Medical Professionals Should Think Twice Before Starting A Recruitment Agency

Everyday there seems to be a new headline showing the strain that the NHS is currently under, either with funding or staffing issues caused by economic austerity, government policy or Brexit.  There is also the negative press suggesting that recruitment agencies are not helping the situation by charging excessive fees above the pay cap, or providing low-quality medical staff from outside of the UK.  In reality, the NHS needs the recruitment market to provide the staff required either on the National Framework (or in most cases off of the framework) to ensure that the wards and departments have the required staffing levels to keep up with the demands of the general public.

Many of the medical staff within the hospitals are disgruntled with the level of bank staff provided by agencies and believe that the agencies are causing the funding issues by charging high rates. This often causes medical staff to make the decision to start their own agency to fill the gaps they think are being missed by current agencies. TBOS receives at least one enquiry a month from a nurse, GP or locum wanting to start their own recruitment agency in the medical sector.

From our experience, nine times out of ten these kinds of agencies fail for a myriad of different reasons. It’s really important for medical professionals to think twice before starting their own agency for the reasons below:-

  • Recruitment Isn’t As Easy As It Looks
    Many medical providers believe that recruitment will be easy because they know the job requirements and may already have a list of contacts that could fill the positions. They may also have some experience of being a contractor themselves for agencies and/or of help in finding staff for hospitals previously.  However, being a recruiter is not as easy as that and understanding the recruitment process including finding placements, negotiating rates, raising contracts and getting candidates compliant, is something that you can only learn and understand by working in a recruitment agency beforehand.
  • Medical Professionals Are Care Givers Not Salespeople
    The main trait that often holds back a medical professional when trying to be a recruiter is that they are caregivers by nature, a trait that is not usually associated with a recruiter. Recruiters are often driven by generating profit to meet targets and filling as many roles as possible to compensate them for the time spent recruiting.  Medical professionals will not have the same kind of sales-driven mentality and may fill lower margin positions for the good of the NHS, without realising the true value of their time. We have often seen this lead to such agencies making a loss.
  • Most Medical Positions Are On The National Framework
    The National Framework is a government PSL agreement with the NHS where a large portion of the medical placements are advertised and filled by agencies who are on the framework. However, when a new medical agency starts they will have to make placements with hospitals who are not on the framework (or to the private sector), meaning these hospitals and placements are usually few and far between.  Once the agency has proved they can make medical placements off of framework, they can then apply to see if they qualify to be accepted onto the PSL.
  • Margins On Medical Placements Are Being Squeezed
    Due to the budget cuts within the NHS, many of the rates on medical placements are being reduced to try and cut spending across the board. With medical placements falling under the IR35 legislation, it means that candidates are now often classed as ‘employed status’ and are as such paid under PAYE rules, so they end up wanting higher pay rates.  Both of these factors mean that the margin the agencies are now making are being squeezed and the candidate pool is becoming smaller and smaller.
  • Lack Of Understanding On Paye Rates For Candidates
    Often medical professionals will start recruiting because they have found that an agency they are dealing with is charging an extortionate rate and making large profits. However, this is often incorrect as the medical professional does not understand fully what makes up the charge rate.  If a contractor is paid via a PAYE scheme then the charge rate will include the pay rate, holiday pay, pension and employers NI (apprenticeship levy) before profit is added.  Also, due to the funding required to pay the candidate before the client pays, there will also be costs for invoice finance that need to be taken into account.
  • Compliance And Administration Are A Large Part Of Medical Recruitment
    In order to make a placement within the medical market, it is important to ensure that the candidates have the correct documentation and meet strict compliance processes such as DBS checks, immunisations, training, qualifications, references, etc. No medical placement can be made until a candidate is fully compliant and this process can take a number of weeks.  All of these processes can take time away from recruiting or have an additional cost to pay administrators to complete.
  • Medical Markets Are Being Dominated By RPO’s
    One of the main struggles that medical agencies are currently facing is that many of the large RPO providers have secured themselves onto the National Framework and are running large placements through the framework. These RPO’s are often squeezing margins even further and will pay the agency on a Pay-When-Paid basis, using poor online systems meaning that agencies can wait between 45-120+ days to be paid.

TBOS manages the full back office and accounting services of many new start-up recruitment businesses, including medical agencies providing nursing, GP and locum staff off framework and existing medical agencies who are on the National Framework.  TBOS has been approached by medical professionals over the years who want to start a recruitment agency but has often found they have struggled to make placements, have worked on placements paying low margins or found that running a business is not as easy as it looks.  However, experienced medical recruiters have fared much better with starting their own recruitment agency as they understand how to generate placements, deal with the compliance issues and be able to negotiate profitable rates on their placements.

For more information on how TBOS can help with setting up your own medical agency as an experienced recruiter, please contact our office.

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