The market in 2026
UK recruitment remains a high-margin industry — the standard 15–20% permanent placement fee has barely moved in a decade despite enormous productivity improvements in sourcing. The businesses getting better rates are those who negotiate properly, use framework agreements, and treat recruitment as a managed category rather than a reactive, transactional spend.
HR software has commoditised significantly since 2020. What cost £20+/employee/month five years ago is now available at £4–9 on modern cloud platforms. Businesses on legacy HR systems or old contracts are paying a substantial legacy premium for equivalent or worse functionality.
What you should be paying
| Service | Market rate | Overpay signal | Notes |
|---|---|---|---|
| Permanent recruitment fee | 12–15% of salary | >18% | Standard is 15%. Always negotiate a rebate clause (sliding scale if candidate leaves within 3–12 months). |
| Executive / senior hire | 15–20% | >25% | Retained search adds structure — ensure the retainer is offset against the placement fee. |
| HR software (per employee/month) | £4–9 | >£12 | Includes payroll, absence, onboarding, performance. Benchmark BambooHR, Breathe, HiBob, Charlie. |
| Outsourced payroll (per payslip) | £3.50–6.50 | >£9/payslip | Under 50 employees: most businesses over-buy complexity. A straightforward PAYE payroll doesn't require a premium service. |
| HR advisory / fractional HR (day rate) | £550–900/day | >£1,100/day | Senior CIPD qualified. Consultancies mark up 25–40% on this rate. Direct engagement is significantly cheaper. |
| Occupational health (per assessment) | £180–350 | >£500 | Per employee assessment. Annual retainer contracts offer better value for businesses with 20+ employees. |
Recruitment red flags
- No rebate clause — if a candidate leaves within 3 months, you should receive a full or partial rebate. Any agency that won't agree to this should not be used.
- Exclusive arrangements without fixed timelines — exclusivity is sometimes appropriate, but only with a defined search period (4–6 weeks maximum) and clear delivery expectations.
- CV-sending without briefing — a recruiter who sends CVs without first taking a proper brief is not searching — they're matching keywords. This produces poor candidates and wasted interview time.
- Percentage fees on contractor rates — contractor margins should be fixed, not percentage-based. A 15% margin on a £500/day contractor costs you more than a 15% margin on a £300/day contractor for the same service.
- Auto-renewal on ATS/HR software — HR software vendors rely heavily on auto-renewal. These contracts should be reviewed annually against the market — migration is easier than it used to be.
What good HR procurement looks like
For recruitment: a preferred supplier list of 2–3 agencies per discipline, negotiated fixed-fee or reduced-percentage arrangements, defined briefing process, and a standard rebate clause in all terms of business. This doesn't require a large procurement team — it requires consistent practice.
For HR software: a clear specification of what functionality you actually need (most businesses use 30% of their HR system's features), a competitive evaluation every 3 years, and a switch conversation whenever the contract comes up for renewal.
How to run a recruitment brief
The quality of a recruitment brief directly determines the quality of candidates. A properly-structured brief includes: role specification (responsibilities, must-haves vs nice-to-haves), team context (who they'll work with, reporting line), culture and values (what makes people successful here), timeline (when is the hire needed), and candidate profile (specific experience requirements, not just qualifications).
Bundle IQ's recruitment intake template is structured to capture all of this and present it to shortlisted agencies simultaneously — creating competitive tension and better candidate quality.