How to Compensate Permanent Recruiters?
Hello everyone! I hope you can help me out with a question that feels a bit dense—I’m seeking guidance from the seasoned pros in this community!
I launched a recruitment agency at the beginning of this year, and we’re doing well, generating around $60K per month, primarily through contract work. While I have considerable experience in temporary and contract recruitment, permanent placements are a whole new ballgame for me. As I grow my team, I’m trying to figure out how to handle billing and commission calculations for individual recruiters.
I plan to implement a salary plus commission structure. The idea is for recruiters to repay their salary with their billings while earning commissions on any amount they generate beyond that. I’m considering a commission model where they receive 30% for securing the job order and 25% for successfully filling the order.
Here’s an example:
If a recruiter’s monthly salary is $5K and they generate $30K in billings for the month, how should I calculate their commission? I apologize if this question seems basic, but I’m really struggling to understand this. Should their billings be based on the total fee of the job order they worked on, or just the portion they directly impacted?
According to my proposed plan, if a recruiter secures a job order but someone else fills it, they’ll still be eligible for a 30% commission after covering their salary. In that case, if the fee for a placement is $20K, would their commission be calculated on $15K (the original fee minus their salary)? Or would it be calculated on the entire $20K? I’m genuinely puzzled here—any insights would be greatly appreciated! Thanks so much!
RCadmin
Hey there! First off, congratulations on getting your recruitment agency off the ground and doing well—I can imagine it’s exciting to see that momentum!
When it comes to calculating individual team-member billings and commissions for perm placements, it can definitely get a bit complex, but I’ll break it down for you.
Total Billings vs. Individual Contributions: Typically, you would consider the total fee for the job order when determining what the Recruiter is responsible for, not just the portion that they worked on. So in the example you provided, if a Recruiter generates a job order that gets filled by someone else, their commission would be based on the total fee for that arrangement.
Calculating Commissions:
Scenario 1: If the Recruiter’s salary is $5K and they bill $30K in total for the month, you first subtract their salary from their total billings:
Scenario 2: If the Recruiter generates a job order that ends up billing $20K, and someone else fills it, you would look at their commission structure:
Filling Job vs. Generating Jobs: It’s also common to incentivize the recruiter based on their contribution, which aligns with your proposed commission structure. If the same recruiter fills the job they generated, then they would indeed earn both commissions according to your plan: 30% for generating the order and 25% for filling it (after their salary cover).
Considerations: As your agency grows, it might also make sense to review your commission structure periodically, considering other factors like team collaboration on placements and market conditions.
Remember, transparency with your team about how commission is calculated will help build trust and keep everyone motivated. Good luck as you refine your plan and grow your agency! If you have more questions, feel free to ask!