The labor market is healthy and active in the Philippines, making it a great time to consider starting a recruitment agency. With a rich outsourcing market and 64% of the population at working age (between 15 and 64 years of age), the country is in a great position to provide local talent for domestic industries and foreign companies over the coming years.
The elections in 2022 have also boosted optimism about economic prospects in the Philippines.
As of October 2022, employment levels in the country have rebounded to pre-pandemic levels, with unemployment falling to 4.5%. This is down from 7.4% in the same month of the previous year.
Between October 2021 and October 2022, the government also reported that the following sectors experienced the largest increase in employees:
With an increasing demand for workers across multiple industries, recruiters will be sought after by employers to fulfill talent needs efficiently. Recruiters who adopt automation, AI, and other technological advancements in their business will have an advantage in helping employers fill vacancies and make strategic hires to fuel their business goals.
These combined factors create a rich environment for a new recruitment agency to succeed. If you are ready to start a recruitment agency in the Philippines, taking these eight steps will help your business get off to a strong start.
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The first step in the process of starting a recruitment agency that aspiring agency owners can take is researching the landscape to identify a niche to help the business stand out in the industry.
This decision should be based on your existing relationships with potential clients and candidates, the employment landscape, and the viability of certain agency models.
In addition to local employers, many international companies outsource labor to the Philippines due to the favorable costs, the skill level of the local population, and their general English proficiency. Foreign workers also relocate to the Philippines for local employment opportunities, and many Filipinos obtain jobs overseas. This provides many options in terms of the candidate population and client base you can plan to engage in your business.
Another factor is the agency model and determining whether to operate as a temp or contingency agency. Temp agencies place contract workers in jobs for specific projects during a set amount of time, while contingency agencies typically source candidates for permanent employment positions with employers.
Lastly, you will need to decide whether the business will have a generalist or specialist focus. Generalist agencies have a broad focus, which allows them access to a wider pool of applicants. These agencies primarily fill entry-level jobs or roles that do not require a lot of experience. While this will provide more flexibility in response to changes in the market, it may not provide you with the relationships to source candidates for senior roles or jobs in specialized, hot industries.
Specialist agencies, on the other hand, may have more knowledge of a select number of industries or focus primarily on recruiting for senior-level positions that generate higher fees from clients.
These agencies may have more insight into employers’ hiring needs and deeper relationships with candidates in particular fields, which can be an advantage over large and international agencies. However, a shift in market demand or a slowdown in hiring in your chosen area can negatively impact business growth.
The process of starting a recruitment agency also requires research into the competitive landscape. This will help you understand which companies are succeeding and identify gaps that your agency can fill in the market.
The top Filipino recruitment agencies like Staffhouse, Manilla Recruitment, and IPAMS, as well as international recruiters, are worth studying to create a roadmap for your business.
As the Philippines struggles to source highly-skilled workers and faces double-digit percentages of underemployment, there could be an opportunity to offer differentiated services that other agencies may not. For instance, your recruitment agency could include a service that provides upskilling opportunities for candidates before placement. Another feature to consider for your agency could be online recruitment, especially as the government works to eliminate illegal operations impacting job seekers.
To ensure the success of your recruitment agency, it is imperative to start with a clear vision for how your agency will operate today and in the future. Business plans may also be required to obtain certain types of licenses and to register the business, so it should take place before the agency is up and running.
A clear strategic vision encourages you to imagine all of the potential paths your business may take and potential issues it could face. This ensures that you have a business model that is scalable, agile, and clearly defines the values that will guide employees to meet their goals.
Another aspect of starting a recruitment agency that you should understand before getting started is the regulatory landscape. Recruitment agencies are required to obtain a license to operate in the Philippines. Agencies must register with the Department of Labor and Employment as a Private Employment Agency (PEA) and foreign companies seeking to recruit Filipinos to work overseas must obtain a license from the Philippine Overseas Employment Administration (POEA).
Of course, all companies must also follow labor laws to avoid fines and other negative consequences. Business owners should also have insight into any pending new legislation that may affect their business.
More countries, including the Philippines, have passed laws in the last decade regarding the proper storage and use of personally identifiable information. Therefore, it is essential to remain aware of the laws that govern recruitment agency operations and determine what personnel you may need to maintain compliance.
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A crucial step in starting a recruitment agency is determining the full cost of setting up your company and keeping it in operation. Among the fees associated with setting up and operating a recruitment agency are the license, business registration, insurance, phone and internet services, office space, business hardware and software, and relevant subscriptions.
Failing to consider all of these costs can create liquidity issues if it is not weighed against the agency’s potential earnings based on the business model. In a contingency recruitment model, for example, the agency is typically paid a one-time fee equivalent to a percentage of the role’s annual salary (usually 15-20%) by the employer.
However, that amount is only paid if your agency provides a successful candidate. Agencies are not allowed to charge job seekers any fees for obtaining a job in the country. Overseas workers can be charged a placement fee equivalent to one month’s salary, except in countries that prohibit the collection of fees from workers, such as the United States, Canada, the UK, and the Netherlands.
License: A PEA license requires a 5,000 peso filing fee, a 15,000 peso license fee, a 50,000 cash bond, and a three-year 100,000 surety bond. The POEA license requires a licensing fee of 50,000 pesos, a 10,000 filing fee, and a minimum of 5,000,000.00 pesos in paid-up capital. The full details for obtaining a PEA license can be found here, and details for a POEA license are here.
Business registration: The Philippines also requires entrepreneurs to register their business with the Department of Trade and Industry, the Securities and Exchange Commission, the local government, the Bureau of Internal Revenue, the Social Security System, and the Department of Labor and Employment. Full details and links for registration can be found here.
Bank account: The next steps are to open a bank account. While the process is fairly simple for Filipinos and expats, each bank has its own requirements. Consider the accessibility of the bank (i.e., availability of branches and mobile banking options), minimum deposit and spending conditions, and bank fees. You will generally need to provide your business certifications, registration, and license information, ownership information, and personal identification to open an account.
Insurance: Although this piece is often overlooked by small businesses, you should also plan to purchase business insurance to protect your enterprise. The type of coverage will be determined by the size of your organization, the number of employees, and any assets your company owns. Policies available for business owners in the Philippines include business interruption, business liability, and cyber liability.
Phone and internet service: Purchasing a phone line and internet service is essential for a recruitment agency, especially if online recruiting will be part of the business model. There are a variety of options, so select a provider that fits your budget and offers reliable service.
Office space: The location of your agency will be important to build the reputation of your business, so make sure to select an office space that aligns with your budget and company size. For a small business, it might be worthwhile to consider establishing your enterprise in a coworking space. The overall costs are lower than maintaining your own office, and there are opportunities to network with other business owners.
Business hardware and software: The technology setup of the agency can also be a huge advantage. Starting off as a digital-native, cloud-based enterprise puts your agency in a position to prepare for the future and allows you to take advantage of current industry trends, especially as legacy companies work to transform their business systems.
In terms of hardware, you can choose to allow any employees to bring their own devices to work and provide software that allows them to connect to the business network. Office workers may also need printers and scanners to conduct day-to-day operations.
Software should be purchased with the aim of simplifying day-to-day operations and improving the client experience. Apart from the operating system subscription and applications such as a Microsoft or Google office suite and accounting programs, a customer relationship management (CRM) tool and industry solutions such as an applicant tracking system (ATS) are essentials that should be factored into business costs.
Subscriptions and memberships: Along with the upfront costs of purchasing software, you will also need to account for the cost of maintaining subscriptions for these services as well as the fees for posting on job boards, LinkedIn premium membership, and advertising job vacancies. Memberships in professional associations should also be included.
Personnel and support services: Small businesses will also need employees and professionals to help support business functions such as finance and accounting, IT, marketing, and legal. Recruiters can be hired as full-time staff or as independent contractors; however, make sure to understand the labor laws surrounding each type of hire. Support functions can be in-house functions or outsourced to business process outsourcing firms. This choice depends on your budget and ongoing needs.
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Whether you handle marketing responsibilities on your own or hire a professional, creating a plan for marketing the agency is critical to getting the word out about your new business. A website, social media accounts, and advertising are valuable tools to achieve your marketing goals.
The costs of setting up a website and managing an online presence for your business can vary depending on if you go the DIY route or hire experts. Social media accounts are free to create and operate; however, hiring a social media manager will be an ongoing expense to factor in for your agency.
The way that your recruitment agency is marketed can have a substantial impact on the company. A marketing plan provides the blueprint for how your recruitment agency will be presented to clients and job seekers.
Creating authentic, customized messages for your target audience will help you build a loyal following and a positive reputation. Equally important is minimizing negative candidate and client experiences so that your agency can have a chance of long-term success. These are crucial aspects of building a thriving business.
Technology adoption is catching on fast in the Philippines, and investing wisely in the latest solutions can have a noticeable impact on your recruitment agency. As one of the fastest-growing digital economies in the ASEAN region, there is significant interest in developing strong technological capabilities in the country.
As President Marcos said in a recent speech, “The landscape change accelerates faster, compelling us to be even smarter, even bolder in finding digital solutions to many problems.”
Investing in solutions such as AI, cloud computing, automation, and advanced data analytics may also entice talent to join the agency. Clients may also be convinced to try your agency for the efficiency and for effective job placement services you will be able to offer.
Along with solutions that are dedicated to business support functions, recruitment agencies should consider prioritizing investments in cloud-based CRM and ATS solutions to simplify daily tasks, speed up candidate sourcing and hiring processes, and provide intelligence about how the business is functioning.
Since the pandemic, companies have quickly learned that people are their truly most valuable asset. Happy employees have a positive impact on the bottom line, and they are less likely to leave for other opportunities. To ensure that you attract and retain the right talent for your recruitment agency, it is vital to provide career development and training opportunities, create positive and diverse work environments, listen to the needs and concerns of employees, and consider their well-being, happiness, and workload.
The Philippines offers tremendous opportunities for starting a recruitment agency today. With a robust, young workforce, talent acquisition needs will be strong for a long period. If you are ready to take the plunge, employers will be keen to seek your expertise to make lasting hires.
To help strengthen your recruitment agency in its first steps, having an efficient recruitment tool at hand is critical. A fine-tuned digital tool like Manatal comes with innovative features, including Applicant Tracking System and Recruitment CRM, that are designed to push your process to its maximum potential.
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