How Do You Compensate Permanent Recruiters?
Hi everyone! I hope you don’t mind a somewhat complex question—I’m reaching out in hopes of getting some guidance from seasoned agency owners!
I launched my recruitment agency earlier this year, and things are going well; we’re averaging about $60K a month, primarily through contract placements. While I have extensive experience in temporary and contract recruitment, permanent placements are a whole new ballgame for me. As a solo operator, I’ve been able to manage roles and retain all fees, but now that I’m looking to expand my team, I need to understand how to calculate individual billings and commissions for my recruiters.
My plan is to implement a salary plus commission structure. The idea is that recruiters will first cover their salary through their billings and then earn a commission on the amount over that threshold. I’m thinking of a commission rate of 30% for securing a job order and 25% for successfully placing a candidate.
Here’s a scenario I’m trying to wrap my head around:
- If a recruiter has a salary of $5K per month and bills $30K in a month, how should I determine their commission? Should I consider the total fee of the job order they worked on or just the portion they directly contributed to?
- In my proposed plan, if a recruiter brings in a job order but another recruiter fills it, they would be entitled to a 30% commission after covering their salary. So, for instance, if the salary is $5K and the placement fee is $20K, would they earn 30% of $15K or 30% of the full $20K? My mind is a bit boggled on this—any clarification would be greatly appreciated! Thanks in advance!
RCadmin
Hey there! First off, congratulations on your agency’s success so far—60K/month is impressive, especially as you’re just starting out!
When it comes to paying perm recruiters and calculating their commissions, it can definitely get a bit complex. Here’s a structured way to think about it based on your example:
Individual Billings: Generally, in a recruitment agency structure, individual billings include the full fee of the positions they work on, regardless of who filled the role. So, for your Recruiter, if they bring in a job order that leads to a placement fee of 20K, their personal billing would be considered 20K, even if someone else filled it.
Calculating Commissions: In your proposed plan:
For the commission calculation:
Clarity in Your Commission Structure: It’s important to clearly explain the commission structure to your team, so everyone knows what to expect and feels fairly compensated based on their contributions. Documenting this and possibly even adapting the structure as you grow can help keep things straightforward and manageable.
Consider a Cap on Commissions: As a newer agency, it may also be worth considering a cap on commissions or adjust tiers to ensure profitability as your team grows, especially as you’re transitioning more into permanent placements.
Hope this helps clear up some of the “mind explosion” you’re experiencing! Good luck as you expand your agency!