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Recruitment agency bashing was back in fashion this week when the New South Wales Health Minister Ryan Park vowed to crack down on the use of private recruitment firms saying the government’s over-reliance on costly third-party companies to service the state’s health system is unsustainable.

Park, who has ordered a special commission of inquiry into health spending due to release its terms of reference imminently, said the system had become “over-reliant” on what he described as a “temporary fix to regional and rural health worker shortages”.

The Sydney Morning Herald started the pile-on earlier in the week when it quoted state Greens MP Amanda Cohn – who worked as a locum doctor in regional NSW towns for years before entering parliament at the last election, accusing recruitment agencies of “deliberately driving up staff costs while also discouraging medical workers from taking full-time jobs in the public health system.”

Cohn said because some recruitment agents were paid via commission, they were “incentivised to price gouge our hospitals”. In a speech in the NSW parliament, Cohn said agents had “discouraged me from accepting placements before the hospital was offering crisis rates”.

The Herald showed its flawed understanding of how recruitment agencies operate when it breathlessly stated, “Documents also reveal that in some cases the contracts between doctors and third-party agencies discourage health workers from permanently filling roles in the public hospital system by including breakage fees. A copy of a contract between a medical worker and one third-party provider states that a doctor who accepts a role with a “client” – which can include NSW Health – within 12 months of accepting a locum placement must pay “damages” to the private company.

This “breakage fee” refers to a temp-to-perm fee that is common in all recruitment agency contracts with end-users, regardless of sector, role type or seniority. There is nothing unique about NSW Health or doctors in having such a clause in the terms of business or candidate agreement – it’s standard practise.

The Herald article continues,

NSW Health did not answer questions about the cost of third-party agencies, but a spokesperson said they typically received 15 per cent of the doctor’s fee per placement. However, those fees can be as high as 20 per cent. It means that based on one 13-week placement of $3000 per day on a five-day roster the placement agency would be paid $29,250.”

The Herald goes on to say that Cohn believes NSW could potentially save hundreds of millions of dollars by cutting out the agencies and managing the health workforce through a central database. This same suggestion was made 15 years ago in the report of a special commission of inquiry into NSW health services.

The ignorance and naivety of politicians, public servants, and journalists with respect to recruitment is laid bare in this latest beat-up.

The delusion of all concerned is captured through the stakeholders’ explicit or implicit sentiments along the lines of ‘recruitment isn’t that hard’, ‘recruitment agencies are unethical and/or profiteering’, and ‘we should do this ourselves and save a bundle’.

It’s yet another example of where recruiters are belittled and demonised and the difficulty of effective and timely recruitment is demonstrably misunderstood and underrated.

If it was genuinely cost-effective for governments and government agencies to create a big centralised recruitment function you can be sure it would have been accomplished somewhere else, either in Australia or elsewhere around the world, long before now.

The fact that it hasn’t been accomplished anywhere, to my knowledge, is market-based evidence that recruitment agencies are providing a valuable service that the government sector is incapable of providing for the equivalent investment of time and money.

The reality of the healthcare market is that there exists a much greater demand for highly-skilled health workers, such as doctors, than there is supply. Recruiters drive the efficient allocation of these scarce resources through pay rates and other incentives.

Recruiters have no control over the overall supply of these highly-skilled workers; however, the government does have this control – through the many ways in which it explicitly and implicitly endorses both the medical student quotas of tertiary institutions and the licensing requirements of the various member bodies that represent these professionals (eg RACGP, RACS etc). These quotas and licensing requirements directly impact the supply of qualified health professionals.

How often do you see politicians and journalists have a go at these tertiary institutions or representative bodies when it comes to expenditure on health workers?

You never do, of course, because it’s much easier to slam recruitment agencies and demonise them for a problem not of their making.

It’s predictable and pathetic and it needs to stop.

Note (14 July 2023): An earlier edition of this blog included the following paragraph: Unless NSW Health has an unusual agreement with recruitment agencies with respect to placement fees the calculation stated in the above quote demonstrates the Herald journalist’s fundamental misunderstanding of what he was told and is simply wrong. I suspect the 15%-20% quoted refers to the margin included within the stated daily payment to the doctor, rather than on top of the daily $3000 wage example used.

I have subsequently been contacted by a medical recruitment panel supplier to NSW Health with the following advice: NSW does indeed have an unusual agreement. They pay the doctors, not the agency, either by PAYG or if they are ABN Sole Traders or Pty Ltd (lots of senior docs have their own companies to locum through) the agency charges only the margin, so the 15% is on top. I must note however that an agency has to sign and agree to NSW health terms with every single LHD to supply non-specialist doctors and they often determine the price – sign or don’t supply basically. They are usually lower and a lot are 12%. Some we have at 14 or 15. 

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susie rogers

Well said Ross

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