How Do You Pay Perm Recruiters ?!?
How Do You Pay Permanent Recruiters? A Guide for New Agency Owners
Hey Everyone! If you’re a new agency owner like me, you might find yourself asking the question: “How do I pay my permanent recruiters?” It might sound like a dense question, but it’s one that’s crucial for the success of your recruitment agency. Having just launched my own agency at the beginning of this year, I’ve been navigating the waters of recruitment, particularly in the realm of permanent placements, which is completely new to me.
As a one-man show, it’s been relatively straightforward to fill roles and keep the entire fee. However, as I look to expand my team, I’m starting to grapple with how to calculate individual team member billings and commissions.
The Payment Structure: Salary + Commission
I’m planning to adopt a salary plus commission pay plan for my recruiters. The idea is simple: recruiters will pay back their salary and earn commission on whatever they bill after their salary has been covered.
Here’s how I’m envisioning the commission structure:
- 30% commission for generating the job order.
- 25% commission for filling the job order.
A Hypothetical Example
Let’s break this down with a hypothetical scenario:
- If a recruiter has a salary of $5,000/month and bills $30,000 in a single month, how do we calculate their commission?
This is where things get tricky!
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Full Fee vs. Responsible Portion: Do you consider an individual’s billings as the full fee of the job order they worked on or just the portion they are directly responsible for?
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Generating vs. Filling: If that recruiter generates a job order but someone else fills it, they would be eligible for a 30% commission after their salary is covered. In this scenario, if the salary is $5,000 and the placement fee is $20,000, would they earn 30% of $15,000 (the fee minus their salary) or would they earn 30% of the total $20,000?
Options for Commission Calculation
The comments from experienced recruiters provide valuable insights on this topic:
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Net Revenue Commission: This approach involves calculating commission based on the net revenue from placements. For example, if a recruiter generates a job order that results in a $20,000 placement fee and their salary is $5,000, they would receive 30% of $15,000. This method ensures that you’re keeping your expenses in mind and can help prevent losses.
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Gross Revenue Commission: Alternatively, you could offer commission based on gross revenue, which would mean they earn 30% on the full $20,000 fee. While this may seem more lucrative for the recruiter, it could potentially lead to financial strain for your agency if not properly managed.
Ultimately, the choice between these two options depends on your business model. For many agencies, net revenue is easier to work out and helps to ensure that you don’t operate at a loss.
Considerations Before Finalizing Your Commission Structure
Before diving deep into commission structures, there are several factors to consider:
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Your Niche: What niche are you operating in? Different industries have varying average fees and placement rates, which could affect how you structure commissions.
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Overhead and Break-Even Point: It’s essential to calculate your overhead costs and break-even point before worrying about commissions. Understanding your financial landscape will allow you to make informed decisions about how much you can afford to pay your recruiters.
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Recruiter Performance and Motivation: Consider how your commission structure impacts recruiter motivation. You want to create a system that encourages growth and performance while also ensuring your agency’s sustainability.
Final Thoughts
Navigating the world of permanent recruitment can be challenging, but with a clear commission structure in place, you can set your team up for success. As I continue to build my agency, I’m eager to hear from more experienced recruiters about their approaches to commission payments.
Remember, there’s no one-size-fits-all solution, and your approach may evolve as your business grows. Don’t hesitate to seek advice from industry veterans, as their experiences can provide valuable insights that will help you develop a robust recruitment strategy.
Here’s to building a thriving recruitment agency together!
Feel free to leave comments below with your thoughts, experiences, or additional tips on how to structure payments for permanent recruiters. Let’s learn from each other!