
7. Review the desk monthly and the terms of business yearly
Once a month, rerun each desk in the recruiter desk cost calculator with that month's placements, and check the funnel in the fill rate calculator. If recruiters split time between sourcing, client work and admin, the utilization rate calculator shows how much of the week goes on billable activity. Once a year, take out your terms of business and check the fee percentage, the guarantee period and the rebate scale against the margins from the placement fee calculator and the fall-offs in the guarantee rebate reserve calculator. If you want the routine in one file, the Staffing Agency Margin Workbook keeps desk costs, placement margins, temp margins and guarantee reserves together for that review.
The mistakes that cost the most
- Counting the gross fee as income. Splits, recruiter hours and advertising come off first. Check the real margin on each role in the placement fee calculator.
- Pricing temps on markup alone. A markup that looks healthy can leave little once on-costs are paid. Check margin per hour in the temp staffing margin calculator.
- Booking fees still inside their guarantee as profit. A fall-off can take back part of a fee you have already spent or paid commission on. Reserve with the guarantee rebate reserve calculator.
- Taking every job order. Roles you rarely fill still use desk time. Track fill rate per client in the fill rate calculator and put effort where placements happen.