Recruitment firms are “confused” by the government’s planned changes to the way wages are paid to fill public sector vacancies.

The Recruitment, Consulting and Staffing Association (RCSA) is concerned about the new “untested” approach,
Likely aimed at cutting costs, recruiters will be incentivized to prioritize their private sector clients over public sector clients.

The industry body believes this could be particularly detrimental for New Zealand, where major government reforms and work programmes are creating jobs amid a labour shortage. In fact, an additional 3,423 full-time staff and contractors are needed to meet the government’s commitments made in this year’s Budget.

The Ministry of Business Innovation and Employment (MBIE) is inviting recruitment firms to bid for government jobs ahead of the existing contract, which has been in effect since 2017 and expires in September next year.

Under the current contract, government agencies can use a group of 40 recruitment firms to provide a range of recruitment services.

A key feature of the new contract is that recruiters must charge government agencies a flat fee to fill certain types of positions, no matter how easy or difficult it is to find the right candidate.

As a result, recruiters will have to charge government agencies the same to fill low-skilled, low-paying jobs rather than high-skilled, high-paying jobs.

Recruiters can set different fees for permanent/fixed term roles and contractor versus temporary roles. They can also set different fees for two broad job categories related to the contract – “General Management and Corporate” and “General IT”.

The former category includes roles in accounting and finance, administration, asset management, health and safety, general management, policy, procurement, project management and a range of other types of jobs. The “General IT” category includes roles in cybersecurity, network engineering, IT support, and web development.

Matt Perkins, MBIE’s director of government procurement delivery services, said the new pricing model was “simpler” and “more transparent”.

“It is up to individual suppliers to set their fixed fees through a ‘request for proposal’ process,” he said.

“There is nothing in the contract that would limit the ability of a business or government agency to attract talent.”

However, RCSA chief executive Charles Cameron called it unattractive, disconnected from the private sector and unsustainable.

With job advertisements in the public sector up 6 per cent last quarter, he said he could not understand why the government had pushed forward with such “radical” changes without consulting the sector first.

“We can only assume this was an ill-advised attempt to reduce costs,” Cameron said.

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

“This process highlights the global use of multiple pricing models, including salary percentage, retention search, flat-fee recruiting, and hourly-billed recruiting,” he said.

Taking a dig at the government, Cameron said: “The ultimate cost savings could be much greater than expected as talent is transferred from government to private sector jobs where clients are willing to pay for critical Valuable professional recruitment services pay sustainable costs. Help them address current skills and talent shortages.”

The new contract is for a period of three years, with two renewal options of three years each. Therefore, the new model can be used for nine years.

Recruitment firms have until September 30 to submit proposals to MBIE for a “Government-wide Talent Acquisition Service” tender.

The new models will be put into service in stages starting from March 2023.