Let's talk about something that's hurting recruiters now.
Margin erosion.

It's not just some finance buzzword, it's genuinely putting good agencies out of business.

Here's what's happening: the changeover of the new financial year has brought about an increase to wages, legislative requirements and company costs - but not all of that is getting recouped with the 1st July rates increases passed onto clients.

Even worse, while our costs are going up, prospect clients are demanding lower fees to counteract their own increases in spending. In the excitement (or desperation) to win the job orders, some recruiters are lowering their fees below the % required to keep the lights on.

The math gets brutal fast. When you lose 5% on your margin, you're not just losing 5% profit - you're often looking at 30-40% less actual cash flow after covering all your fixed costs, tech stack, and keeping good people on board.

Sadly, it's not just the clients who don't understand the real cost behind their placements; it's recruiters as well. It's easy to look at a simple % on top of pay rate to calculate what you should charge, but that doesn't take into account any increases to payroll tax, workers comp premiums, super contributions, finance and admin expenses.

The agencies that are actually surviving this mess are the ones that calculate all these costs from which to build their margin. Often using smart software like RatesCalc to do it for them effortlessly. Especially now, after the NFY increases. Then they are brave enough to clearly explain their value, focus on specialised niches, and honestly - walk away from unprofitable business when they need to.

Good recruiting isn't a commodity. It's a strategic partnership that deserves proper compensation.

#Recruiting #Profitability #RecruitmentFees #Superannuation #Workcover #PRT #PayrollTax