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Outsourcing Employment Recruiting Activities

Filed under Hiring Workers. Fact checked on May 24, 2012.

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Outsourcing your recruiting to employment agencies frees you from the often time-consuming process involved in finding the right employee. Your input and criteria is used by the recruiting firm to find suitable candidates for your consideration and final approval.

Small business owners are busy people. When the time comes to hire someone, it's perfectly logical for business owners who have their hands full running their business--which is likely the very reason that they are hiring someone to come aboard--to opt to outsource their recruiting functions, either in part or completely, instead of doing it themselves.

Outsourcing recruiting like the outsourcing of other functions not essential to your main line of business, has its pros and cons. On the negative side while outsourcing obviously can save time, the dollar costs can add up. In addition, you lose some personal involvement in the process.

On the plus side, outsourcing relieves you of some of the more tedious functions of finding the right employee but leaves the ultimate decision — the hiring decision — to you. And the dollar cost may be negated at least in part by the time outsourcing frees up allowing you to work at running a successful business.

If you think outsourcing your recruiting might be a good fit for you you should know that there are basically two different types of agencies that you can consider when outsourcing all or some part of the recruiting function:

  • public employment services
  • private employment services

Public Employment Services

There are hundreds of offices of state employment services affiliated with the U.S. Department of Labor's Training and Employment Service. There are branches located in every large city and in every county.

Originally set up to process unemployment compensation claims, these agencies are still regarded by some as purely "unemployment offices" and have a negative public image. However, they do much more than pass out checks to the jobless.

They provide a variety of services for job seekers and employers:

  • counseling
  • testing
  • training
  • placement
  • analytical and statistical services

Employees for every occupation. Traditionally viewed only as sources of unskilled or semi-skilled workers, the agencies can actually provide all types of employees for every occupation, including professional, technical, and managerial positions.

They have a large pool of job seekers, not merely because they handle unemployment, but because many smart job hunters would rather use their services than pay a private employment agency. Services are free to both employer and job hunter (except, of course, that they are financed through the taxes we pay).

Through a nationwide system of job matching, state offices can locate talent around the country. This network matches candidates with employers. Federal contractors are also required to list many of their job openings with the state services.

If you hire a referral from a state employment agency, you may have special Form I-9 considerations that may require you to keep certain records.

Private Employment Agencies

There are various types of employment agencies. Some deal solely with placing temporary help, while others specialize in placing managerial candidates within a specific industry. All employment agencies engage in some method of screening and referring applicants to the employer.

Selection functions. Some agencies also perform selection functions in addition to recruitment. These agencies may interview applicants, determine their qualifications, administer job skill tests, and verify credentials and check references.

Employee leasing. Increasingly, agencies are also maintaining all records on applicants and providing services, in what is commonly known as employee leasing. Services provided by employee leasing agencies include payroll tax withholding and administering employee benefits and payroll.

Because employee benefits constitute a high percentage of an employer's payroll, there can be substantial cost savings to an employer choosing to use a temporary employee who is "payrolled" by the employment agency.

Work Smart

Due to the tedious tasks and time involved in recruiting, the temptation to outsource as many recruiting and payroll functions as possible to an agency can be great. However, realize that outsourcing all these functions may be cost prohibitive because it can get quite expensive. Partial outsourcing will probably be a more economically realistic choice for most business, particularly those just starting out or hiring for the first time.

How Do You Choose an Employment Agency?

When you outsource your recruiting activities you want to be sure that you're getting what you pay for.

A poor employment agency will waste your time by performing inadequate screening, thus sending your business unqualified applicants. Even worse, unscrupulous agencies will misrepresent the job to the applicant and the applicant to the employer in an effort to get their fees. Such practices are outlawed, and most states require agencies to be licensed and bonded.

But be aware that even within the law, some agencies are engaged in hard-sell tactics that don't always best serve either client or company.

How do you make the right choice? To find a helpful and reputable agency:

  • Ask around.
  • Check with others in your industry or with your employer association for recommendations.
  • Consult the Better Business Bureau and other business and consumer groups.

Before selecting an agency, it is a good idea to make a personal visit (if possible) to determine the professional level of the staff and the selection methods that are used. It is also helpful to have an agency representative visit your company to find out personnel needs and get a feel for the type of people you want. The better an agency knows a company, the better service it can give.

The agency will also need precise job descriptions and specifications, as well as feedback about candidates that have been rejected. The names of national and local employment agencies should be in your local telephone directory, as well as online.

Is the employment agency in compliance with various laws and regulations? The increasing responsibilities of employment agencies have led the National Association of Personnel Services, the professional organization of employment agency personnel, to establish a Certified Personnel Consultant (CPC) program. The designation is granted, upon payment of a fee, to agencies whose representatives pass a written examination. Look for this certification.

Fees. Although agency fees are occasionally paid by the job seeker, most reputable agencies work only with employer-paid fees. These fees vary within the industry — sometimes they are a flat rate, but more commonly they are a percentage of the job's annual salary. This percentage can run as high as 30 percent of the first year's salary or 1 percent per $1,000 of salary.

An agency that has the employer pay the fee, however, normally guarantees that the applicant will perform satisfactorily for a minimum period or the fee will be refunded to you.

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