Recruiters must talk to each other and be less coy about defining their actual costs of doing business - or face further erosion of margins and lack of acceptance as a professional service, warns the REC’s departing managing director.

Gareth Osborne says that recruiters have continuously absorbed the costs to them of demanding new employment law and regulatory legislation enacted over the last decade in an effort to ward off competition. Recruiters make the problem worse by not being more open with each other about their margins. But in doing so, recruiters undercut and undervalue the services they provide, Osborne contends.

Implementing the Employment Agencies Act in 2004 alone has cost recruiters “close on half a billion pounds” by Osborne’s estimate.

“We mobilise 4% of the total UK labour market. We contribute £26bn a year to the UK economy. We are important. We are responsible for the thing that allegedly across Europe is our most important asset - people,” Osborne told Recruiter in an exclusive interview. “Why are we treated like used car salesmen?

“The reason that has continued,” Osborne says, “is that the industry does not talk collectively. People are so insular and inward-looking, they don’t actually debate issues.”

During his three-and-a-half years at the head of the Recruitment and Employment Confederation, Osborne says he tried to encourage discussion amongst recruiters by beefing up the REC’s regional chapters. “But they’re still standing in corners. If you give them the opportunity to sit down and not talk to other people, then they’ll do it,” he says. “The industry has to mature.”

Recruiters “can’t form a cartel; that’s illegal”, he says. “But what you can do is define your costs so that people understand. Be honest, and then declare your margins. Why not declare your margins, because one business knows what another business has to make to survive.

“That’s what we don’t do. And that’s where we get it wrong.”

Osborne claims at least one major recruiter has told him of “operating far below” the minimum price for supplying temporary labour in a number of contracts and acknowledging, “I’ve got to get us out of it.”

In leaving the top job at the REC, Osborne says his successor must be someone who can fully empathise with recruiters. “It’s a brilliant industry. It’s a fabulous industry,” he says. However, he acknowledges that the role he is vacating attracts controversy. “You can’t do a job like this and not be controversial…and not be tough at times,” he says.

* See the 23 August issue of Recruiter for more of our interview with Gareth Osborne.