There comes a time for every growing business to ask themselves:
Is it better to hire a recruitment agency, freelance recruiter(s) or to build an in-house recruiting team? Or even – just do it yourself?
Truth is, there are pros and cons to all options. In some situations, it makes sense to use a recruitment agency. At other times, the CEO or team leaders can handle recruiting by themselves.
Of course, it doesn’t have to be an either-or choice. Often it's a combination, for example when in-house recruiting teams collaborate with specialized recruitment agencies or freelance recruiters.
In this 10-minute read, I’ll explain some basics, compare the alternatives and help you decide the best choice for you.
Sounds helpful? Let’s get started.
Types of internal and external recruiters
In general, there are two types of approaches to recruitment teams: internal and external. The first one includes Do-It-Yourself recruiting or building an in-house recruiting team. External recruitment support is either recruitment agencies or freelance recruiters. Let's look at each of these in more detail.
Do-It-Yourself (DIY) recruiting
aka someone (CEO or manager) who is not a recruiter is responsible for recruiting, without the support of a recruiter or an HR person
Team leaders or managers who are hiring to their respective teams are called Hiring Managers. Hiring by yourself is possible in small quantities or if you have a strong network of peers (potential candidates). At other times, small companies with very limited budgets are left with no other choice than to just ask around and make a hire.
In-house recruiting team
aka recruiters who are full-time members of your team
Minimally, your in-house recruiting team can consist of a single recruiter or an HR person, who makes time for recruiting besides their main responsibilities. In-house recruiters usually have general know-how – they need to handle all kinds of vacant positions and take care of any recruitment-related tasks. When the team grows, you might see more specialization within your recruiting team. To name a few examples: recruiters who 1) only do sourcing or; 2) only hire engineers or; 3) focus more on employer branding.
aka external recruiting teams who provide various recruitment services
Recruitment agencies are companies that will help you find and shortlist top candidates for a certain fee. There are huge international agencies (e.g. Randstad, Addeco), mid-sized (more) local agencies and small boutiques. Smaller agencies tend to be more specialized in an industry or niche (for example Sales Recruitment, IT recruitment, Product, etc.). They also offer a more personal and flexible approach than large agencies.
With an array of recruitment services, these two are most used:
- Full-cycle recruiting per position – filling a specific vacant role; providing a list of top candidates for the agreed position.
- Recruitment Process Outsourcing (RPO) – the agency acts as a recruiting partner for all hiring for the company, generally on a monthly or yearly fee.
aka contract recruiters
aka independent recruiters
aka recruiters who work with you part-time or temporarily
Freelance recruiters operate as contractors or sole proprietors (meaning: one-man-businesses). They are often considered as something in-between of an external and internal recruiter, called Embedded Recruiters.
Coming from an agency or an in-house recruiting team, they seek more independence in choosing their clients and projects. Being the boss of their own time and choices. 💪 But it's not easy to become and operate as an independent recruiter, so these professionals usually have a lot of experience, established candidate networks and confidence in their abilities. Most independents are specialized in a niche based on a role (e.g. Sales Recruitment) or industry (e.g. Cyber Security).
The best recruiters will go out of their way to become familiar with your company goals, mission, vision, and values. These modern forward-thinking recruiters lean towards having a more personal committed relationship with their clients, integrating themselves into your team and processes. Their highest mission is to match the right candidate with the right company to ensure long-term happiness.
Comparing internal and external recruiters
Scope of responsibilities
End-to-end recruiting vs specific tasks
- In-house recruiters usually take charge of the whole recruiting process. They are involved at a much earlier stage in the hiring process – helping to plan the position, put together a job description, create a budget, etc. Working closely with Hiring Managers and facilitating the whole recruitment process is a key responsibility.
- External recruitment services vary – from sourcing profiles to sending you a shortlist of best-suited candidates to managing the whole process. They mostly focus on specific tasks or projects.
General knowledge vs specialized expertise
- In-house recruiters usually have a wider knowledge base. As the business grows and evolves, they have to adapt fast and tackle any arising recruitment challenges within your company.
- Agencies and freelance recruiters are more specialized for specific industries or roles. From a company perspective – It doesn't make sense to keep niche recruiters on a steady payroll. Outsourcing them when needed is more cost-efficient.
Inbound vs outbound activities (advertising vs sourcing)
- Although some positions are easily filled with advertisements and receive a good amount of applications, the greatest talents are not active job seekers. Meaning, your recruiters have to find and reach out to them personally (it's called sourcing). As in-house recruiters are more focused on inbound recruiting activities and have a lot of projects on their table, they might lack in sourcing skills.
- The expectation from external recruiters is to help with challenges the company can't efficiently handle (e.g. active sourcing and outreach). Expert recruiters will know how to proactively find the right candidates, approach them and convince them to join your team.
Skills and qualities
Speed vs precision
- Agency recruiters who are paid for results, are more motivated to move faster. Some recruiters even have an established network of candidates in their niche so you can skip the sourcing stage and get right to interviews.
- In-house recruiters tend to be more thorough and careful. They take their time to go through all applications and referred candidates before starting sourcing. It's just not humanly possible to use all channels at the same time. ;)
Sales-focused vs people-focused
- Agency recruiters have a more sales-focused mindset which often allows them to get the job done quicker. They are competitive and will leave no stone unturned in their search for candidates. However, the pressure to be fast can sometimes lead to errors in the screening process.
- In-house recruiters are more focused on the quality and cultural fit. As they work within your team, they might have (not always the case) a better understanding of team dynamics and what it takes to be successful in the role.
Understanding the role vs the company culture
- As agency and freelance recruiters specialize in particular jobs or industries, they understand the roles and needed skills more deeply. This allows them to move efficiently since they don’t need to spend much time learning the role specifics. They are also more likely to give advice and share insights from the job market.
- In-house recruiters, as mentioned before, are most often generalists. While they sometimes lack the understanding of what a specific job entails (especially complex tech roles), they always have deep knowledge of what your company values in every employee.
Average fees and compensation
According to Undercover Recruiter recruitment agency fees are around 15 to 25% of the annual salary of the placed candidate. The percentage can be higher (up to 50%) for a hard to fill or senior position.
This means that yes, agency recruiters can seem expensive, but this is offset by the fact that you only need the recruiter until you fill the position.
In-house recruiters may earn less in the short-term but keeping a recruiting team on the payroll for a year will no doubt cost more than hiring an agency for a specific recruitment project.
Compensation types: flat fee, retainer, contingency
The pay-for-results aka contingency fee is the most common collaboration model with external recruiters and recruitment agencies. Companies prefer it due to lowered risk and recruiters like the potential of receiving higher earnings.
However, contingency is not always the best option. It can foster a spray-and-pray mentality. Meaning: agencies start competing for your placement fee and often get sloppy with the quality. You will become frustrated with the agency and thus, start working with more and more recruiting partners.
Thankfully, not all agencies and freelance recruiters work only on a commission fee. You might also consider:
- Flat model – pay for time (hourly or daily rate)
- Retainer model – pay for milestones (percentage combined with fixed fee)
If you're looking for a more personal relationship and room for flexibility, turn to freelance recruiters or boutique agencies. They are more likely to negotiate collaboration terms and pricing. Choosing the right pricing model is important because it determines the overall collaboration type between your recruiting partner.
Pros and cons
✔️ You will have full control of building your own talent pool and employer brand.
✔️ In-house recruiters know your company culture and background well. Meaning, they can a) understand your company's needs and situation better; b) understand the team leads (hiring managers) and team dynamics better.
✔️ They are adaptive to new projects and tasks, as your business grows and needs change.
❌ Handling many roles at the same time. They always have to prioritize, meaning some roles are put on hold and recruiting projects can take a longer time.
❌ Having general recruiting knowledge is good for full-cycle recruitment and process management, but this can mean a lack of technical know-how and sourcing skills to fill more complicated roles. You can't know it all. 🤓
❌ Long onboarding process: it takes time to start seeing results.
✔️ A recruitment agency can help you find high-quality candidates and fill your open positions faster.
✔️ Specialized agencies have expert know-how in their niche fields or industries.
✔️ You can hire an agency on an as-needed basis. It's flexible.
❌ Lack of employer branding. If you put your recruiting efforts in the hands of a recruitment agency, you won’t have full control of your employer brand. You can't really know and influence how the agency recruiter will be presenting and selling your brand. Your potential candidates will create their first impression of your company based on secondhand information - not direct contact with your company.
❌ Using a recruitment agency can be expensive. Especially with the contingency fee model.
❌ An agency recruiter can’t understand your company culture in a way your employees would. This means they can help you find the best people for the job, but they can’t ensure that the selected candidates are a truly great fit for your company culture and your team.
❌ Choosing the wrong recruiting partner is too easy. You can't know if they're a good fit for you before working together. Take your chances.
✔️ In a perfect world, you'll get the best of both options: they are embedded in your team like an in-house recruiter but offer flexibility and specialized skills like an agency.
❌ Unfortunately, we don't live in a perfect world. Meaning: it's a lot of effort to find the recruiter who a) matches your values and working culture, b) has the skills and experience in the niche you're looking for, c) is available for the time you need them.
Interested in how freelance recruiters can help you? To get a personal overview of your options, sign up for our free recruitment consultation. 🎁 Or just send us an email firstname.lastname@example.org 📩
When to do-it-yourself (DIY)?
- When you're still in the early stages of your company. Usually, the first 2-20 team members are hired by the management using their own network or more affordable channels such as job boards, social media ads and job matching apps.
- When you have your own network of potential candidates and can easily reach them by yourself. For example, you're a well-known Marketing Leader with an established social network of fellow marketers.
- When you just don't have the money to hire a recruiter (internal nor external) and have no other option than to do it yourself.
When to hire an in-house recruiter?
- When you're constantly hiring and you have stable recruitment plans. Depending on recruiter's abilities and the complexity of roles, in-house recruiters hire about 2-3 people per month for complex roles and around 10 people per month for mass roles.
- When you need a recruiter full-time and long-term. Usually someone with wide knowledge – to cover various arising tasks regarding recruitment and adapt fast.
- When your company has a clear culture and you want to make sure new employees fit in the team synergy.
- When you want to make sure your recruiters are the best representation of your employer brand and attract the right team members.
When to hire an agency?
- When you've tried filling the role by yourself without success. This might mean you need a recruiter with specific expertise or an established talent pool to fill this challenging role.
- When you have little or no recruiting expertise in your team. And you acknowledge that you need a bit of support ;)
- When you have little or no time for certain recruiting projects. You need some expert help asap.
- When your company is hiring technical or difficult-to-fill positions (e.g. you need 16 engineers). You need a specialized recruiter with a deep understanding of these talents and where to find them.
- You need to fill a position quickly and don’t have time to source, screen and interview multiple candidates.
- When you can’t afford or don’t need a full-time in-house recruiter. This is the case if you need to fill a fixed amount of positions or your recruiting is seasonal.
When to hire a freelance recruiter?
Basically, all the points apply as for agencies. The core reason is the same – you need an expert recruiter from outside to temporarily help you with whatever challenges you face.
Consider these differences when choosing between agencies vs freelance recruiters:
- Freelance recruiters are something in-between an agency and in-house recruiter – you'll get the flexibility and specific expertise, but also more personal collaboration and a better understanding of your culture.
- Freelance recruiters are not cheaper by default, but they can be more flexible and forth-coming regarding pricing and work scope.
- Freelance recruiters can be even more specialized and experienced than agency recruiters.
That's it for today, folks! I hope you found some useful insights on choosing your recruiting strategy.
PS. We offer a free recruitment consultation, where we discuss your specific goals and challenges. If you need help figuring out your options:
Take care and keep growing! 👋😊