8 Steps for Starting a Recruitment Agency in India

Starting a new business can be a hectic time for an entrepreneur. Considerable planning and research go into creating the business’ concept, mission, and values. That is just the beginning, as the initial setup and building of the business follows - which can have a significant impact on the future success of the enterprise. Yet, many people are driven to strike out on their own to start their own business venture.

Historically, it has been considered difficult to start a business in India due to the complex steps required for each company type, the tax requirements, and the costs. In its 2020 Doing Business Report, the World Bank included India as one of the top 10 improvers. The report noted changes to starting a business, such as “abolishing filing fees for the SPICe company incorporation form, electronic memorandum of association, and articles of association.” With these improvements, entrepreneurs should look forward to starting a fruitful enterprise. 

India’s recruitment industry has tremendous growth potential with many opportunities for recruiters to facilitate smoother connections between job seekers and the country’s employers. The use of staffing firms to fill “flexi staffing” or temporary employment roles is just one way that the recruitment industry helped employers make it through the COVID-19 pandemic. 

Online recruitment activity also increased year-over-year, with activity in April 2022 exceeding 2021 levels in 25 out of 27 industries monitored by Monster India. As Lohit Bhatia, president of the Indian Staffing Federation noted in a report, “the staffing industry ended the FY 2021 with a modest 3.6% growth over Mar’20 and added more than 1.03 million flexi staff across industries. This growth reiterated the resilience of the Indian staffing industry, its customers, and maturity and that it will continue to be India’s key job creation engine.” 

In 2022 this momentum is expected to continue with employers showing strong hiring intent across industries including IT, telecom, e-commerce, education, engineering, retail, and logistics. Digital recruitment platforms like Taggd and Naukri, which have millions of active users between them, have released hiring data that presents an optimistic view of the market. Taggd predicts a 31% increase in hiring activity for 2022 compared to the previous year, while Naukri’s monthly year-over-year reporting for April shows a 38% increase in hiring activity on their platform compared to the same month in 2021.

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Despite the pandemic, India’s job market appears focused on growth. If you are ready to begin building a recruitment agency in India, following these eight steps can help you ensure that you are prepared for anything that comes your way in the first months of operating your business. 

Determine your niche

An essential step in conceptualizing your recruitment agency is identifying a gap in the existing recruitment market that your business can fill. This process includes determining if the agency will place candidates in temporary or permanent roles, as well as whether they will have a generalist or specialist focus. 

As the terms suggest, a generalist recruitment agency will look to fill roles for clients across industries. Most of the work will be to fill entry-level jobs or roles that do not require significant experience. However, providing general recruitment services enables the agency to be more flexible in response to changes in the market. 

Conversely, a specialist recruiter focuses on executive-level recruitment or providing highly-skilled talent for a particular industry. Focusing on an area of the market or gaining deep knowledge in an industry can be beneficial for recruitment agencies that are poised to form relationships and demonstrate skill in identifying the best talent for a role.

Given the demand for talent - driven by technology adoption during the pandemic - it may be worthwhile to consider working with clients to fill tech jobs - for example. Specializing in other industries mentioned above that are experiencing significant growth may help to differentiate your recruitment agency. Ultimately, you will need to assess your strengths, evaluate existing relationships, and research how the industry may evolve to decide what niche is best for the agency. 

Virtual hiring and remote work also became a significant part of how the business community operated during the pandemic, and this is expected to become a permanent part of the workplace. Starting a recruitment agency that prioritizes technology and digital engagement can be an advantage in this rapidly evolving job market. Adopting technology also enables a new recruitment agency to benefit quickly by helping employers navigate skill and talent gap issues in their industry. Catering to the nascent gig economy and getting involved with digital staffing platforms can also give a new agency an edge against competitors.

Identify your competitors

Staffing Industry Analysts calls India the most attractive staffing market in the world for a good reason. There remains a significant untapped opportunity for growth in the second-most populous country, and the market has rebounded rapidly as COVID restrictions have waned. 

As the Indian market recovers, employers need more recruiters to meet hiring needs. International companies such as Adecco, Michael Page and Randstad operate in India alongside domestic agencies that serve regional areas as well as the entire country. In a dynamic and fast-growing market, distinguishing your agency’s strengths quickly will be crucial to the long-term success of the business.

Calculate the total cost of opening and running an agency

Once the conceptual aspects of the business have been decided, the next step will make your recruitment agency a reality. As mentioned above, India is known for being a challenging market to start a new business, and there are several consulting firms that you can engage to help you navigate the process. To summarize here, any new business owner will need to register their business, set up the workspace and operating structure, and hire staff - as needed. Each choice comes with its own set of steps to complete the setup of your business.

The first consideration is what type of company your recruitment agency will be (e.g. a sole proprietorship firm or a limited liability corporation). The company will need to be registered with the Service Tax Department and Employee’s State Insurance. Recruitment agencies can be formed to place candidates locally and to place Indian workers in jobs outside of the country. Agencies that fall into the latter category must also register with the Protector General of Emigrates, which is supervised by the Ministry of Overseas Indian Affairs, and obtain a Recruiting Agent license. 

Other steps involved in setting up your business include opening a bank account, selecting a phone and internet package, creating a website and social media pages, obtaining insurance, and renting office space. However, with the rise of remote working, it may not be necessary to open an office right away. Technology investments in hardware like computers and printers will depend on whether you and your employees work in an office or from home. Software investments should include digital solutions to aid with back-office tasks, such as accounting and payroll, email, and an applicant tracking system.

These costs should be evaluated against the structure of the business and fee structure for services (i.e. temporary staffing, contingency or retainer recruitment) to ensure that you have the cash flow to cover ongoing payments for services like marketing and IT support.

Familiarize yourself with local laws and regulations

Other areas to understand before starting a recruitment agency are the state and national laws governing labor practices, which stem from the concurrent list of the Indian Constitution (Seventh Schedule). Indian companies are considered Factories or Establishments, while employees can have many designations, including workers, employees, and temporary workers. Having a clear understanding of the labor laws in each state is critical to avoiding issues with employees.

As a recruitment agency, the Emigration Act 1983 describes the guidelines to follow when placing Indian workers in jobs outside of the country. Recruitment agencies must apply for a Recruiting Agent license with the Protector General of Emigrates. The materials required for obtaining this license include an asset and liability statement, income tax return, a degree certificate, and a bank guarantee for Rs. 20 lakhs, among others.

Establish business goals

Once you have a sense of the practical steps to create and operate a recruitment agency legally in India, it is valuable to imagine the future for your business. Setting goals for your recruitment agency will allow you to conceive of the business’ potential in the short and long term. It also ensures that you have a plan for responding to potential changes in the market and that you have conducted market research to plan for how your recruitment business will grow.

Create a marketing plan

Another critical aspect of bringing a recruitment agency - or any business - to life is building the brand and sharing the company’s mission with clients, job seekers, and potential employees. The marketing plan is the blueprint for how your recruitment agency will be presented to clients and job seekers. Creating authentic, customized messages for your key audience group will help you build a loyal following and a positive reputation in the market.  

It is incredibly important to determine how your agency will utilize online and traditional channels to raise awareness of the agency’s brand. Equally important is minimizing negative experiences and erosion of brand value so that your agency can have a real and positive impact on revenue. 

Adopt technology 

With the current pace of digitalization in India and the world at large, new business ventures should be created by leveraging the best technology available at the time. We have observed how digital-native enterprises have revolutionized product and service delivery across industries. 

There is no reason why it can’t have the same impact on recruitment services in the Indian market. With digital adoption accelerating during the pandemic, planning how the agency will use technology is a crucial aspect of building a successful business. New businesses can gain a significant advantage over competitors in terms of agility and efficiency by utilizing the latest recruitment industry and CRM solutions along with software to manage back-office processes.

Deploying these solutions will simplify daily tasks, speed up candidate sourcing and hiring processes, and provide intelligence about how your recruitment agency is functioning. Powerful recruitment technology like Manatal combines the ATS and CRM capabilities into one solution to make recruiters’ jobs easier. Ensure that you are selecting tech solutions built with security and local regulations in mind that will grow and evolve with your business.

Think of your employees

The most important element of a successful recruitment agency is the staff. Consider how many employees you will need to start and ensure that their roles are well-defined. Even as a startup, employees should have a clear sense of how their careers may benefit from working with your agency. In addition to their qualifications and experience on paper, also consider the soft skills and interpersonal qualities that they may bring to your agency.

Employees are the face of your organization to candidates, clients, and future colleagues. Keeping them happy and motivated is a must to maintain a low turnover rate and protect the agency’s reputation. Some important ways to invest in your workforce include:

  • Providing career development and training opportunities
  • Cultivating positive and diverse work environments
  • Hiring people who display empathy and listen to each other
  • Creating a work environment and business model that account for employees’ well-being and workload

Taking the next step

Starting a new business is never easy. With a clear vision, a solid plan, and trusted partners, your business will have a chance to succeed in the rapidly-developing recruitment industry. As you get your recruitment agency up and running, look to partners like Manatal to offer you a fast, smooth and cost-efficient start to recruitment operations, while you focus on the daily responsibilities of running a business in India.

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