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Market insight Recruitment

How recruitment agencies are structuring their work from home & remote schemes in 2023

The world of work has changed drastically over the past 3 years and recruitment is no exception to that. Prior to the pandemic, most agencies required their employees to work in the office but the landscape today is completely different.

Big tech companies have offered a work from anywhere policy which dominated the headlines on the topic in 2022. Due to the sales-based nature of a recruitment role and the need for face-to-face meetings from time-to-time, it has been one of the more complex industries to navigate when it comes to creating a structure that works for everyone.

The working environment of agencies today can be categorised into 3 environments – fully remote, hybrid and office – but which category do recruiters like the most? There is no simple answer to this one, every person is different and this has created what can be considered a divide in opinions.

Here is an overview of how recruitment agencies are approaching their work from home strategies in 2023.

1. Work from home or work from anywhere

Some agencies offer a fully remote or work from anywhere structure. This is more common in smaller boutiques who operate flat structures and hire experienced billers, with established networks, who are able to work independently.

At this level, the recruiter will have a network that requires less face-to-face interaction, due to their existing track record with clients.

If the recruiter is a manager, they may find it challenging to manage a sales team remotely if the team are relatively junior or new to the job. If the team is more experienced, management can be more straightforward.

Some recruitment leaders, especially in the larger agencies, aren’t for this structure as they feel they start to lose some of that high energy sales floor culture, which is why they would prefer employees to have a hybrid structure.

Other recruitment leaders use this structure as a key attraction to join an agency, especially the boutiques, as some of the larger agencies aren’t able to offer it. It’s also popular on the employee side for recruiters who want full flexibility, but not for everyone which we will explain later in the article.

2. Hybrid structure

This is the most common structure in agencies today.

What we see most often is that employees have about 2 days at home and 3 days in the office. They generally tend to keep the days the same for everyone, so there is team interaction on the days employees are in the office.

Some managers would also offer the work from home or anywhere option up and above the hybrid structure, if the consultant is hitting billing targets.

Some agencies also manage how many days a consultant has at home by seniority. For example, a Principal Consultant may have more days at home than a Consultant. Managers may also be required to be in the office more often for training and fostering a team culture.

3. On the sales floor

A handful of agencies have returned full-time to the sales floor. This is more common in mid to large agencies who have high growth plans or agencies who hire employees with no recruitment industry experience. This is typically because the agency can manage closer and deliver training more effectively.

Some recruiters may favour this environment, especially those who worked in the industry prior to the pandemic as they’re used to the buzz of a busy sales floor and that’s what they love.

We still speak to recruiters who ask specifically for an office environment for the reason above, although most recruiters prefer a hybrid option.

Based on performance

In most agencies, recruitment managers base flexibility on performance. For example, if there is a performance issue, or if a consultant requires more training, face-to-face tends to be the preferred method for managers so they will call their employees into the office.

One size fits all or at the manager’s discretion

Some agencies have a ‘one size fits all’ structure for everyone, whilst other agencies delegate the decision of how they structure it to the leader of the team and what that particular manager wants to do.

Juniors require more training and face time

Although agencies have always hired recruiters without prior experience, this is becoming a go-to model in 2023 due to the scarcity of recruiters, compared to the availability of graduates.

Agencies who hire juniors are much more likely to require a consultant to be in the office full-time during onboarding to soak up the key fundamentals of recruitment.

Structures may change

The landscape is changing constantly and in some countries there are still lockdowns that may disrupt a model that has been put in place recently.

Not only Covid-19 affects a structure, but any shifts in the market, such as economic conditions in 2023. A shift in market conditions will require some level of training to adapt successfully.

Most working environments may change from time-to-time depending on this, but also the situation and needs of the business.

Which is the best and what agency offers one of these structures?

There is no simple answer to this one, every recruiter has their own preference and working style as to what works best for them. My advice would be to discuss how the agency structures their scheme during an interview process and assess how you feel about it.

Make sure you’re not closed off to change. A structural change in your environment will happen at some point in the future and it’s best to keep an open mind. You can talk to your manager to discuss your feedback on the change and how that affects you personally. Worst comes to worst, you can move agencies.

If you’re interested to know what agency has your preferred structure, feel free to connect with me on LinkedIn and we can have a chat.

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Categories
Recruitment Salary guide

The ultimate guide to commission schemes in recruitment

How does a commission scheme work? As a recruiter, are you making enough money with your scheme? As an agency, how competitive is your commission scheme in the market? You’re a recruitment entrepreneur starting a new business, what scheme should you use?

In this complete guide to commission schemes in recruitment, we answer these questions and much more.

Here’s a summary of what we’ll cover:

  1. Two common types of commission schemes
    1. Non-discretionary
    2. Discretionary
  2. Understanding the components
    1. Qualification period
    2. Threshold
    3. Percentage tiers
    4. Deficit
    5. Payment
    6. Retaining commission
  3. What is a competitive return

1. Types of commission schemes

Non-discretionary

A non-discretionary commission scheme is black and white. The components are transparent and laid out before you join. You’ll know exactly what you’ll be earning depending on the revenue you generate for the organisation. Non-discretionary commission schemes are more common than discretionary in the recruitment market.

Discretionary

A discretionary commission scheme is when your commission is paid at the company’s discretion. Whether you’ll get paid or not depends on a number of factors; a majority of these factors are related to your own performance and perceived contribution.

More often than not, you will be paid if you perform to or above agreed targets. However, if the company as a whole is not performing, other consultants’ performances may be taken into account and this may reduce the amount of commission you receive.

A discretionary commission scheme may also be built around your perceived contribution towards a particular placement. For example, if you were involved in the process flow management and closing of a placement, but the successful candidate was identified by one of your colleagues, then the proportion of commission allocated to you could be decided by your manager, at their discretion. In this case, commission would probably be distributed between yourself and your colleague involved in the identification of the candidate. 

Discretionary schemes are less common in the recruitment market.

2. Understanding the components and how competitive they are

Qualification period

The qualification period is the time in which a recruiter’s commission is assessed.

The most common qualification period is a quarter, although some companies have a monthly or annual qualification period.

A qualification period is not related to the period that you’re paid, which is covered later in this article.

Threshold

The threshold is the amount of revenue a recruiter must generate before commission becomes payable.

Multiplier of base

A threshold is commonly calculated as a percentage multiplier of your base salary. The standard multiplier in the market is 9 x your monthly base salary for the quarter (the qualification period). For example, if you’re on 5k per month, the calculation would be 5k * 9, which equals a threshold of 45k for the quarter. Some firms offer lower thresholds, such as 7.5 x your base salary per quarter, or if you’re very lucky, 6 x your base salary per quarter.

The advantage of this calculation is that when you’re on a lower base salary, your threshold is lower and on the flip side, as your base salary increases, so does your threshold.

As your base salary increases, so does your threshold, meaning your total earnings will stay roughly the same if you bill the same amount, despite your base increasing.

Flat figure

A threshold can also simply be a flat revenue figure rather than the percentage multiplier structure above. The standard revenue figure for this type of threshold is between SGD 40 – 60k.

The advantage of this calculation is that, as your base salary increases, your threshold remains the same. The disadvantage is that when you’re on a lower base salary, your threshold is more challenging to surpass.

As your base salary increases, your total earnings will also increase if you bill the same amount.

No threshold

A handful of firms offer a no-threshold scheme, although there is a trade off as percentage tiers (discussed next) are often lower.

Less common variations of a threshold include calculating commissionable income from your total revenue for the qualification period first, and then subtracting base salary. Whilst this still yields competitive returns, it shouldn’t be confused with a scheme that offers a threshold of simply just your base salary, as the calculation is different.

Percentage tiers

When you surpass your threshold, you’ll be eligible to collect commission on the amount above your threshold (total revenue – threshold). How much depends on the percentage pay-out of the scheme.

A majority of firms operate a tiered percentage structure. In this structure, percentages will start at a specific amount and increase in tiers as you generate more revenue. Percentages commonly start at 20 – 35% and increase in tiers until 40 – 45%, and even 50% in some companies. Some firms offer above 50% but it may be extremely challenging to generate enough revenue to earn that.

Some firms operate a simple flat percentage structure. In this structure, you’ll earn the same percentage on any revenue you generate above your threshold.

In some rare cases, some firms offer a tiered percentage structure, but rather than the percentage being based on the revenue you generate, it may be based on other factors at the discretion of the company, such as how many clients you’ve brought in or how you’re performing in comparison to your expectations.

Deficit

Some firms have a deficit. If your firm has a deficit and you don’t achieve your sales target, you will go into a deficit. The amount by which you missed the sales target in the previous qualification period will roll over to the next qualification period. This means that you’ll have to make up for the revenue that you fell short of in the previous qualification period before earning commission.

Whilst deficits are less common these days and unfavourable for obvious reasons, there’s a reason why companies still use them and it’s important not to overlook this. Schemes with deficits offer a high risk, high reward option. You’ll find that with these schemes the threshold may be lower and percentage yields may be higher. As the firm is taking a risk in losing money based on a highly lucrative scheme, they need to protect themselves if sales targets are not met.

Certain firms wipe the deficit clean from time to time if non-revenue related performance has been strong.

Payment

Different firms write revenue on the board at different times. Revenue is commonly recognised on the start date of a candidate or when the invoice is settled by the client.

Once revenue is recognised, your commission becomes payable. Commonly the payment will be made at the start of the upcoming qualification period. For example, if you’re due $30k for placements in Q1, you’ll be paid the 30k at the start of Q2.

There are some firms who don’t relate the qualification period to the payment period. For instance, take the example of a firm who has a qualification period of a year but pays monthly. If you’ve earned 10k in Feb Q1 under the scheme, that will be payable in March, even though the qualification period concludes at the end of December.

In the market, firms often pay on a quarterly basis, a handful of firms pay on a monthly basis and some firms also pay on an annual basis.

Most firms will withhold commission until the client pays the invoice even if they’re late paying, despite the commission being payable to the consultant. Whilst most consultants understand the reason behind this, naturally they would prefer a scheme where they’re paid despite when the client pays the invoice.

Retaining commission

Some firms in the market retain a percentage of your commission over a qualification period or over a year. The average amount retained can range anywhere from 5 – 20% and upwards to 50%. To collect that commission, the firm will often set additional targets, the most common being to surpass your threshold for three out of four quarters of the year.

If you hit the target and collect the commission back, some firms return the same amount and others will offer interest on top of the collectable amount as a reward. If you don’t hit your target, the company retains the commission.

This mechanism is strong for retaining employees and encouraging consistent performance, however it receives mixed opinions from recruiters.

Retaining commission is a newer addition to schemes and has become more common in recent years.

3. What is a good commission scheme?

Now that we’ve looked through the various standard components of a commission scheme, what’s a good one and are you being paid enough?

When it comes down to it, a majority of commission schemes in the market, although varied in structure, end up returning a similar percentage return on your billings.

The percentage return of your billings, including base salary and commission, is considered to be competitive around 35%.

If you’re earning less than 35%, it doesn’t necessarily mean you have a bad commission scheme. You may be working with a large global player who offers access to established relationships with clients, allowing you to maintain a strong pipeline without the pressure of business development. They may also offer more support in the form of learning & development, marketing and more.

If you’re earning more than 35%, you’re earning a competitive amount in the market.

The graph above shows the example of total percentage return of billings vs quarterly billings for a boutique recruitment agency with a base salary of SGD $5,000 and billings ranging from 0 to 250k in quarter. The threshold in this example is 7.5x monthly base salary with percentage tiers ranging from 30 – 50%. This particular example includes CPF, so for non-Singaporeans or PRs the percentage return would be slightly lower.

The graph starts at a higher percentage return of nearly 60%, as at lower billings levels, a majority of your return will come via your base salary. At that stage, the agency is losing money on the consultant. The return averages at roughly 38% on standard billings of 75k per quarter. As billings increase, say to 200k per quarter, the return goes up to 42%.

In the early stages of your career, finding a platform with established relationships that has a good percentage return is the sweet spot. When you become more experienced and you’re ready to step into a new environment where the risk of starting or building a desk is higher, you’ll have the opportunity to reap the rewards with higher percentages.

Do you want to learn more about recruitment entrepreneurship?

As the Co-Founder of Vocay, I have run small teams of recruiters and I love blogging about entrepreneurship, especially in the field of recruitment. My business partner Roger Smart built Charterhouse Partnership from zero to 180 recruiters across 5 offices and he also writes articles.

If you’re interested to learn more about recruitment entrepreneurship, and if you found value in this article, please consider subscribing or following us on LinkedIn to have new articles for recruiters like this delivered directly to your inbox.

Categories
Moving jobs Recruitment Template Training

How to write a business plan for recruitment in 2023 (template included)

Writing a business plan in recruitment has always played a crucial part in the interview process for a number of recruitment agencies around the world.

A comprehensive business plan can demonstrate a recruiter’s commitment, knowledge and commercial acumen. During economic uncertainties in 2023, these qualities are more important than ever.

Arriving at an interview armed with a comprehensive business plan before you’re even asked will no doubt set yourself apart from other recruiters.

During economic uncertainties, managers will need to present a business case to leadership for budget approval in order to make a hire. Your business plan will be an important element of this business case. An impressive business plan could be the difference between landing an offer today, or falling into a pipeline of other candidates.

In this article, we share a step-by-step guide outlining how to create a comprehensive business plan. We walk through the key components and include examples.

At the end of the article, you can download a free recruitment business plan template which is tailored towards the key components mentioned in this article.

Length

A business plan should be packed full of relevant information but should be compressed and to the point. Avoid verbiage, stay specific and keep to 4 – 6 pages.

Introduction

Start with a title. Include your name and the company you’re writing the business plan for. A little personalisation will go a long way.

Underneath your title, outline the objective of your business plan and again personalise it towards the agency you’re interviewing with. While you have the hiring manager’s attention, this paragraph is an opportunity for you to demonstrate how comprehensive your business plan is. The aim is to capture the hiring manager’s interest so they continue to read each component:

“The objective of this business plan is to outline the value I can add to employer’s name.

In this business plan, I have highlighted my specialism, hiring activity in my market, my candidate and client strategies, my methodology, how I plan to recruit through economic uncertainties in 2023, my competition and my personal revenue projections over 12 months.”

You can use this paragraph as a way to introduce your business plan verbally if you’ve called up a hiring manager. You can also use this extract in a cold email.

Your specialisation

This is a crucial positioning statement for your value-add. It sets out precisely where your network and experience lies and what you intend to bring to the table in your new role.

Your specialisation can be described clearly by outlining what roles you will specialise in, what industries you will target, what level of seniority you will focus on and what geographies you will cover.

For ease of reading, you can use each component as a title and use bullet points to expand upon your answers.

Taking a Technology recruiter as an example:

What roles I will specialise in:

  • Product Management permanent roles
  • UX/UI Design permanent roles

What industries I will target:

  • E-Commerce
  • Series A – C funded technology startups (high investment, high growth and high volume of roles)

What level of seniority I will focus on:

  • Mid to senior (120 – 180k salary range for Product Managers, 140 – 200k salary range for Designers)

What geographies I will cover:

  • Based in Singapore, the local market will be my core market
  • Secondary markets include Jakarta, Bangkok and Kuala Lumpur due to less competition from recruiters and high volume of roles

Hiring activity trends

The hiring activity trends section provides an opportunity for you to demonstrate and portray your knowledge of the market.

The 3 important components of this section are: hiring activity over the past 3 years, hiring activity for next year and how you predict hiring activity to shift beyond that.

Utilise your own knowledge of the market but back it up with research gained from reputable sources related to your market e.g. Tech in Asia, Tech Crunch, Channel News Asia, The Straits Times or The Financial Times.

You’ll want to cover how hiring activity has increased or decreased, what the drivers of growth are in your industry and what the threats and challenges are within your sector.

Candidate strategies

Moving on from market trends, this section indicates how you will acquire candidates for your desk. It offers an opportunity for you to demonstrate the experience you’ve learnt in candidate management from your previous firm, but also an opportunity for the employer to ensure that your approach aligns with theirs.

3 key components of this section include: how you will generate candidate leads, what challenges you expect to face and how you will overcome these challenges.

Taking a Front Office Banking & Financial Services recruiter as an example:

How do I plan to generate candidate leads:

  • Direct headhunting using a LinkedIn Recruiter account, this costs approximately $X amount, the key benefits being access to a high volume of InMails and enhanced search capability. This has been the sourcing tool for 60% of my previous placements

Challenges I expect to face:

  • In light of economic uncertainties in 2023, highly sought-after candidates may be risk-averse and may not see this as a good time to move jobs

How I will overcome these challenges:

  • I will develop relationships with these candidates for the future but I will adjust my sourcing strategy accordingly by increasing volume of direct approaches

Client strategies

A similar section to candidate strategies but geared towards clients. Arguably more important than candidate strategies during a recession as the market could be job-short – even in the good times, strong business development capabilities in recruiters are harder to find.

This section includes 6 key components including how you plan to onboard new clients, how you plan to sustain relationships with clients for repeat business, what industries your clients are in, the challenges you expect to face and how you will overcome these challenges.

Take these bullet points as a basic example:

How I plan to onboard new clients:

  • During a recession, I plan to cultivate relationships by helping and consulting clients on non-recruitment related issues, such as advising clients on the current state of the market
  • I plan to generate leads by making 25 cold calls per day during the ramp-up period, to again offer support and advice where needed, and to leverage any open roles
  • A soft approach of connecting with hiring managers, HR contact and C-Level candidates on LinkedIn, to establish working relationships and eventually convert into clients

How I plan to sustain relationships with current clients and win repeat roles:

  • The most important way to sustain relationships is by offering a service that is superior to competitors. That is by being transparent, sticking to deadlines and delivering results
  • Regularly catch up with clients on a monthly basis to see how they’re doing and see if you can generate new roles
  • Keep yourself updated on company news and congratulate clients on milestones e.g. if they generate a Series C round of funding

What industries I will target clients in:

  • E-Commerce
  • Series A – B funded technology startups

Challenges I expect to face:

  • During a recession there is less of an appetite to use agencies due to an unprecedented volume of great candidates available in the market

How I will overcome these challenges:

  • Offer free support to companies currently not using agencies, provide an impressive service and convert into paying client post-recovery

The 6th component is “examples of target clients” and this is where you can really demonstrate tangible market knowledge. Use company names, find the potential contact in each company and add your comments, such as the volume of roles you expect from that client. 5 examples should be enough to peak your hiring manager’s interest.

You can use a table to display this information with ease:

The company namePotential client contactMy comments
Company nameContact nameThis hiring manager is at the senior end so I pick up mid-senior roles for their team. Given they’re working for a Series B, I expect to pull in about 6 roles per year from this contact

It goes without saying that you should never be tempted to use information that is proprietary to your previous employer. This information can be openly found with some basic LinkedIn research.

My methodology

Are you a recruiter that is focussed on crunching numbers? Are you a recruiter who is focussed on cultivating long-term relationships? In this section, you can include a few quick bullet points to explain how you approach recruitment. This information gives your hiring manager an indication about whether you hold similar values and whether you have similar working styles.

How you can adapt to recruiting during a possible economic downturn

This section is a new one in response to market conditions in 2023 but can demonstrate how you are prepared to deal with current and upcoming challenges.

You can use this section as the title and include bullet points to outline how you will adapt to these market conditions.

My key competitors

Which recruiters and agencies offer the greatest competition? Demonstrating your knowledge in this area highlights that you are commercially aware outside of your core market.

Include about 5 different competitors who are directly competing in your patch. You can use the table below to display this information:

The company nameThe name of the recruiter in your fieldMy comments
Company nameRecruiter nameThis recruiter has a well-established presence in this market, however they have less of a presence in UX/UI roles, which is a market I feel I can pick up

Personal revenue and target projections

In many business plans, financial projections are of utmost importance and can demonstrate your commercial acumen. If you’ve ever watched Dragon’s Den, you’ll know what happens when you don’t know your numbers!

Project your personal revenue for 4 quarters. You can start your calculations by predicting the average annual salary of a candidate in your patch. You can project your average percentage fee agreed with clients and from there you can calculate your average fee. Once you have this, you can predict the amount of placements you’ll be making per month.

Make sure your revenue projections are realistic and achievable. Avoid the temptation to predict vastly optimistic revenues, especially during a possible recession. You must allow time to ramp-up and there must be a logical relationship between your historical and predicted revenues.

The plan only includes project revenue. Your historical revenue should be on your CV.

Take the below as an example:

My predicted average annual salary of candidates:

  • $140,000

My predicted average percentage fee agreed with the client:

  • 22%

My predicted average fee:

  • $30,800

My predicted average placements per month

  • 1

My projected revenue over 12 months

Year20232024
QuarterQ2Q3Q4Q1
Personal revenue ($SGD)$061,60092,40092,400
Number of placements0233

Underneath, you can also include the KPIs you will set yourself to guide you in achieving these numbers. For example, you can set yourself a guideline for how many CVs you need to send, how many candidate meetings you need to arrange, how many client meetings you need to arrange and so on.

The template

We’ve constructed a free template built around the components mentioned above, so you can create your own for when you reach out to hiring managers.

To download this template, please add your email below and you’ll be redirected to the template.

Summary

This step-by-step guide should give your hiring manager a clear idea of your plan. If executed successfully, you’ve already demonstrated your commitment, knowledge and commercial acumen before even attending an interview.

The way you’ve structured your plan will give your hiring manager a very clear indication of your methodology and whether you’d fit their structure. Keep in mind that if your methodology is focused on high volume recruitment, it’s not going to work well with an executive recruitment agency.

As a next step, learn this plan inside and out. Be prepared to pitch your plan to your hiring manager and answer detailed questions surrounding each component.

Leave your interviewer with no room for concern and secure that role! Lastly, if you enjoyed the article, please consider subscribing or following us on LinkedIn to have new articles for recruiters like this delivered directly to your inbox.