Getting your commission structure right isn’t just about keeping your recruiters happy. It’s one of the most critical decisions you’ll make as a recruitment business owner.
A well-designed commission scheme directly impacts your bottom line, influences the quality of placements, drives the right behaviours and determines whether you can attract and retain top talent in an increasingly competitive market.
The challenge? You need to balance fairly rewarding your recruiters whilst keeping enough margin to cover overheads, invest in growth, and maintain healthy profitability.
Get this balance wrong, and you’ll either struggle with high turnover as good consultants leave for better deals, or find yourself squeezed on margins with little room for reinvestment. Here’s a detailed explanation of how recruitment commission works and how to get it right.
Commission in recruitment agencies can take several forms: it might be a flat fee per placement, a percentage of the total fee charged to the client or net fee income, or a percentage of the candidate’s salary. The specific calculation method varies widely across the industry, but the principle remains consistent: the more successful placements a recruiter makes, the more they earn.
The Benefits of Commission in Recruitment
Commission structures in recruitment agencies serve multiple purposes beyond just compensation. They’re a powerful tool for driving the right behaviours and aligning individual performance with business objectives.
The most obvious benefit of commission in recruitment is that it incentivises hard work and rewards employees who consistently go above and beyond to deliver results. It’s one of the most effective ways to encourage better performance from your team.
When designed properly, commission schemes hold recruiters accountable for hitting targets and encourage them to focus on quality placements rather than just quantity. Since candidates who quit early often trigger commission clawbacks, recruiters have a vested interest in making placements that stick, which improves the quality of matches and reduces client churn.
Another benefit of recruitment commission structures is that they create better alignment between individual goals and agency objectives. This alignment reduces the need for micromanagement and creates a more entrepreneurial culture where consultants take ownership of their results.
The high income potential that comes with successful commission-based roles is also incredibly desirable for ambitious recruiters, helping you attract and retain top talent in a competitive market. Many experienced consultants actively seek out agencies with generous commission structures, so without an effective system for paying recruiter fees, you might find growing your team quite difficult.
Types of Recruitment Commission Structure
There’s no universal commission model in recruitment – what works well for one agency might not suit another. The best approach depends on your culture, goals, market positioning, and team dynamics. That said, here are some of the most common – and effective – commission structures used across the recruitment industry, along with key considerations for each.
High Basic / Low Commission vs. Low Basic / High Commission
Striking the right balance between fixed and variable pay is crucial. Many agencies are currently increasing base salaries to attract and retain talent, but this often means a reassessment of commission levels.
- A high basic with lower commission may foster a more collaborative and secure working culture.
- A low basic with higher commission can drive performance and entrepreneurial behaviours – but may lead to unhealthy competition or short-termism.
Ultimately, the total reward package should align with your desired salary-to-net fee income (NFI) ratio.
Desk Cost or Threshold Models
In these schemes, recruiters must exceed a minimum billing amount – typically calculated to cover their “desk cost” – before commission kicks in. Desk costs can include:
- Base salary and NI
- Software and licence costs
- Direct overheads
Once the threshold is surpassed, commission is typically earned at progressive rates, rewarding overachievement and improving profitability.
Percentage-Based vs. Flat-Fee Commission
The percentage-of-placement-fee model remains the industry standard. Recruiters earn a percentage of the total client fee, with variations based on:
- Role seniority (e.g. junior vs. exec-level)
- Type of placement (perm, contract, retained)
It’s performance-driven but can sometimes favour volume over quality.
A flat-fee model – where each placement earns a fixed amount – offers simplicity and predictability. This can work well for delivery roles or where output is more consistent, such as resourcing or RPO functions.
Tiered & Sliding Scale Commissions
To motivate sustained performance, many agencies use tiered or sliding scale models. These provide escalating rewards based on revenue thresholds or placement volume. For example:
- 5% on billings up to £50k
- 7% on £50k–£100k
- 10% on anything above £100k
Alternatively, sliding scales increase commission incrementally per deal, which can drive consistent month-on-month delivery. These models are particularly effective for executive search and high-value placements, but care must be taken to avoid creating earnings disparities that undermine team morale.
Split Commission Structures
When multiple recruiters or functions contribute to a placement, split commissions ensure fair recognition. This is especially relevant in non-360 models. Splits are typically based on contribution:
- Who sourced the candidate
- Who managed the client relationship
- Who closed the deal
Examples might include a 60/40 split between delivery and BD functions, or a three-way split where account managers are involved. These models must be clearly defined to prevent disputes and ensure transparency.
You can read more about the commission structures we’d suggest on our blog.
Establishing a Recruitment Agency Commission Structure
Now that you can answer the question “How does commission work in recruitment?”, it’s time to apply these learnings to your own agency. Whether you already have a structure in place that you want to improve, or you’re working on establishing one for the first time, here’s what you need to know.
Analyse the Existing System
If you’re running an established agency, start by thoroughly reviewing your current recruitment commission structure and its impact on both individual performance and overall profitability. Look at patterns in recruiter retention, performance distribution, and whether your top performers are earning competitive rates compared to market alternatives.
If you don’t have a formal commission structure yet, consider what approach will be least disruptive to introduce while addressing your current challenges. The key is understanding what motivates your existing team and what gaps need addressing in your current approach.
Gather feedback from your recruiters about what works and what doesn’t in the current system. You should also analyse your client feedback to understand whether your current structure is driving the right behaviours in terms of service quality and candidate fit.
Remember, commission structures need to reflect the reality of your business model. Whether you’re focused on high-volume, lower-value placements or specialised, high-fee executive search will fundamentally change how you approach commission design.
Determine Parameters
The next thing to consider is the type of recruitment agency commission structure you’re going to use and any parameters that will impact this.
Your commission structure should reflect the realities of your specific market, the types of roles you recruit for, and the experience levels of your team. High-volume, lower-fee recruitment requires different incentives compared to executive search or specialised technical recruitment.
Consider whether you need different commission structures for different experience levels; graduate recruiters might need more base salary support, while senior consultants might prefer higher commission rates with less security. The complexity of your roles and typical sales cycles should also influence your approach.
Factor in your agency’s positioning and fee structure when determining commission rates. If you charge premium fees, you can afford to pay higher recruitment commission rates. But if you compete on price, your margins may be tighter.
Finally, consider your recruitment agency’s growth plans. If you’re expanding rapidly, you might need more aggressive commission structures to attract talent. But if you’re focused on profitability, you’ll need to ensure your structure protects margins.
Calculate the Desk Cost
The ‘desk cost’ refers to the total cost your agency incurs to accommodate each recruiter in your team. This includes not just their salary but all associated costs like LinkedIn licence, training, and support resources.
Understanding your true cost per recruiter is essential for setting commission rates that maintain profitability while offering competitive rewards. Once you have the desk cost, add the base salary of the recruiter to this amount. This gives you the minimum revenue a recruiter must generate to start contributing to your agency’s profitability.
You can use this analysis to ensure your commission rates leave sufficient margin for reinvestment in the business, whether that’s technology improvements, marketing, additional support staff, or simply maintaining healthy cash flow.
Decide on a Payment Timeline
Recruiter fees timing significantly impacts cash flow for both your employees and the agency, so you need to choose a schedule that works for both parties. Monthly payments provide regular income for recruiters, but may strain agency cash flow if clients generally take longer than 30 days to pay or there is a rebate period.
Consider your typical payment terms with clients when setting recruitment commission schedules, and then decide on a commission timeline that will keep your costs in the clear. Some agencies use a split approach, paying part of the commission immediately and the remainder once client payment is received. Others have implemented a “paid when paid” commission scheme which completely reduces the cashflow risk as the client has paid the invoice before commission is paid out.
Remember to check that your payment timeline is clearly documented and consistently applied, as irregular or unclear commission payments are one of the fastest ways to demotivate recruiters and damage trust.
Make it Clear
In order to avoid constant questions or confusion within your agency, make sure that your structure is documented clearly with worked examples showing how commission is calculated in different scenarios. Avoid ambiguous language that could lead to disputes when recruiters achieve unusual results or work on complex deals.
Communication is crucial: every recruiter should understand exactly how their commission is calculated, when it’s paid, and what behaviours are rewarded. Regular conversations and updated documentation help maintain clarity as your team grows.
It’s also a good idea to ensure the structure is flexible enough to adapt as your business grows and market conditions change, as rigid systems that can’t evolve will eventually become counterproductive. Build in review periods where you can adjust rates, thresholds, or structures based on performance data and market feedback.
Measure Your Success
Finally, it’s really important to track key metrics to assess whether your recruitment commission structure is achieving its intended objectives. These should include net fee income to staff cost ratio, recruiter retention rates, average time to productivity for new starters, overall profitability per consultant, and client satisfaction scores.
Monitor the distribution of commission earnings across your team to ensure the structure isn’t creating unsustainable imbalances. If only a few recruiters are earning significant commission while others struggle, you may need to adjust thresholds or provide additional support. Pay particular attention to quality metrics alongside quantity measures, as commission structures that drive high placement volumes but poor candidate retention or client satisfaction may need rebalancing.
Summary
The best commission structures align individual success with business objectives while providing the flexibility to adapt as your agency grows and market conditions change.
The key is understanding that there’s no one-size-fits-all solution. Your recruitment commission structure should reflect your specific market position, the experience level of your team, and your long-term business objectives.
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.
Want to review your current approach and explore opportunities for improvement? Get in touch with our team today to discuss how the right commission structure can accelerate your agency’s success.
