Fears cost saving could hamper quality of recruitment in the public sector

Recruiters up in arms over a planned change to the way the Government pays them. Photo / Getty Images

Recruitment firms are "bewildered" by a planned overhaul of the way the Government pays them to fill job vacancies in the public sector.

The Recruitment, Consulting and Staffing Association (RCSA) fears the new "untested" approach, likely aimed at cost-cutting, will incentivise recruiters to prioritise their private sector clients over their public sector ones.

The industry body argues this could be particularly detrimental for New Zealand, given the number of jobs major government reforms and work programmes are creating at a time there's a labour shortage. Indeed, an additional 3,423 full-time staff and contractors are required to fulfil commitments the Government made in this year's Budget.

The Ministry of Business Innovation and Employment (MBIE) is inviting recruitment firms to tender for government work ahead of an existing contract, which has been in place since 2017, expiring in September next year.

Under the current contract, a panel of 40 recruitment firms is available to government agencies for a range of recruitment services.

A key feature of the new contract is that recruiters will have to charge government agencies a fixed fee for filling certain types of positions, regardless of how easy or difficult it might be to find suitable candidates.

So, a recruiter will have to charge a government agency the same for filling a low-skilled, low-paid position, versus a high-skilled, high-paid role.

Recruiters can set different fees for permanent/fixed-term roles and contractors versus temporary roles. They can also set different fees for the two broad job classes the contract relates to – "common administration and corporate" and "common IT".

The former category includes roles in accounting and finance, admin, asset management, health and safety, general management, policy, procurement, project management and a range of other types of jobs. The "common IT" category includes roles in cyber security, network engineering, IT support, and web development, among others.

MBIE's director of delivery services for government procurement, Matt Perkins, said the new pricing model was "simpler" and "more transparent".

"It is up to individual suppliers to set their fixed fee through the 'request for proposals' process," he said.

"There are no barriers in the contract that will limit the ability of the business or the government agency to attract talent."

However, RCSA chief executive Charles Cameron dubbed it unattractive, out of step with the private sector, and unsustainable.

With public sector job ads up 6 per cent last quarter, he said he couldn't understand why the Government was forging ahead with such a "radical" change without consulting with the sector first.

"We can only assume it was a poorly-informed attempt to reduce costs," Cameron said.

However, Perkins said MBIE sought feedback from "industry and experts across government agencies" when developing the model.

"This process highlighted that there are multiple pricing models used globally, including percentage of salary, retained search, fix fee recruitment, and hourly billed recruitment," he said.

Taking a dig at the Government, Cameron said, "It might end up saving a lot more than anticipated as talent is directed away from Government and into private sector roles where clients are more than prepared to pay sustainable costs for professional recruitment services that are vital to helping them navigate current skills and talent shortages."

The term of the new contract is three years, with two rights of renewal of three years each. So, the new model could be in place for nine years.

Recruitment firms have until September 30 to submit proposals to MBIE for the "All-of-Government Talent Acquisition Services" tender.

The new model will start being phased in from March 2023.