The post-recession years in the UK have seen an explosion in employment, with the number of people in work reaching record numbers. Even while wage growth has remained sluggish, the Office for National Statistics (ONS) reports that the employment rate has topped 76.1% in the June 2019 period – the joint-highest figure on record.
This increase in employment has naturally created opportunities for recruitment agencies and high demand for workers means there are now more than 39,232 recruitment agencies in the UK, contributing more than £35.1 billion to the economy every year.
However, despite the growing size of this sector, recruiters are finding it more and more difficult to get their clients to pay their recruitment agency fees.
Reasons why a client may refuse to pay recruitment agency fees
There are a number of different reasons why a recruiter may struggle to get a client to pay the recruitment fee. They are as follows:
- A temporary or contract worker you supplied to a company for a set period of time is taken on as a permanent employee.
- The employer recruits the worker for a different position than the one they were originally put forward for.
- The prospective employee leaves within the rebate period, but the employer has breached the terms of business – usually by not paying the invoice as they agreed to.
- The issue of timesheets may also prove to cause problems – if the employer’s representative doesn’t sign them, you’ll need to validate the hours with the customer yourself. The number of hours claimed on the timesheet may not be correct, or the performance of the worker may not be considered acceptable. Ensure your terms and conditions set out a procedure for your customer if they are dissatisfied with the work.
The employer may refuse to pay the recruitment agency fees under any or all of these circumstances, which can result in a protracted struggle for the recruitment agency and ruin what may otherwise be a valuable relationship with a client.
Steps you can take to increase the likelihood of your recruitment fees being paid
There are some steps recruiters can take to help minimise this kind of behaviour in clients:
- You can insist on payment of the recruitment fee, or partial payment, upfront.
- You can make sure you keep the lines of communication open, as a missed payment could just be an administrative error that could be resolved quite easily. However, if your client is experiencing cash flow problems, its best that you find out quickly, so you can discuss it with them and consider a new payment plan.
- Always follow up telephone conversations with an email outlining your conversation.
- When sending multiple CVs to your client for consideration, detail each candidate within the body of the email and seek confirmation of receipt.
- Always enclose a copy of your terms of business when sending a CV over to a client.
- Have a clear plan in place, from engagement through to the invoice being raised. Ensure all stakeholders follow the same and this will stand you in good stead.
Sometimes it’s not just poor client behaviour that can cause problems with collecting recruitment fee payments. Many agencies, for example, only bill a client after they’ve successfully placed a worker within a role. All of these factors can have a negative impact on agencies’ cash flow.
And, of course, you might want to think about the difference the right debt recovery team could make to ensuring your recruitment agency fee payments are honoured in a timely fashion.
How we can help
- We have recently launched a DSO comparison tool which, using some basic figures obtainable via Companies House, allows you to calculate your debtor days and compare your performance to those in your sector, and to see how much your working capital could be improved by dealing with late payments.
- Each sector has different challenges and therefore requires different services; our recruitment sector experience means we are ideally placed to deal with any queries and we have the sector know-how to recover your unpaid invoices.
- We have a targeted hands-on approach where we provide quick and effective solutions to recover aged debt.
- Our service is tailored to fit the client’s specific needs, opening a dialogue with the debtor to reach settlement before expensive court proceedings. This enhances chances of recovery and takes you out of the situation, preventing heated discussions and helping to preserve the client relationship.
- We operate on highly flexible terms based on results and act on behalf of a wide range of organisations, both throughout the UK and internationally.
- Where appropriate, the Team provide sound, economical advice whilst escalating the matter through the County Court, or proceeding with insolvency actions, should this prove necessary.
If you’re from a recruitment company and would like to discuss improving your cash flow, please contact our Debt Recovery Team.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.