AI vs Recruitment Agency: AI Hiring Tools (2026)
AI has disrupted recruitment agencies more than almost any other service. AI screens CVs, ranks candidates, writes job ads, sources passive candidates on LinkedIn, and even conducts initial assessments — all for a fraction of the 15–30% salary fee agencies charge. For a £40,000 hire, that's the difference between £600 (AI tools) and £8,000 (agency).
Penny's take
AI has created a new hiring hierarchy: first, deploy AI screening and sourcing (£80–200/month). Then employee referrals (£1,000–2,000 bonus). Then direct LinkedIn advertising. Only use an agency after AI-assisted direct sourcing has failed for 4–6 weeks. For most roles, AI finds better candidates faster than agencies — at 1/10th the cost.
From my notebook
“A tech company was spending £45,000/year on agency fees for 3 developer hires. We deployed AI recruitment tools: AI wrote optimised job ads, screened CVs automatically, and ranked candidates by fit. Combined with a £2,000 employee referral bonus. Next year: 4 hires made. Two through AI-sourced candidates (£1,200 in tool costs), two through referrals (£4,000 in bonuses). Total: £5,200 instead of £45,000. Better retention, too.”
“Employee referral hires have 45% higher retention rates than agency placements, at less than 10% of the cost.”
— CIPD Recruitment and Retention Survey, 2024
What affects the cost — and can AI replace it?
- •Seniority of role
- •Industry specialisation
- •AI screening capability
- •Volume of hires
- •Direct sourcing success rate
What Penny says
Penny calculates the true cost of each hiring method and maps which roles AI recruitment tools can fill directly. AI CV screening, job ad optimisation, and candidate sourcing replace most of what agencies charge 15–30% for — at £100–200/month.
Ask Penny about AI alternatives →Frequently asked questions
Can AI replace a recruitment agency?
For most roles — yes. AI screens CVs, writes optimised job ads, sources candidates on LinkedIn, and ranks applicants by fit. For senior, specialist, or C-suite roles, agencies still add value through networks and executive search capabilities. But for general hiring, AI tools at £100–200/month outperform agencies at £6,000–12,000 per hire.
What AI recruitment tools work best?
AI CV screening: Workable, Lever, or Applied. AI job ad writing: ChatGPT or Textio. AI candidate sourcing: LinkedIn Recruiter with AI features (£80/month). AI interview scheduling: Calendly or Paradox. Total stack: £150–300/month vs £6,000+ per agency placement.