Recruiting agency vs internal hiring: What are the cost differences?

Recruiting agency vs internal hiring: What are the cost differences?

For every business, hiring new employees is a crucial step. In addition to engaging and impressing top talent before they even start working for you, it sets the tone for the type of employees you want to attract. Selecting and keeping the best candidates is crucial since they will be the face of your company. 

Your business will have the best chance of attracting the most qualified applicants if you can properly and deliberately plan your hiring procedure and select the best recruitment process. This is commonly done either by recruiting via agencies or by internal hiring. The choice you make between them will depend on your hiring requirements and budget. 

To find the option that best suits your budget, you must compare the costs of hiring employees directly with the costs of hiring employees via a recruiting agency. In this article, you will learn more about the cost differences between them, which will help you understand both options and how they differ, allowing you to choose the best recruiting option for your organisation.

Overview of in-house and agency recruitment process

Before discussing the cost differences, it is better to understand the basics of how the internal and recruiting agency hiring processes work. In-house recruitment involves hiring employees directly, while agency recruitment involves hiring through a recruiting agency. Both methods have advantages and disadvantages. An outline of how they function is provided here.

Internal or in-house recruiters

Hiring an employee to join your HR team is what happens when you use in-house recruiters. From planning and budgeting for new hires to a wider range of responsibilities, they frequently handle more. Together with your managers, they may assist in creating your company’s recruitment strategy and anticipating hiring requirements. Internal staff members may also help with HR and other administrative tasks. 

If your HR team is small and you need additional assistance, this can be helpful. Furthermore, since an internal recruiter exclusively works for you, they are more inclined to concentrate on finding a good fit. Rather than being sales-focused, they are usually people-focused. Long-term workers are what in-house recruiters typically seek out, and they tend to be more committed to the organisation.

Agency recruiters

In order to find candidates for their openings, agency recruiters frequently collaborate with multiple companies simultaneously. Generally speaking, an agency recruiter only manages the recruiting portion of hiring, locating, and screening applicants for your open positions. You might receive assistance from an outside recruiter in managing candidates and setting up interviews. The hiring needs, budget, and other hiring decisions are at the discretion of your organisation. 

When you go with agency recruiting, the emphasis is frequently on sales. The agency recruiter gets paid to bring you a new hire. The agency recruiter doesn’t have to work with the new hire after the job is done, so they might not be as concerned with finding a good fit that matches your company culture. Their goal is to fill the post, get paid, and move on to the next opportunity.

Cost comparison

Choosing between an agency and an internal recruiter is often determined by your company’s budget. Paying a recruiting agency only for the candidates you need makes it nearly less expensive. You can work with them as needed.  It is probably more affordable to use an agency if you hire people occasionally. Although the price varies, it is usually expressed as a percentage of the salary for the job you are filling. 

If the recruiting company does not live up to your expectations, you can move on. You will only be charged when hiring occurs. On the other hand, an internal recruiter is just like any other employee in your company. You have to pay them a salary or hourly rate and provide them with employee benefits like paid time off, insurance, etc., from the company. 

You can compare the costs more easily if you estimate your recruitment needs and find out how much the recruitment agencies you are considering will charge. To find out which hiring agency is less expensive for your needs, add up all of the expenses associated with hiring an internal staff member and compare it to the average amount you anticipate paying for a recruitment firm.

  • Include the cost of internal hiring in your estimate. While comparing costs, bear in mind other limitations such as time, effort, and urgency. 
  • It also costs extra to leave a position unfilled for an extended period of time. In this situation, it would be better to visit a hiring agency.
  • Employing an internal recruiter will cost you the standard salary, which, according to Indeed Salaries, is $50,133 annually on average. 
  • A hiring agency charges a fee, but it is often cheaper than the salary of an internal recruiter. A recruiting agency can also offer more specialised guidance and access to a wider pool of candidates. 
  • Agencies can also provide guidance and advice throughout the recruitment process, helping to ensure that the right candidate is chosen for the role. Moreover, the agency can provide further advice and support after the recruitment process is complete.

The choice between agency and in-house recruiting ultimately comes down to your needs. It is usually more affordable to use an agency if you need to hire people on occasion. Hiring an internal recruiter might be a better option if your recruiting needs are more extensive. Which option is better also depends on your focus. An agency might be a better choice if speed is the main factor in your recruiting goals. 

An internal hire could be more effective if you are worried about making long-term hires that fit the business well and have a high enough demand for hiring. The recruitment process is more efficient when your needs are communicated explicitly, regardless of the option you select. Look into another agency if the one you hired needs to provide you with a good pool of candidates. Make sure that internal recruiters collaborate closely with hiring managers and that clear expectations are set for them.

Interesting Links:

How To Determine Whether Recruiting Agency Or Internal Hiring Is Best For Your Company’s Hiring Needs

Some of the Pros and Cons of Recruiting Agency vs Internal Hiring

Pictures: Canva

The author: Sascha Thattil works at which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies and IT departments.

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