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Better Commission structure = better earnings... Right?

It’s a simple equation isn’t it: better commission structure = better earnings. But is that always the way it works?
Let’s look at an example:

Company 1 Commission Structure:
No SR
20% on all billings.

Company 2 Commission Structure:
No SR
£0-10k = 20%
£10k+ = 40%

Which is better?
They both have no SR/ Threshold/ Desk Charge. But commission structure 2 goes up to 40%. In fact that’s double on everything you bill over £10k when compared to commission structure 1!
No brainer, commission structure 2 if far better… right?

Well, yes it is when it’s considered in isolation.
But, what if you bill slightly more at Company 1 than you would at Company 2?
Company 1. £200k billings = £40k commission.
Company 2. £150k billings = £36k commission.

Now you could argue that I’m comparing apples with oranges. But, only if you believe that you’ll bill exactly the same amount regardless of what desk/ sector/ environment/ starting point you’re given. Most recruiters believe that, particularly in year 1 these things have a baring.

When considering commission structures I think it’s important to consider how successful you can be at each business. As the above illustration shows, if you can be 25% more successful at a business with a significantly lesser commission structure you will earn more – not to mention it driving up your market value when you come to make your next career move.

I’m not making an argument for poor commission structures. I believe that recruiters should be rewarded handsomely for the tough job they do. But, when you’re faced with a career decision, look at your chances of success over an above the slightly better commission structure.

How do you accurately asses your chances of success when chasing which recruitment business to join? – I’ll cover this in my next blog.