The Hidden Costs of Recruitment Agencies

"We only charge a small fee." "Our rates are competitive." "Think of it as a convenience charge."

If you've ever used a recruitment agency or labour hire company, you've heard these lines. But what do agencies actually charge? And more importantly, where does all that money go?

The Visible vs. Invisible Costs

Agencies are masters of obfuscation. The fee you see is rarely the fee you actually pay. Let's break down the typical cost structure:

What Agencies Admit To

•Commission: Usually quoted as 15-20% (but often higher)
•Booking fee: $15-50 per job

What Agencies Don't Mention

•
Margin on hourly rates: Labour hire companies often pay workers $30-40/hr while charging clients $55-75/hr. That's a 40-90% markup, not a "fee."
•
Insurance markup: Agencies charge for insurance coverage that often costs them a fraction of what they pass on.
•
Materials markup: When agencies handle materials, expect 10-30% added on top.
•
Call-out fees: Separate charges for "administration" that duplicate the commission.
•
Cancellation fees: Charged to workers AND customers for schedule changes.
•
"Urgency" premiums: Same-day or next-day requests cost 20-50% more.

Real-World Examples

Case Study 1: The $800 Drain Unblock

A Wellington homeowner needed an urgent drain unblock. Through a well-known booking platform:

Quoted price: $380 + GST = $437
Urgency fee: $85
Call-out fee: $75
Platform fee: $45
Total paid: $642

The plumber received $245 for 1.5 hours of work. The remaining $397 (62%) went to the platform and agency fees.

Had the customer hired directly, they could have paid $300-350 total, and the plumber would have earned $50-100 more.

Case Study 2: The Construction Labour Trap

A carpenter working through a labour hire company in Auckland:

Client charged: $65/hour
Carpenter received: $38/hour
Agency margin: $27/hour (41.5%)

Over a 40-hour week, that's $1,080 per week going to the agency – for matching a worker to a job site.

Over a year (48 working weeks), that carpenter "donated" $51,840 to the agency.

The "Value" Agencies Claim to Provide

Agencies justify their fees with promises of value. Let's examine each claim:

"We vet all our tradespeople"

Reality: Most "vetting" consists of checking a license number online (free) and asking for references. Time investment: 15-30 minutes per worker. This justifies thousands in annual fees?

You can do the same verification yourself with a quick phone call and a license lookup.

"We handle insurance and liability"

Reality: Legitimate tradies carry their own insurance. Agencies simply add a margin on top of coverage that already exists, or provide minimal coverage that wouldn't help in a real claim.

"We guarantee the work"

Reality: Read the fine print. Most agency "guarantees" involve sending another worker to look at the problem – not actually fixing it for free. And qualified tradies guarantee their own work anyway.

"We're available 24/7"

Reality: So are phones. And most emergency tradies already offer after-hours services directly. The agency just adds a layer (and a fee) between you and the same worker.

The Cost of Living Connection

New Zealand is facing a cost of living crisis. Every unnecessary middleman fee contributes:

Higher home maintenance costs mean deferred repairs, leading to bigger problems and higher eventual costs
Higher construction costs flow through to house prices and rents
Lower tradie wages make trades less attractive, worsening the skills shortage and driving prices even higher
Money leaving communities as agency profits flow to shareholders rather than local workers and families

When everyone in the chain takes a cut, ordinary New Zealanders pay the price – whether they're getting work done or doing the work.

The Global Shift Away from Middlemen

Worldwide, industries are moving toward direct connections. Consider:

Accommodation: Airbnb connects hosts directly with guests, disrupting traditional booking agencies
Transport: Uber and Lyft connect drivers directly with passengers
Retail: D2C (direct-to-consumer) brands bypass traditional retailers
Freelance work: Platforms connect businesses directly with freelancers

The trades industry is one of the last holdouts of the old middleman model. But change is coming, driven by workers and customers who refuse to accept unnecessary fees.

Questions to Ask Before Using an Agency

If you're considering an agency, demand transparency:

What is your exact commission percentage on labour?
What is the margin between what the worker receives and what I pay?
Are there any additional fees beyond the quoted price?
What specifically does your "vetting process" involve?
What does your guarantee actually cover?
Can I get the worker's direct contact for future jobs?
How much would this job cost if I hired the same worker directly?

If they won't answer clearly, that tells you everything you need to know.

The Better Alternative

Direct hiring isn't just about saving money – though you will. It's about:

For Customers

✓ Transparent pricing without hidden fees
✓ Direct communication with the actual worker
✓ Building relationships for future work
✓ Supporting local tradies, not corporate middlemen
✓ Real reviews from real customers

For Tradies

✓ Keep 100% of what you quote
✓ Build YOUR reputation and client base
✓ Set your own rates and schedule
✓ Direct relationships with customers
✓ Control over your business growth

Making the Switch

Moving away from agencies doesn't have to be complicated:

For Customers:

Start using direct-connection platforms for your next job
Ask neighbours and friends for tradie recommendations
When you find good workers, save their details for direct contact
Leave reviews to help others find reliable tradies

For Tradies:

Create profiles on commission-free platforms
Ask happy customers for reviews and referrals
Gradually shift work from agencies to direct clients
Calculate your annual "agency tax" – use that number as motivation

Stop Paying Hidden Fees

FindYourWork connects customers directly with verified tradies. No commissions. No hidden fees. No middlemen taking a cut.

Find a Tradie Join as a Worker

The Hidden Costs of Recruitment Agencies: What They Don't Tell You