Most recruitment agencies do not have one simple commission structure. They often have several, built up over time as the business has grown, people have been promoted, exceptions have been made, and old arrangements have been left in place. The result is often a structure that still rewards individual billing clearly, but is far less clear when it comes to rewarding management properly.
The problem is not simply that managers are under-rewarded. It is that they are often rewarded using a structure designed for individual billers. Management requires a different mindset and different behaviours: developing people, improving team performance, retaining consultants and building a more consistent business. If the reward structure still points managers back to their own billings, it is no longer fit for purpose.
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Why This Keeps Happening
This is usually not deliberate. Commission plans often start out as simple, individual billing schemes and then get added to over time. But as the agency grows and a management layer develops, the reward structure does not always keep up. A manager’s pay can end up looking like their old billing plan with a few extras bolted on:
- A small, poorly defined override
- A discretionary bonus that varies year to year
- A token increase in base salary
- No distinction at all between what they’re paid for billing and what they’re paid for managing
From the manager’s side, the maths is brutal: taking on a team, reporting, reviews and firefighting for a marginal uplift on what they could earn just billing flat out. No wonder your top performers avoid the promotion or take it and quietly keep billing like an individual because that’s still what pays the mortgage.
Four Ways to Reward Management Properly
1. EMI Scheme
An Enterprise Management Incentive (EMI) scheme is often one of the most effective ways to give key managers a meaningful stake in the future value they are helping to create. In simple terms, it gives them the option to buy shares at today’s agreed value at a later date, usually when a defined future event takes place. That event does not have to be a business sale. It could be linked to the business reaching a certain EBITDA target, a set period of time passing, or, most commonly, an exit. We cover this in more detail in our share option guide, but in practice it means:
- No Income Tax or National Insurance is due at grant or exercise if options are granted at least at the market value agreed with HMRC. Capital Gains Tax applies upon selling, with reduced rates available via Business Asset Disposal Relief after 24 months.
- Options can be worth up to £250,000 per employee
- You can be selective about who’s included, rather than offering it business-wide
- Options can be linked to specific performance targets
2. Growth Shares
Growth shares can be a useful alternative where you want key managers to benefit from future growth in the value of the business, without giving away value that already exists. In simple terms, the shares only participate above a set hurdle value, so the manager is rewarded if the business grows beyond that point. This can work well where you want managers to buy into the bigger picture and be rewarded for the growth they help create. It does need careful consideration though, because you are creating a shareholding relationship with those individuals and need to be clear on their rights and tax position from the start.
3. Move from Individual Billing to Team or Department Performance
A management incentive should be separate from the individual billing commission plan, not just an extra layer added on top of it. The point is to reward a different role and a different set of responsibilities. Once someone is managing a team or department, their incentive should be linked to the things they can influence across that team, such as Team NFI, growth above target, team profitability, fill rate, productivity or margin. The right measure depends on what the business is trying to achieve, but the focus should clearly shift from individual performance to team or department performance.
This is important because mixed incentives create mixed behaviour. If a manager earns more from their own billing than from improving the performance of the team, they will naturally keep prioritising their own desk. A simple structure might be, for example, a percentage of Team NFI above an agreed target, or a bonus linked to team profitability once a minimum margin has been protected. The formula can vary, but the principle should not: management reward should encourage management behaviour.
4. Choose Measures That Match the Business Goal
There is no single perfect set of management metrics. The right incentive depends on what the business needs that manager to focus on. If the priority is profitability, the measure might be team profit, margin or NFI growth above target. If the business is scaling quickly, it might be time-to-fill for new starters, consultant retention or average NFI per head. If the owner is trying to reduce founder dependency, it might be stronger processes, more consistent performance management, or the development of future leaders.
The mistake is choosing measures that do not link back to what the business is trying to achieve. For example, a plan built around turnover or NFI growth may look sensible on paper, but it will not solve the problem if the real issue is profitability, margin pressure or overhead creep. Equally, a plan that rewards performance in an existing market may not help if the business strategy is to build a new desk, sector or geography. A good plan should include measures that point managers towards the priorities that matter most within the business, whether that is profit, growth, productivity, retention, fill rate or business development.
What Good Looks Like on the P&L
None of this needs to be overly complicated, but it does need to be intentional. A well-structured management incentive plan should be aligned with the goals of the business and should encourage the behaviours that support those goals. When it works, the value is not just in the direct commercial return. It can also show up in better team performance, stronger retention, less reliance on the founder and a management team that is more aligned with the direction of the business.
The businesses we see get the most value from this aren’t paying their managers more overall. They’re paying them differently, rewarding things like:
- Team NFI growth, not just personal billing
- Consultant retention and time-to-productivity for new starters
- Long-term capital value, through genuine equity participation
- Process and structure that reduces founder dependency
Structure This Once, Benefit for Years
Reward structures are one of those things owners often mean to revisit properly, and then leave alone because the current setup broadly works and changing it feels risky. But if the business now needs genuine managers, the reward structure has to support that. If managers are still rewarded mainly as individual billers, or treated as an afterthought, it should not be surprising when they keep behaving that way.
Is your commission and equity structure actually creating and incentivising the managers you need — or just paying out?
At Recruitment Accountants, we work with ambitious agencies across the UK to optimise their commission structures and financial performance. We understand the unique challenges of balancing recruiter rewards with business profitability, and we can help you design and implement commission structures that drive sustainable growth.
