How to start a recruitment agency

You don’t need any specific training or qualifications to set up a recruitment business.

If you’ve not worked in recruitment before, an accredited course will provide a useful overview of the industry and teach you specifics such as recruitment interview techniques.

The Recruitment and Employment Confederation offers a wide range of training covering all aspects of the business.

Pin down why you want to start a recruitment business.

Most-cited examples include the ability to be your own boss, work hours that suit your lifestyle, bring a different type of customer service to the industry or having spotted a gap in the market.

You’ll need an entrepreneurial mindset, dedication, stamina and resilience.

Expect to work during evenings and at weekends, as you won’t be able to interview many potential candidates during office hours.

Decide the nature of your recruitment agency

The first step in setting up a successful recruitment agency is to decide how you’ll operate, and the industry you’ll focus on.

Traditional recruitment agencies operated as a bricks-and-mortar business, with high street premises listing job vacancies.

Today’s recruitment start-ups are increasingly online first – creating interactive websites that list vacancies, allows candidates to create CVs and send them to prospective employers.

Starting online means lower start-up costs, but attracting online traffic can be highly competitive, and you’ll still need somewhere to interview staff and meet clients.

While it might sound good to welcome clients from every sector, honing in on a specific niche could actually help your agency gain a foothold in the market faster.

By focusing on a particular area, you can streamline your efforts without the stress of juggling too many different tasks at once.

Decide which area of an industry you’ll focus on, such as supply teachers, media professionals or off-shore engineers.

Setting up as a recruitment agency operating in specialist field can give your start-up an advantage over larger, more generalist recruitment agencies that can struggle without in-depth industry knowledge when trying to match candidates with jobs.

It lets you develop relationships with potential client companies and target marketing at industry professionals seeking a job in that particular industry.

What are the different types of recruitment agency?

There are a number of common types of recruitment services offered by recruitment agencies. These include:

Temporary recruitment

Temporary recruitment services are all about finding people to fill specific roles at companies for a short period.

This could be because the company needs extra hands due to a busy period, or when regular staff are away on leave like maternity or sick leave.

Sometimes, there's a need for people with special skills for a project that won't last forever.

Agencies specialising in this, like Randstad or Adecco spread the word about job openings through their websites, social media, job boards, and emails.

They look for suitable candidates, do background checks and interviews, and then set them up with work contracts.

These agencies often handle the nitty-gritty details like payroll and benefits for the temporary staff too.

The cost for using such a service typically ranges from 20% to 75% of what the temporary employee gets paid.

Executive recruitment

Also known as 'executive headhunting,' executive recruitment focuses on finding highly qualified individuals for top-level jobs across various industries, like Chief Executive Officers (CEOs), directors, and more.

These candidates are often not actively looking for new jobs but have the extensive expertise and experience that make them valuable.

This service also targets specialists or experts for niche and competitive roles, such as top-tier Data Scientists.

These headhunters look for talented professionals, often employed by competing firms or within the same industry, to fill these prestigious roles.

After identifying and shortlisting candidates, the agency reaches out to propose the opportunity to join their client's company.

Throughout the process, from recruitment to offer and even after the candidate starts, the agency remains involved, ensuring satisfaction on all sides.

The cost for this premium service usually ranges between 25% to 35% of the candidate’s total annual salary in their first year.

Additionally, contracts may require a retainer fee to start the search and grant exclusivity rights, meaning the job search is restricted to just that agency.

Vertical and Niche recruitment

Vertical recruitment is all about focusing on a specific industry, like how some agencies are dedicated to filling positions in the IT sector.

Niche recruiting takes this concept even further by focusing on very particular roles within an industry, for instance, finding Executive Directors for Nonprofit Organisations.

These specialised companies stick to their area of expertise and don't venture into other fields, unlike larger recruiting firms that might have various teams for different industries.

Agencies offering vertical recruitment services need to have a deep understanding of the markets and industries they work in.

This specialisation is attractive to companies because these recruiters bring a wealth of industry-specific knowledge and a strong network of contacts.

The trick with niche recruiting is to be as focused as possible.

The more specialised the focus, the more an agency can build its reputation, improve its reputation as an expert in the field, and increase its share of the market.

The fees these specialized agencies charge can vary, but they typically take a percentage of the annual salary package for each candidate they successfully place.

Mass recruitment

Mass recruitment is essentially about hiring a large number of employees quickly, a common scenario for fast-growing companies like Amazon, especially for positions like warehouse workers and delivery drivers.

These companies need to fill many roles rapidly due to their swift expansion.

Trying to manage mass recruitment on their own, companies can run into significant challenges.

Recruiting even one employee requires considerable time and resources, so scaling this up for hundreds of positions magnifies the complexity.

This is where agencies specialising in mass recruitment step in.

They handle the bulk hiring process efficiently by carefully planning, organising, and streamlining every step—from finding and screening candidates to setting up interviews and onboarding new hires.

The cost for mass recruitment services varies depending on the specific role and the number of positions to be filled.

Fees are generally based on the salary package of each hired candidate and may also be linked to performance metrics, such as the number of candidates successfully hired by the client.

Social recruitment

Social recruitment represents a unique twist on how companies find candidates.

While some agencies specialise in this method, it's often used as an additional tool rather than the only way to find candidates.

Instead of recruiters actively searching for candidates, job openings are shared widely across social media and other platforms.

The aim is to encourage people to recommend others who are a good fit for the role.

In return, if their referral leads to a hire, they receive a portion of the revenue from the placement.

This approach relies heavily on maintaining or expanding a network of people who can refer candidates, alongside promoting numerous job opportunities.

One of the benefits of social recruitment for agencies is cost-effectiveness.

By relying more on referrals and less on recruiters' efforts, agencies can reduce the expenses tied to candidate sourcing.

When it comes to fees, social recruitment agencies typically charge clients 15% to 25% of the hired candidate's annual salary, sharing a part of this fee with the individual who referred the successful candidate.

Recruitment agency start-up costs

Setting up a recruitment agency doesn’t have to involve lots of up front costs, and you can set up a recruitment agency from home.

But you will need enough money to see you through the inevitable lean first months.

Costs include:

• Website - You’ll need a specialist recruitment website to advertise your jobs, including recruitment database capabilities. You can find an off-the-shelf recruitment website with decent functionality for around £1,000, with costs rising depending on how bespoke you want the site.
• CV databases - Used by online ‘job boards’ such as Monster and Total, these allow people to upload their CVs for potential employers to view. Recruitment firms can access these CVs for a fee. You can also pay to advertise your vacancies to the job board’s large audience. Ask for a free trial with a job board before negotiating monthly fees.
• Equipment - Computers, a broadband connection, mobile phones and recruitment software will lead the equipment list. Some recruitment software is available online, such as Zoho Recruit, for around £40 with free trials available. Expect to pay around £40 per month for mobile and broadband contracts.
• Premises - Starting a recruitment agency from home means you can avoid this initial cost, though, despite the rise of virtual interviews, you’ll probably need office space as you grow and take on staff, interview candidates and meet clients.

Looking for office space for your start-up? Read our free guide to renting business premises.

• Membership fees and subscriptions - Factor in subscriptions such as membership of the REC and LinkedIn Recruiter, as they can help boost credibility, knowledge and contacts.
• Insurance - You’ll need professional indemnity insurance to protect you against negligence claims. If candidates visit your office or go out to meet clients, it’s worth considering public liability cover for your business. If you employ staff, you must have Employers Liability to cover you should an employee be injured because of the work they do for you.

Need to get the right insurance? Here’s how to choose the right business insurance for your start-up.

What are Recruitment franchises?

As an alternative to starting from scratch, consider buying into a recruitment franchise.

This is a way to get up and running quickly with an established brand known to both clients and candidates.

Franchises start at around £25,000 – with an additional capital sum required – and typically provide marketing materials, advertising and recruitment software.

Learn more about how franchises work.

Setting recruitment fees and agency pricing

Recruitment companies are usually paid a percentage of the job’s salary or a regular retainer for larger clients.

Prices are based on the level of the job role and whether it is permanent or temporary.

With permanent positions, most recruiters take a percentage of the worker’s annual salary, which increases in line with the salary.

For more junior roles, this percentage may be 10% - 15% of the yearly salary, increasing to a 20% to 25% for most job roles.

High-end niche and executive recruiters can charge 30% or more for jobs offering six or seven-figure salaries.

Some online recruitment agencies charge towards a flat fee for filling client vacancies.

This approach can be popular with clients, but it will eat into the margins you get for higher salaried vacancies.

To work out your firm’s charges, consider how much you need to spend on advertising, networking, time spent liaising with the client, filtering CVs, and interviewing candidates.

You won’t get paid until you place a candidate in a position, so cash flow can be critical in the early days.

Another factor to consider when setting fees is your competition.

Recruitment is a crowded and competitive industry, with numerous successful agencies already operating in the market.

By studying these agencies—understanding how they operate and identifying any potential weak spots—you can fine-tune what your agency offers.

This strategic insight could help you attract higher-quality clients.

Finally, remember that you won’t get paid until you place a candidate in a position, so cash flow can be critical in the early days.

Understand recruitment rules and regulations

Recruitment is a heavily regulated industry, and you’ll need keep up to date with the latest legislation and follow employment guidelines carefully.

It’s a good idea to get professional legal advice to ensure your business is compliant.

Create a recruitment agency business plan

Before you take the plunge and launch a recruitment business, don’t start without a business plan and enough working capital to get you through the first six months of trading.

A business plan is like a map for your business, showing you where you want to go and how you'll get there.

It spells out your main goals, the strategies you'll use to achieve them, and how you plan to make money to keep your business thriving.

Think of it as a tool that not only helps you see your business's future path but also guides others to understand your vision.

Inside a business plan, you'll find details about what you aim to accomplish, how you intend to market and sell your products or services, and your financial predictions.

When running your company, remember that your time is valuable, so be sure to spend it looking for clients and candidates, not wasted on tinkering with website design, bookkeeping or other distractions.

Hiring specialist help can be useful for tasks such as accounting, IT and office administration.

Make sure that you register your new business correctly with HMRC and Companies House.

Consider hiring an accountant to help with tax compliance and filing tax returns and annual accounts.

Marketing your Recruitment agency

Getting the word out about your agency and what it offers is key to its success.

You can boost your chances by teaming up with a branding expert or an external agency.

They can help create a standout website, design an eye-catching logo, and map out a digital marketing strategy just for you.

But if you're up for doing it yourself, think carefully about who you need to connect with.

Say you're offering recruitment services to nearby businesses.

In that case, pick marketing tactics that will catch their eye, like attention-grabbing billboards or local ads on social media.

Learn more about marketing your business.

Hiring recruiters for your Recruitment agency

To really unlock your recruitment agency's growth potential, it might be worth thinking about bringing on some recruiters to enhance the services you offer to clients.

Hiring staff is a fantastic way to expand your business, but remember, it comes with responsibilities.

You need to ensure your agency has the resources to support new hires.

Many new agencies start by collaborating with freelance recruiters.

Then, as their financial situation improves, they offer these freelancers full-time positions with regular salaries.

Learn more about the benefits of hiring freelancers.