Now, let’s state the obvious: the economy has an effect how much recruitment revenue a person can generate. When the economy is good (like now), a recruiter can generate a lot of revenue. When the economy is bad (like during the Great Recession), that is rarely the case.
But outside of the economy, what other factors contribute to recruiting revenue? It’s important to note that just because a recruiter is busy does NOT mean that recruiter will bill a lot. Activity level is not a key performance indicator for cash-in billings. The recruiting profession simply does not work that way.
How much recruitment revenue is available?
It’s also important to note that this blog addresses the topic of recruitment revenue for professional recruiters and search consultants. It does not include corporate recruiters or internal recruiters. The latter usually receives a set salary from their employer. As such, the only way they can increase their revenue stream is through earning raises and/or bonuses. (For what it’s worth, according to Indeed, the average salary for a recruiter working in United States was $54,745 as of the writing of this blog post.)
A professional recruiter or search consultant can potentially make a lot more than that. One reason is the amount of money that is available to them. According to Statista, the market size of the staffing and recruiting industry was $151.8 billion in 2019. (Yes, that’s billion with a “B.”) Although the market size shrunk in 2020 due to the pandemic, it was also expected to bounce back in 2021.
How professional recruiters get paid
Before we go any further, we should probably review how professional recruiters make money and get paid. First, search consultants are paid a percentage of the first-year salary of the candidate they place. No, they don’t take money from the candidate. The employer that hires the candidate pays the recruiter (or the recruiting agency) a percentage, which the agency and the employer agree upon before the search begins.
For example, if a recruiter places a Plant Manager at a starting salary of $100K and the agreed-upon percentage is 20%, the recruiting fee for that placement is $20K. Does that mean the recruiter receives all of that $20K? That depends upon the following factors:
- If the recruiter is also the owner of the agency, then the recruiter does receive all of the $20K and can do with it as he or she pleases.
- If the recruiter is NOT the owner of the agency, then how much of that $20K they receive is dependent upon their compensation structure.
To commission . . . or not to commission
You see, it’s up to the agency owner how they compensate their recruiters. And they have multiple options for doing so:
- The recruiter could work on full commission. This means the agency owner only pays them when they make a placement. Does that mean they’ll get the full $20K? Hardly. They’ll receive a percentage of that $20K based upon their commission structure.
- The recruiter could work with a base salary, plus receive a commission on the placements they make. Obviously, since they’re earning a base, the percentage for the commission will be smaller than if they were working on commission alone.
- The recruiter could work with a base salary, plus a flat fee for each placement they make. In this case, their base salary is typically higher. For example, they could earn a $1,000 flat fee for every placement they make. That’s a lot less than $20K, but keep in mind that they’re earning a higher base salary to offset that difference.
This is the wonderful world of recruitment revenue, as it pertains to professional recruiters and search consultants. For more information, I invite you to check out our blog posts on the types of recruitment agency fee structures you can use and setting up a recruiter commission structure.
In the meantime, let us continue . . .
Recruitment revenue starts with the job order
Not only is it important for recruiters to work hard, but it’s even more important for them to be working on the right things. If not, then you’ll just be “spinning your wheels.” There have been plenty of recruiters with high levels of activity who ultimately left the profession because they simply could not make enough placements. (Or any placements, for that matter.)
The focal point of this whole analysis is the job order. A recruiters “lives and dies” with the job order they work. If a recruiter is working on the right job orders, then their activity will be rewarded with more recruitment revenue. If, on the other hand, they’re working on the wrong orders, then the disparity between activity and revenue could grow quite large.
So as you can see, it’s critical that a recruiter is working on the right job orders. And there is a lot involved when it comes to determining which job orders are right and which ones are wrong.
In fact, below are three factors that contribute directly to recruitment revenue:
#1—The quality of the job order (or search)
The better the quality of the job order, the better the chances that you will fill said job order and receive a placement check for doing so. So what makes a high-quality job order?
An accurate job description for one thing. For another, there should be some “sizzle” in the order, not just a laundry list of tedious job duties and responsibilities. Your client does want the job to be attractive, right? The job order should truly reflect the type of candidates that the hiring manager wants to see.
#2—The sense of urgency
In order to collect a placement fee, you must fill the job order. In order to fill the job order, the hiring manager must be motivated to make a hire. If they’re not that motivated (i.e., there’s no sense of urgency tied to the search), then they’re not that motivated.
If you have 50 job orders, you won’t fill any of them if the hiring manager is not truly motivated, even if the job orders are quality orders. The last thing you want to do is present quality candidate after quality candidate, only to have the hiring manager “drag their feet” and delay the whole process. No urgency, no placement. It’s as simple as that.
#3—The recruiter/hiring manager relationship
The best way to make sure that decisions happen—and happen quickly—is to work directly with the decision maker. If you don’t, then that will surely slow the process down. Whoever you’re speaking with directly will have to speak with the decision maker. And you have absolutely no idea what they’re saying to that person regarding you, your candidate, and the search.
The bottom line is that you’re getting your information second-hand. So not only does this type of arrangement slow everything down, but it also increases the chances that there will be some kind of miscommunication along the way. As every recruiter knows, “Time kills all deals.” For our purposes, we’ll amend that saying to “Time kills all placements.” Dead placements do NOT equal dead presidents.
So as a professional recruiter, the worst thing you could be doing is just snatching any job order that comes along. A job order is no guarantee of a placement. It’s just a job order, one component of the whole process. You must ask the right questions and properly qualify the order. If you don’t, then you run the risk of jeopardizing your recruiter revenue flow.
So to recap, here are the crucial steps:
- Make sure that the job order is of high quality.
- Make sure that there is a high degree of urgency tied to the job order.
- If at all possible, speak directly with the decision maker during the entirety of the hiring process.
These are three factors that contribute directly to recruiting revenue. Or more specifically, to maximizing your revenue for each and every search that you undertake.
How to increase recruitment revenue
So . . . now you know the three factors that contribute to recruitment revenue. However, what are the other ways that a recruiter can increase his or her revenue? Surely, there must be more. And there are!
Below are two more ways to increase the recruitment revenue on your desk and/or within your agency:
#1—Split placements
Yes, making a $25K or $30K placement fee is quite exciting and fulfilling. (You’re filling up your bank account, at the very least.) However, what if you could make money on the placements that you’re not able to make by yourself? You might be wondering what the heck I’m talking about, and that’s okay.
Obviously, you’re not able to fill every single job order or search assignment on your desk. If you could, you’d be the undisputed “Best Recruiter in the History of the World.” And although you still think that’s the case, your status is very much disputed by others who also think they’re the best. But let’s put that argument aside for a moment.
That’s because you could share the job orders you can’t fill or the candidates you can’t place with other recruiters as part of membership in a split fee recruiting network. By sharing resources, recruiters in a split network make placements they would not have been able to make otherwise. As the old adage goes, “Half a loaf is better than none.” And half a recruiting fee is better than no recruiting fee. So instead of making nothing on an unfilled job or an unplaced candidate, you could earn $10K, $12K, or more.
In fact, some recruiters become “split minded” and they share job orders with their network as soon as they receive them. That’s because they want to fill the positions with the best candidates possible in the shortest amount of time possible. By doing this, they’re meeting their clients’ needs more quickly, helping to cultivate loyalty with them. As a result, their clients will continue to use them to fill their most urgent and high-level openings.
What’s that, you say. Does Top Echelon have a recruiting network? We absolutely do! In fact, we’ve been operating our recruiting network since 1988 and have helped recruiters earn hundreds of millions of dollars in placement fees.
See for yourself by requesting a demo of our split network!
#2—Contract placements
Instead of placing candidates on a direct hire basis, you can also place them on a contract basis. After all, organizations hire contractors all the time. There are multiple benefits to hiring contractors. First, they’re paid for with a different budget than direct hires. Second, employers can use them to finish a project or meet a deadline and then terminate the contract. The candidate doesn’t mind because they knew it was a contract assignment when the recruiter placed them.
And there are multiple benefits for you, the recruiter, as well. First, you get paid for every hour that the contractor works. Rather than receiving payment in one lump sum check like you do with direct placements, you are paid on a weekly or monthly basis over the course of the contract assignment.
Second, you receive consistent and steady income. In fact, there are recruiters who make both direct hire and contract placements. This means they don’t worry about where their next direct hire placement is going to come from. That’s because they have the peace of mind associated with knowing there will be a steady stream of contract income between direct hire placements.
Want to know more about contract staffing and how it can benefit your recruiting desk and agency? Talk to our friends at Foxhire (formerly Top Echelon Contracting). They can tell you all about it and prepare you to start offering contract staffing services to your clients so you can increase your recruitment revenue.
Search consultants who are truly serious about maximizing their recruitment revenue utilize everything available to them. They make direct hire non-split placements, they make direct hire split placements, they make direct hire contract placements, and they even make contract split placements. They’re giving themselves more opportunities to make placements, while at the same time meeting more of their clients’ needs in a shorter amount of time. That’s truly a “win-win” strategy, both in the short term and for the long haul!
Recruitment revenue and your ATS
Another way to increase your recruitment revenue is to get organized and know your numbers. You’ve probably heard this phrase before: “Inspect what you expect.” If you expect to make a lot of placements and generate a lot of revenue, then you’d better inspect the numbers that affect your results. This is where a high-quality and low-cost applicant tracking system can help.
Take, for instance, Top Echelon’s recruiting software and ATS. Top Echelon Software’s reporting tools give users insight into their recruiting process, so they can see what’s working and what’s not. Below are the types of reports that Top Echelon Software users can utilize to analyze what’s happening on their desks:
- Candidate Sourcing Reports—When you discover which sourcing channels are attracting your best candidates, you can better target your efforts. The end result: maximizing the resources that you’re dedicating to fill your open positions.
- Activity Reports—Gain insight into the activities your team members are logging during specific time frames. Then you can use these data points to prioritize and optimize their efforts going forward.
- Pipeline Reports—Use these reports to visualize candidate names and the total counts associated with the various stages of your recruitment process. This helps with reviewing overall progress and establishing priorities.
- Hiring and Placement Reports—With Top Echelon, you can review important hiring and placement metrics over specified time frames. This way, you can understand how you can improve your recruiting process, fill more positions quickly, and increase your recruitment revenue!
Free recruitment software
But don’t take our word for it. Request a recruiting software demo and see for yourself how Top Echelon’s applicant tracking system can help you. You can even take it a step further than that. You can get free recruitment software for 15 days as part of your Top Echelon Software trial. Test-drive our software for FREE without a credit card and with no obligation! What do you have to lose?
And yes, Top Echelon Software is powerful and customizable, but it’s also one of the most affordable applicant tracking software packages in the market. We offer both an annual pricing plan and a monthly pricing plan. Visit our recruitment software pricing page for more details.
