Commission structures for recruiters: How recruiter pay works

The opportunity to earn commission for successful placements is one of the most appealing parts of working in recruitment. However, companies and agencies take a range of approaches to paying commission, and it can be complex to navigate. 

Whether you’re planning your next career move or assessing your staffing costs and commission planning, this article breaks down the most common models for recruiters’ commission.

Do recruiters get commission?

Commission is performance-based payment linked to successful placements or billings. The vast majority of agency recruiters earn commission of some kind, and recruiters working in-house for a company will often have performance-linked bonuses.

 When structured well, commission is a useful tool to motivate staff and build accountability for performance. However, it’s worth noting that if commission is tied to immediate placement without retention, it can reduce quality of hire, since recruiters may focus on speed of recruitment over candidates’ longer-term fit with a role.

Recruiter commission models explained

Recruiter commission models enable agencies to tie staff rewards to their performance. Depending on the model and commission plan, recruitment agency staff will be paid, or paid extra, based on the number or type of placements they make, or the amount of revenue they bill, during a set period.

Core recruiter commission structures

Here are a few of the most commonly used commission structures for recruiters:

• Salary + commission: Under this model, a recruiter receives a base salary, on top of which they can earn performance-based commission. The benefit of this structure is that the base salary provides income stability, and the opportunity to earn commission on top is a performance incentive. Salary + commission is a particularly good model for more junior staff who are still developing their skills and contacts, as the base acts as a financial safety net as they ramp up, while the commission provides motivation to grow.
• Tiered: In the tiered model, the commission rate increases as the recruiter achieves higher levels of performance. So, they might earn 5% commission on their first three placements, 7% on their next three, and 10% on any further placements. This structure aims to motivate staff to work beyond their baseline targets, as the rewards increase exponentially.
• Threshold: Under this model, recruiters must reach a certain level of performance (such as number of placements or amount billed) before they receive any commission. This model discourages mediocre performance and helps align performance metrics with an agency's financial goals. However, recruiters might have to wait longer until they are eligible for a commission, and if the threshold is set too high, some may struggle to attain this perk, which can be demotivating.
• Draw: A draw is essentially an advance commission a recruiter earns for a goal they’re aiming to achieve in the future. The recruiter receives a monthly draw, plus additional commission on top of it, depending on how the model is structured. For example, a recruiter might have a monthly draw of $6,000 + 50% commission on the fees they generate above this. A draw can be recoverable or non-recoverable, i.e., it may or may not have to be paid back if the performance level isn’t met, which is a risk for underperformers, who can incur a debt. 
• Commission-only: In commission-only models, recruiters are paid only based on their performance, but they do not have a guaranteed base salary. For example, the recruiter might receive a commission of 20% of all placement fees they bring in, and this is the person’s entire salary. The commission-only approach is best for highly skilled and experienced recruiters, who’ll be motivated by the opportunity of maximizing their earnings (rather than intimidated by the lack of fall-back). 

Agency fee and client payment models

The fee and client-payment model an agency uses is also an important part of its compensation structure, shaping how the agency organizes commission. The most frequently used fee and payment models used by recruitment agencies are:

• Flat-fee: The agency charges clients a set amount for placing a candidate.
• Percentage-of-salary: The agency charges a percentage (for example, 20%) of the candidate’s annual salary upon placement.

• Contingency: The agency will only be paid if a candidate is successfully placed, like a no-win, no-fee arrangement.
• Retained search: The agreed fee will be paid to the agency in stages: at the beginning, during, and on completion of the search. Even if the search is not successful, the agency will receive some payment.

• Temp markup: This model applies to temporary staffing only. The temp staffing agency employs the staff member while charging the client (for which the staff member is working) a markup.
• Temp-to-perm: This model applies at temp agencies, when a temporary worker transitions to a permanent staff member for a client. The agency usually charges a pre-agreed conversion fee for making the worker permanent, since it loses the ongoing markup income once the worker moves onto the client's payroll. The fee is typically a percentage of the worker's new annual salary, often reduced the longer the worker stayed on as a temp first.

• RPO: RPO stands for recruitment process outsourcing and happens when a company decides to outsource its entire recruitment operation to a recruiting agency, rather than paying for recruitment support piece by piece (as in the above models).

How much commission do recruiters make?

Commission amounts vary depending on the market a recruiter is working in, their seniority, the type of placements they are making, and if relevant, the contract markup for temporary staff. Here are some typical benchmarks to guide you.

Permanent and executive placement benchmarks

Finding permanent staff involves a recruitment agency working on behalf of a client to find them a new, permanent staff member. The agency usually gets a fee based on the annual salary the candidate will be paid (roughly 15-25%). The commission paid to the agency recruiter placing the candidate may be somewhere between 20-35% of the fee, but this will depend on their seniority (more senior = higher percentage) and on the commission structure in place at the agency.

When agencies are working on executive search, they’ll usually earn higher fees (around 25-35% of the candidate’s annual salary). The commission passed on to recruiters varies but is generally higher than in other permanent placement scenarios. This higher rate is due to the larger fees generated rather than a different commission structure. 

Regional and contract staffing benchmarks

Recruiters’ commission also varies by factors such as the geographic region and contract types they fill. For example, there tend to be higher commission rates in major cities where the cost of living is greater (such as New York or San Francisco), compared to smaller cities or more rural locations. Supply and demand and the concentration of different industries also affect commission rates in different locations. If talent is scarce in an area, recruiters can command higher fees.

In terms of the staff being recruited, higher-level and specialist roles usually earn higher placement rates and thus commission, as the right hires are more difficult to find. And contractor placements are billed differently than permanent positions. A contractor will likely stay on the recruiting agency’s payroll, and the agency will bill the client a markup on top of the contract’s wages. In the case of a permanent placement, however, the employee goes onto the client’s payroll and the agency receives a one-time fee.

What affects recruiter earnings

The way an agency structures commission will of course affect recruiters’ earnings, but there are a suite of other factors that also feed into how much a recruiter makes. 

• The roles they fill and how well they place them: Finding candidates for niche or high-level roles that become successful long-term hires will usually lead to higher earnings than filling a high volume of easy-to-place roles, or those where the candidate is a less good fit for the company. 
• Experience and network: Recruiters with more experience also often work for lower base salaries but higher commission levels, with a remuneration structure designed to give them the opportunity to maximize their earnings. This means recruiters with strong networks and experience usually earn more than their junior colleagues. 
• Thresholds and caps: Some agencies place limits on recruiter earnings. Limits can take the form of simple thresholds or caps on commission. 
• Clawbacks: Recruiters’ earnings can be reduced if there are clawbacks in place for placements that don’t last for an agreed period, so the client will be due back some of their fee if the employee doesn’t pass their probation or stay in post for a minimum period, such as a year. 
• Split commissions: When recruiters are working collaboratively or in teams, commission payments are divided between the staff involved, which is another limiting factor to consider when mapping recruiters’ potential earnings.

How to choose the right commission model

With so many variables contributing to how recruiters are compensated, it can be tricky to know how best to structure commission in a recruiting agency. Yet despite this complexity, you have the opportunity to tailor the fee and commission structure precisely to the needs of your business, keeping staff motivated, finances healthy, and clients satisfied.

Match the model to the search and client

Base the model on the type of searches you perform and clients you serve. 

• If you’re working on repeat and higher-volume hiring, or roles where more than one agency is in competition, contingency fees paid on results make more sense. 
• If you’re working on executive search or to fill specialist roles, where the client wants to have a dedicated recruitment partner, a retained model is better. 
• If a company needs dedicated support but also has to fill a high volume of roles on an ongoing basis, an RPO model could work well. 
• When budgets are tighter, and clients need to make sure their recruitment costs are predictable, a flat fee model can enable this. 
• Using a temp-to-perm model is another way client needs can be supported via the fee structure, as this allows them to test potential hires out more thoroughly before they become permanent.

Pressure-test economics and operating tradeoffs

Once you’ve narrowed down options for fee structure by considering search and client focus, map out the implications of the commission model for your business to see whether it will stand up in practice. Consider the risk the agency has the capacity to take on: If a search is unsuccessful or a placement doesn’t last, do you have the resources to absorb not receiving a fee if using a contingency model, or with clawback enabled? 

Assess, too, cash flow and timing. Working for higher-volume, lower-value placements may be less lucrative, but is good for consistency. Evaluating possible fee and commission models involves understanding your operational costs: what are the staffing, IT, equipment, and admin costs that go into making each placement. What and how do you have to charge to cover them, reward your staff, and be profitable?

Model recruiter pay or hiring costs

Everything above shapes what recruiters earn, but it also determines what recruiting costs employers. If you’re an employer deciding whether to build an in-house recruiting team or use an agency, it helps to model both against each other rather than comparing a salary to a fee in isolation.

Internal recruiter cost model

When calculating the cost per hire of doing recruitment in-house, as well as the recruiter’s salary, you should factor in all their additional benefits, and operational costs like the sourcing tools, equipment, and training they need, and the costs of support functions including admin and management. Once you have this figure, you can divide it by the number of anticipated hires to get an idea of the cost per hire.

Agency and placement cost scenarios

You can then compare this in-house cost with agency options. For example, an agency fee might be a straightforward percentage of the hired candidate’s salary. If using a retained model, this fee will be paid in stages over the duration of the search. If you’re working with temporary staff or considering an RPO arrangement, you need to factor in their monthly cost to run, and how long you anticipate the arrangement will last.

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FAQs

Do internal recruiters receive commission?

Internal recruiters usually receive a bonus payment of some sort in place of commission for successful placements.

How much commission does a recruiter make?

The commission a recruiter makes will vary depending on the commission structure in place where they work, and their performance. Some recruiters work only for commission, while others receive a salary with commission on top of this. Key factors that shape commission rates include: the experience of the recruiter, the sector they are working in, the level of roles they are recruiting for, and the placement type. 

What is the most common recruiter commission structure?

The most common structure for recruiter commission is base salary + commission based on performance. Usually, the commission will be a percentage of the fee or revenue from each successful placement.

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