While commission is not the only incentive that matters, it's fair to say that it's probably the most important. As a recruitment founder, the commission structure you choose will ultimately determine your bottom line and play an important role in attracting top talent to your own team. As an agency recruiter, the commission structure you sign up for will impact the size of your check at the end of each month.
4 Key Pillars of Any Recruitment Commission Structure
- The first is to ensure that your commission structure is easy to understand, clear & concise. After all, it's a key part of your recruitment company’s internal strategy
- Secondly, it must align with your goals. If your goal is increased billings, it should incentivise billings. If it's developing major client accounts, then that should be reflected in how you structure your incentives. Same goes for profitability.
- Thirdly, make sure everyone has skin in the game. Is the structure fair? You want to ensure that your recruiters are being rewarded fairly for their efforts while making sure you're also taking care of your business
- And finally, while your contracts should be etched in stone it should also be flexible, with room to grow. You want to ensure that your structure can be adapted as your company grows & changes.
With that in mind, in this article, we are going to break down some of the most common commission structures used in the recruitment industry, what they mean, and how they work.
We'll cover:
- The nuts & bolts of any good recruitment commission structure
- Real world examples from recruitment companies we trust
Whether you're working under contingency, retained, or hybrid of both, there’s a host of ways to reward top billers, incentivise increased billings & grow your revenue through clever recruitment commission structures.
The Nuts & Bolts of Recruitment Commission Structure
First, let's get some key considerations out of the way. When drawing up your own commission structure there are 4 key components you need to consider:
1. BASE SALARY OR DRAW
It's so important to get this first consideration right. Too little, and you'll struggle to attract good recruiters. Too much, and you risk getting stuck with high monthly costs and lackluster productivity. Not where you want to be. Ultimately you want to cover basic costs for the recruiter while leaving enough room for commission to be a meaningful motivator.
Another variation is the draw: an advance against future potential incentive commission earnings. In most cases this is recoverable. Meaning if a recruiter fails to hit their targets at the end of a period, the recruiters owe the agency the difference. The amount owed is usually carried forward to the next period, with anything owed at the end of the contract paid back in full. This is ironclad for you but only works well for recruiters when commission percentages are high. Great for the strivers.
2. FLAT RATE VS PERCENTAGE INCREASE
With a flat rate commission structure, a recruiter is paid a set fee for each placement made. A percentage based commission structure pays a percentage of the fee charged to the client for each placement made. For example, 20% of the first year salary.
The type of commission structure you choose will depend on a number of factors, including the type of role you are recruiting for, the industry you are recruiting in, and the size of the fee you are charging. But in the main, flat fee seems to work best if you're charging your client a flat fee. Commission is much more common, and arguably a much greater incentive. The Doherty Group have interviewed hundreds of Recruitment Professionals from all levels to get insights into the salaries, commissions, and benefits across the industry.
In the images below, you’ll find the most common percentages for flat rate commission with and without threshold as well as how much it increases depending on the billings for UK Recruiters.
Source: Doherty Group Salary Survey
Source: Doherty Group Salary Survey
Capped or Uncapped Commission?
A capped commission structure limits the amount of commission that your recruiters can earn in a given period. For example, they may only be able to earn up to 10% commission on each placement made in a month.
An uncapped commission structure, on the other hand, has no limit on the amount of commission you can earn. So, if a recruiter makes 8 placements in a month, they will earn commission on all 8 placements. The incentive here is obvious.
Thresholds
A threshold is the minimum amount of billings or placements a recruiter needs to make in order to start earning a commission. For example, a recruiter may only start paying commission once they've billed $5k in a month. This is a great way of avoiding mediocre performance. Commissions are a reward for excellent performance. The base salary is there to take care of your staff in a lull. The threshold makes sure that if a recruiter wants a great bonus, they work for it!
Final top tip: Avoid allowing for a way to 'load up' (holding back placements for the following month).
Most Popular Commission Schemes in the UK
The more placements you make, the more you earn. This is the most common commission structure for UK recruitment professionals, according to our recent salary survey. The second most popular option is a similar structure with a threshold. See the examples below for more details:
Source: Doherty Group Salary Survey
Real Recruitment Company Commission Structure Examples
When considering the recruitment commission structure you choose, it's important to remember that commission is not the only incentive and many of these companies offer a different mix of benefits and perks. To help you get a better idea of how much you can potentially earn as a recruitment professional, we've included a chart below that shows the potential earnings based on the amount you bill.
Keep in mind that this is just an example gathered from our UK Salary Survey and your actual earnings will depend on a variety of factors, including the commission structure you choose and the mix of benefits and perks offered by your employer.
Source: Doherty Group Salary Survey
As you can see, there are a variety of commission schemes to choose from, and each one has its own unique set of variables. As experienced recruitment experts, we strongly recommend that you thoroughly analyse your company goals first and foremost.
