How to start a recruitment agency

Starting your own recruitment agency can be very lucrative, however, you’ll need to know the basic steps before you can officially launch your own business.

To set up a recruitment agency you will need to consider branding, financing, costs, legislation, and the start-up process itself.

The recruitment sector is quickly becoming one of the UK’s leading industries, so take advantage of this rapid growth and don’t hesitate in starting your very own recruitment agency.

If you’re not sure how to get into recruitment, but you would like to know more, we’ve compiled a comprehensive guide on how to set up a recruitment agency.

Headhunting

Headhunting is a style of recruiting that aims to fill vacancies in the most senior positions of an organisation. Also known as executive search, recruiters will either seek out expert candidates or advertise the job and wait to be contacted.

This type of recruitment is more industry-specific because the recruiter, or headhunter, needs to have an extensive understanding of their client’s requirements. Therefore, these recruiters tend to specialise in a specific industry niche.

Temporary recruitment

Temporary recruitment is the process of connecting potential candidates with clients from a wide range of industries that are only seeking temporary placements.

These professionals are only needed for a specific project or period of time and the demand for this type of employment is growing year upon year.

Permanent recruitment

Also referred to as perm in the recruitment industry, permanent recruitment helps businesses connect with full-time employees. These candidates will be expected to fully incorporate into the company’s workforce.

Therefore, the successful applicant will be entitled to tax relief, pension entitlements, sick pay and any other benefits provided by the employer.

Contract recruitment

Finally, contract recruitment refers to any contractual employment arrangements between the employer and applicant. This can be either a task-based, project-based, or fixed-term contract.

Don’t limit yourself to providing one type of recruitment. Specialising in a niche can be useful but it’s always a good idea to widen your portfolio and include contract recruitment as well as permanent recruitment.

Human Cloud and Gig Economy

It’s worth mentioning another form of employment that has revolutionised the workforce – the gig economy.

The gig economy has become one of the fastest-growing markets in the world. The human cloud refers to the multitude of independent workers performing jobs, projects, and simple tasks on a remote basis.

Over the past year, employers have spent billions of dollars outsourcing work to self-employed individuals all around the world. Employers can advertise anything from web design, data entry, or translation services, without ever having to worry about employer taxes, sick pay, or minimum wages.

Technological innovation, access to the internet, and the increase of remote professionals are all factors that have created a human cloud of on-demand workers and a rapidly growing gig economy.

However, there is no need to limit the “gig economy” to transactions or contracts that are mediated online. Although definitions vary, the Staffing Industry Analysts argue that the gig economy encompasses any contingent work over a fixed duration, including the hire of temporary workers and independent contractors. Under this definition, the term contingent work becomes synonymous with the gig economy.

Start-up process

The start-up process is relatively straightforward and you can set up your own recruitment agency in five easy steps.

You’ll need to come up with a great name before you can get to the more serious stuff. First impressions are everything, so make sure you are happy with how your brand comes across. Don’t pick something that may limit your business in the future, like Construction and Building Recruiters, and make sure the name is legally available.

Once you’ve come up with a name, you’ll need to register your company as a legal entity with Companies House. It only costs £12 and it’s much easier than it seems, all you need is some information about yourself and your shareholders.

The next step involves creating a workable infrastructure for your recruitment agency. For example, you’ll need to open a business bank account, hire an accountant, familiarise yourself with the legal requirements, and insure your business.

Then you’ll need to develop your branding by creating a website and establishing a presence on social media. Depending on your budget you can outsource the work or try creating the website yourself.

Finally, you’ll need to develop a thorough business plan outlining the trajectory of your first year as a recruitment agency. Think about your budget, your objectives and how you will achieve your targets.

Costs of starting a recruitment agency

The real cost of starting your own recruitment agency can vary depending on your budget, but to help you get a clear idea of how it could set you back, let’s take a look at the most basic costs…

Registration costs are inexpensive, you only need to pay a one-time fee of £12 to list your business as a legal entity.

Another expense you will encounter is your monthly phone contract. Recruiters are constantly on the phone chatting to clients and candidates, so try to find the most cost-effective plan. You’ll want to find a contract with unlimited minutes and plenty of data. This will set you back around £15 to £30 a month.

Branding can take up a sizable chunk of your budget, however, if done right, this is another one-time fee. You want your company to stand out, so it’s best to invest in a great logo and brand package. Fees for these types of services can range anywhere from £15 to £200 or even more.

An essential part of any business is its web presence. Without a great website, your business will lack credibility and exposure. You can either make your own using a DIY provider for £10-30 a month or hire a web designer for £25-£75 an hour.

Other central aspects of the business are completely free, such as setting up a business bank account, building a LinkedIn page, and posting job offers.

Overall, the costs of starting your own recruitment agency are very much dependent on your budget and how much you are willing to invest.

Laws and legislation

As with any business, when you start a recruitment agency, you need to be fully aware of relevant laws and legislation in the industry.

HMRC Income Tax

In the UK, all recruitment agencies are required to disclose any payments to staff in which employment taxes and NI are not deducted.

Tax Returns

Paying your taxes on time and correctly is another essential aspect of any business. Tax returns can be complicated, so this is when a reliable accountant comes in handy.

Data Protection Act

All stored data, whether it belongs to employees, clients, or candidates, should be stored confidentially and securely. This data can only be processed for specified purposes and should not be kept for longer than necessary.

Agency Worker Regulations (AWR)

This piece of legislation has been designed to protect the rights of agency workers. It ensures that permanent workers are not treated preferentially over any temporary staff.

Equality Act 2010

This law encompasses the Race Relations Act, Disability Discrimination Act, and Sex Discrimination Act to ensure that everyone is treated equally.

UK Code of Non- Broadcast Advertising, Sales Promotion and Direct Marketing

(CAP Code)

Finally, the CAP code was created to improve the standards of advertising by ensuring that all job advertisements are non-discriminatory and realistic.

These are just some of the basic laws that recruitment agencies must abide by, however, it’s worth noting that legislation is constantly being updated.

It’s up to you to keep up to date with the latest changes in your sector, for example, how changes to the IR35 and the employment bill can affect your business.

How to scale up your agency quickly

In order to scale your recruitment agency quickly and efficiently, you will need a steady stream of revenue. This can be achieved by maximising margins, outsourcing work, and securing financing.

One of the biggest barriers to growth is unreliable cash flow, especially in the recruitment industry. Many clients will only pay recruitment agencies once a candidate is successfully placed and, depending on the role, this can take anywhere from three days to three months.

You can increase your revenue by evaluating your pricing structure and maximising your margins. Find new ways to provide your clients with added value and concentrate your efforts on the most profitable streams of income.

Invoice financing is an effective way to plug the cash flow gap of your business. Getting an advance on the cash you are owed, allows you to focus on growing your business and paying your expenses, rather than chasing after clients.

Hiring strategically is another way that you can help your agency grow to its full potential. Always hire people that are smarter than you and conduct in-depth training with every new member of the team.

You can also help scale up your business by optimising business procedures and taking advantage of the gig economy. Assess your outgoing costs and ask yourself whether there are any that you could cut down on. Rather than hiring someone new, why not find a freelancer to complete the task?

How to win clients

Once you’ve got all of your admin out of the way, it’s time to start finding those clients and winning them over.

Make sure to utilise all of your resources, practice traditional cold calling methods, and network in person and online. Look for local networking events in your area or join community business groups.

If you’re not quite sure where to start, Linkedin is always a great place to connect with old colleagues and network with potential clients.

You only have one chance to make a great first impression, so don’t forget to do your research before contacting people. If you have a strong message to convey when you introduce yourself to clients, you will be more likely to succeed.

How to attract candidates

Winning over clients is only half of the job, you’ll also need to attract the best talent and find suitable candidates to fill the positions.

Make sure your job advertisements are simple yet compelling. Don’t limit yourself to posting on job boards, instead, use social media, referrals, and CV databases to find the right person for the job.

Once you’ve found some ideal candidates, don’t be afraid to use technology to help you recruit. You can conduct video interviews, psychometric tests, and even online assessments to ensure you are on the right track.

Offer your candidates a positive experience to enhance your reputation as a recruiter and help spread the word about your business. Creating a favourable reputation is one of the best ways to attract the best candidates and establish yourself in the industry.

How technology can help recruitment agencies

Technology has become an integral part of everyday life and the same applies to recruitment agencies.

Talent intelligence systems, testing tools, applicant tracking systems, job aggregators, and video interviewing software are just a few of the technological tools that recruiters can use to help narrow down the search for the perfect candidate.

What should be in my Rectech stack?

Rectech is simply the tech software you use to enhance your recruitment capabilities.

Analysing the strengths and weaknesses of your recruitment agency is the best way to determine what software should be in your Rectech stack.

Are you finding it hard to access new and relevant talent? Or are you having difficulties in managing all your applications? Whatever the case, identify the weak spots and find software that can help you overcome these issues.

Nevertheless, the core elements of any Rectech stack include software for qualification and screening, candidate attraction, interviewing, talent management and an excellent content management system.

Guide to setting up your recruitment agency

Setting up your own recruitment agency? Then you need this ebook.

Packed with expert advice, its practical, step-by-step approach explains exactly what to do and when to do it so you’ll go further, faster.

FAQs

What is external recruitment?

External recruitment is when a business chooses to fill a vacancy with a professional from outside of the company. Companies will typically pay recruitment agencies a fee to help them find a suitable placement for the job vacancy.

What is social recruitment?

Social recruitment is a modern recruitment method that helps organisations network and connect with potential candidates or clients whilst simultaneously raising brand awareness.

Facebook, Twitter, LinkedIn and online job boards are all popular ways to reach desired candidates. You can also use your own social media to convey your brand and organisational culture.

More recruitment agencies are turning to social media because it’s a powerful yet inexpensive tool. An increasing amount of workers spend their time on social media, so it’s a great place to find new customers, gather more referrals, and find prospective applicants.

Can I run a recruitment agency from home?

Yes, nowadays you can practically run any business from the comfort of your own home.

All you need is an internet connection, phone contract, and registered business. Once you get going and your business begins to grow, you can think about moving into an office space or keep on working remotely.

How do recruitment agencies set their fees?

Placing a candidate often takes a lot of time and hard work, so it’s vital that recruitment agencies price their services fairly and competitively.

You want to set a price that’s attractive enough to draw in clientele. So, before you begin to set your prices, it’s important to research the market and see how much your competitors are charging.

However, you should make sure that you’re calculating your profit margins correctly. Knowing the difference between your markup and your margin will ensure you make a profit with each sale and help you keep track of finances.

What is Rectech?

Retech is the technological revolution taking place in the recruitment sector.

There are countless tools available to recruiters that make the process of finding, screening, interviewing, and managing candidates much easier.

Rectech software allows recruiters to find candidates and manage their business in a more streamlined and efficient way.

Our recruiter finance platform

A reliable stream of income is vital to the survival of any business. Without any kind of financing, it’s difficult to plug the sizeable cash flow gaps of a recruitment agency.

If you have cash flow concerns, our recruiter finance platform can help you manage your contracts, timesheets, and most importantly, your finances. Our easy to use and centralised application gives you access to all metrics in real-time.

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