The way recruiters are paid has been a fraught topic forever.

Plenty of business owners struggle with recruiter productivity.

Plenty of recruiters struggle under schemes they feel are unfair, cumbersome or just miserly.

Bonus and commission schemes have been lauded for motivating teams and criticised for driving lousy behaviour.

For 44 years, I have debated, tested, and struggled to get compensation, commissions, and bonuses right in the businesses I have run and the many I advise now.

Firstly, it’s hard. There are so many moving parts and so much to consider. It’s not one-dimensional.

Secondly, I have tried every scheme under the sun, and nothing is perfect. Every scheme had downsides. A few are demonstrably better than others.

Recruitment leaders need to be very careful about opportunistic schemes that work ‘in the moment’, but are not fit for purpose long-term.

We saw that in the post-Covid boom.

Everyone was hiring recruiters and needed to make their offer attractive. So, commission and bonus plans were finessed to make them more generous and appealing to the recruiter. And it worked while the market boomed. But as recruiter production fell, the flaws were exposed. Recruiters were earning too big a slice of what they produced, and owners rushed to change the bonus structure. Doing that will not earn you love and affection from your recruiting team, and falling out ensues.

Equally, recruiters often fall for a juicy-looking scheme but do not understand the nuance of how it works, and more importantly, do not put enough store on how much or how little help they are going to get to achieve their GP goals. A general rule of thumb is “the more generous a commission plan looks, the less likely you will be highly supported in the job.”

There are some great truths and some practical learnings about incentivising recruiters. You may not be hiring now. But you will be, and you need to get this right. You need it to get it right in a downturn, too, because balancing corporate profitability with fair and attractive recruiter reward is the key.

So, I prepared a 25-minute video downloading the summary of what I know and believe. It is up on the Savage Recruitment Academy, so it is available to subscribers only. You should join now.

I also made a short version of the video for everyone. In it, I highlight 11 critical points regarding commission and bonus plans, which I have also laid out for you here.

For the complete explanation, sign up to the Savage Recruitment Academy.

1. Align the reward scheme with your ethos. Your fundamental ethos and culture, not your PR blurb. The type of company you want to create. Yes, a profitable company, I know, but what else?  You want a collaborative environment; your comp scheme must reflect that. You are happy for the winner takes all, survival of the fittest vibe, then structure accordingly. This message is just as crucial for recruiters considering a new opportunity. The earning potential looks excellent! But what about the culture of the business you are planning to join? You could hate it and last a few months. How much will the hot bonus plan help you then?

2. Reward people for what you want them to do. Sounds obvious. LOL. How many billing managers are asked to coach, develop, and lead a team of 4/5 recruiters but rewarded 90% on their own billings? Total conflict. It will never work. How many businesses reward the recruiter 100% on the job filled? Then, expect recruiters to miraculously share candidates. Good luck. Again, recruiters must work through this. Don’t be taken in by the shiny bauble of what looks like a generous scheme if your job performance is measured differently from how you are paid. 

3. Get your Base salary right. Don’t respond to recruiter shortages by rapidly escalating your bases.  Bases must be fair and attractive. I call them ‘Goldilocks Bases’. Not too little, and not too much. Too little means you will get no interest. Too much, and you will soon be caught at the uncomfortable crossroads of high fixed costs and mediocre productivity. Trust me, that is a painful place to sit. The recruiter, too, must take heed. No recruiter ever entered the hurly-burly of third-party recruiting to rest on their base salary alone. It’s a hard job with great rewards for the successful. Of course, a high base is attractive, but look closely. A high base usually means a high threshold before commissions kick in. In many cases, a lower base with a suitable scheme for contingent reward will result in much higher earnings. (View Video)

4. Avoid ludicrous ‘buy-in’ premiums for so-called superstars. ‘Superstars’ who routinely underdeliver and where you mess up the fairness and equilibrium of your reward system, leading to unrest and distrust and much more. Which recruitment owner does not have a version of this cautionary tale?  There is a learning opportunity here for recruiters, too. Be careful not to ‘big yourself up’ too much as you switch employers. Of course, put your best foot forward. But gild the lily? Push for th highest possible base? That’s fine.. if you deliver! You have nowhere to hide if your results are modest and your salary is peak.

5. Over-rewarding mediocre performance. Disaster. This is where the commission kicks in too soon. Thresholds are too low. At first, it might be small money, but it breeds a ‘See monkey-feed monkey’ mentality and ethos. It can get to the point where a recruiter won’t pass the stapler to a colleague without asking for a fee split! Commissions are bonuses. Bonuses are a reward for results above expectations. Not for turning up. What exactly is the base for, after all? That’s for doing a good job, like any job. Do you want tasty bonuses? You over-deliver! This ethos will appeal to high performers or those intending to be great at this job. And frankly, the job is too hard not to be good at it. If that statement does not make sense to you, read this.

6. No understanding of ‘Cost of Seat’. Or ignoring it. This is linked to the previous point. Don’t ever devise a comms structure without calculating COS. Total costs, deduct fee-earners salaries. Leave managers and admin in. Divide by the number of fee-earners. (There is much more detail on this in the full video on the SRA) It will be AUD 100,000 or £50,000. Then add the base to the Cost of Seat, and only above that number are you just starting to get a return. Devise bonus strategy accordingly.

7. Not rewarding high performance. Also, very dangerous. Once a recruiter has billed three times base, you can be generous. Salary and COS are paid, and so is an essential return to the business. Don’t scrimp with your good performers. Show them the money! Once they have billed four times and above, what does it matter if they get 40% or 50% of the fees produced? You have made a fortune via their efforts. Drive high performance by ensuring high performance is very lucrative. Recruiters, are you highly rewarded for high performance? You should be.

8) The commission structure is too complicated.  I have seen some needing a calculus degree and a PhD in English Lit to comprehend. Too many levels of bonus percentage. There are too many ‘ifs and buts’. It builds distrust in the system and stunts effort. Make it clear, simple, and easy to understand and calculate. Every recruiter who has worked under such a plan is nodding their head right now (View Video)

9) Paying monthly, not quarterly. Common, especially in the UK. I don’t like it. I like quarterly. You must encourage people to take a longer-term view of their careers and rewards. Train people to do great work and value the benefits that flow, like success, happy customers, and high self-esteem. And money comes after that. Monthly comms schemes breed ‘short-termism’ – which sometimes leads to candidate abuse, such as people being pushed into jobs that are wrong for them, dishonesty, and even fraud. Like start dates being finessed or even phantom placements being created on the last day of the month. Or three ‘back-outs’, so sadly occurring on day one of the next month, after comms is paid.

10) Having a quarterly or monthly threshold that does not carry shortfall forward. In Australia, this is heading the wrong way. Carry–forward is being abandoned. In the UK, I suspect carry-forward is rare. It’s gone that way in Australia during the post-Covid recruiting boom (circa 2022), and now many owners are trying to revert back! Well, it will cost you a lot!  Let’s be clear, your bonus calculation is or should be this. People get paid, say, 30% above three times the ANNUAL base. We just happen to pay it quarterly. Do the sums. A recruiter has a huge month and gets a massive bonus. Next month, she bills ‘doughnut’ but still gets her base. Then, a colossal month is next up. If you don’t carry forward the monthly or (preferably) quarterly threshold shortfall, then at the end of the year, you will find you have paid the recruiter half of what they billed, and you are going nowhere. That’s how we get companies growing sales and going back in profit. Sound familiar?

11)  Pay on collected fees, not invoiced fees. Simple. We must have the money to pay the money. It is great for cash flow and getting the business and the recruiters aligned on what a ‘good client’ is. And a good client is many things, including paying within terms. (View Video)

I know this sounds hard-core. But you are running a business that wants to be a high-performance one. And the hallmarks of high performance are non-negotiable high standards and high rewards for success. Don’t flop towards the mediocre.

Work out what of this suits your business. But be honest with yourself. Be brave enough to make the changes that lead to improvement. Of course, not everyone will be happy when you do.

Recruitment consultants, this is not about paying recruiters less. That’s the irony—this is about paying recruiters more. And the company benefits as well. If the company does well and is well run, much of the success will go back to recruiters regarding bonuses, marketing support, training, and career growth. That is the secret sauce.

I encourage recruiters and leaders alike to consider the big picture

For leaders, I know it’s hard. But just making concessions is not the way. And if you must keep offering higher bases and more lucrative comms schemes to attract recruiters, maybe the problem is not the way you pay people but the fact you offer nothing else that recruiters value.

A bonus structure is not in itself a foolproof retention or motivation tool.

Trust me; there is plenty that recruiters value in addition to comms.

Make sure you work that out in parallel with fixing how you pay people.

 Watch the video for more details!

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https://www.youtube.com/watch?v=F7p6z7yNbnw

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