The Biggest Mistakes Recruitment Agencies Make with Commission Structures

Introduction

A well-designed commission structure can be the difference between a thriving, high-performing recruitment agency and one that struggles with low motivation, high turnover, and inconsistent revenue.

While commissions are meant to incentivize recruiters and drive agency growth, many firms unknowingly make critical mistakes that can demotivate consultants, reduce profitability, and lead to recruiter churn.

In this article, we’ll explore:
✅ The most common mistakes agencies make with commission plans.
✅ How these mistakes impact recruiter performance and retention.
✅ How to fix and optimize commission structures for long-term success.

Mistake 1: Using a One-Size-Fits-All Commission Structure

The Problem

Many agencies use the same commission structure for all recruiters, regardless of role, experience, or contribution.

🔹 Business development (BD) consultants earn commissions the same way as resourcers.
🔹 Account managers receive identical commission structures to new business recruiters.
🔹 No differentiation between junior and senior recruiters.

This results in:
❌ Demotivated team members—those who do the hardest work may feel undercompensated.
❌ Lack of incentives for specific roles—BD consultants may not feel rewarded for winning new clients.
❌ Recruiters focusing on personal gains instead of agency success.

The Fix: Implement Role-Specific Commission Models

✅ BD consultants – Rewarded for winning new clients (e.g., X% of first-year billings from new or lapsed customers).
✅ Delivery consultants – Commissioned based on successful candidate placements.
✅ Contract consultants– Incentivised based on runner book growth and high margin placements.

🚀 Key Takeaway: A one-size-fits-all approach doesn’t work—customise commissions based on role and value contribution.

Mistake 2: Paying Senior Leaders Based on Revenue, Not Profit

The Problem

Many agencies layer further commission based on total placement fees for their senior leaders instead of actual profit margins.

🚨 Why this is dangerous:
❌ You're likely already paying 15-20% on consultant and team leader commissions (see The Census for more data).
❌ Giving away further %'s to your most senior leaders erodes your margin, and incentivises the wrong behaviours.

The Fix: Use Profit-Based Incentives for Senior Leaders

✅ If your senior leaders are responsible for the P&L, incentivise them against profit
✅ Use the same principles you would for consultants, tiered payouts as performance increases

🚀 Key Takeaway: A revenue-based commission model for senior leaders can hurt agency profitability—align incentives with net profit margins instead.

Mistake 3: Commission Thresholds That Discourage Performance

The Problem

Some agencies require recruiters to hit a minimum billing threshold before earning commission, but failure to hit the thresholds results in it rolling into the next period and beyond

Example:

• A recruiter must bill £10,000 before earning any commission.
• If they bill £9,900 in month 1, the threshold increases to £20,000 in month 2

🚨 Why this is bad:
❌ Demotivates consultants who fall just short of the threshold.
❌ Results in high staff attrition of those who may suffer only a single poor period
❌ Creates an unsustainable environment of unnecessary pressure

The Fix: Replace Rolling Thresholds with Something Better

✅ Monthly schemes with quarterly kickers
✅ Isolated, exclusive thresholds
✅ Fair threshold levels which align with desk cost.

🚀 Key Takeaway: Rolling commission thresholds demotivate recruiters—instead, use tiered structures that encourage over-performance, and more reasonable threshold options.

Mistake 4: Delaying Commission Payments Too Long

The Problem

Some agencies only pay commissions several periods after a successful placement, which can take 60 - 90+ days from the rewardable action.

🚨 Why this causes problems:
❌ Recruiters feel disconnected from their earnings.
❌ Cash flow problems for consultants, especially those reliant on commissions.
❌ Encourages recruiters to prioritise quick starts over high-value clients.

The Fix: Pay Commissions Faster or in Stages

✅ Pay quickly, ideally 1 month in arrears – 84% of the market pay this way
✅ Offer recruiters real-time commission tracking so they can see their expected earnings.
✅ Use automated commission tracking software to speed up processing.

🚀 Key Takeaway: Fast commission payments keep recruiters engaged and motivated.

Mistake 5: Setting Commission Caps That Limit Earnings

The Problem

Some agencies cap how much recruiters can earn, e.g.:
🔹 "Maximum annual commission: 33% of billings"
🔹 "You can’t earn more than 20% of billings, regardless of performance"

🚨 Why this is harmful:
❌ Top billers leave for uncapped opportunities.
❌ Recruiters lose motivation once they hit the cap.
❌ Limits agency growth—if recruiters aren’t pushing beyond targets, revenue stagnates.

The Fix: Remove Commission Caps

✅ If a recruiter is generating revenue, they should be rewarded fairly.
✅ Introduce progressive commission tiers instead of earnings limits.
✅ Offer bonuses and incentives beyond commissions for exceptional performance.

🚀 Key Takeaway: Capping commissions limits agency success—top recruiters thrive in uncapped environments.

Mistake 6: Failing to Review and Update Commission Structures

The Problem

Many agencies set their commission structures and never revisit them.

🚨 Why this is a problem:
❌ Industry trends change—commission benchmarks evolve over time.
❌ Competitors adjust their structures—if yours is outdated, you’ll lose talent.
❌ Your business model may shift—and your commissions should reflect that.

The Fix: Review Commission Structures Annually

✅ Conduct annual reviews of commission plans.
✅ Benchmark against competitors to ensure competitiveness.
✅ Gather feedback from consultants—they’ll tell you what works and what doesn’t.

🚀 Key Takeaway: Commission structures should evolve with your agency.

Case Study: An Agency That Fixed Its Commission Mistakes

The Problem

A UK-based IT recruitment firm had:
❌ A flat 10% commission—no incentives for over-performance.
❌ A 7% senior leader override—Directors focussed on driving unprofitable revenue
❌ A 90-day commission payout delay—recruiters lost motivation.

The Solution

✅ Switched to a tiered commission model (10%-40%).
✅ Shifted to profit based bonuses for Directors.
✅ Started paying commissions 1 month in arrears of invoice date.

The Results

📈 Revenue increased by 15% in one year.
🚀 Top billers stayed, reducing turnover by 30%.
💰 Recruiter motivation skyrocketed, leading to higher placements.

🔹 Key Takeaway: Fixing commission mistakes led to higher billings, better retention, and more engaged recruiters.

Final Thoughts: How to Avoid Common Commission Mistakes

🚀 A well-structured commission plan fuels agency growth and recruiter success.
🚀 Avoiding mistakes like commission caps, delayed payouts, and one-size-fits-all structures ensures long-term success.
🚀 Regularly review and optimise your commission model to stay competitive.

💡 Next Steps:
✅ Audit your current commission structure—are you making any of these mistakes?
✅ Survey recruiters to see if they feel fairly compensated.
✅ Test improvements like tiered commissions, faster payouts, or profit-based rewards.

🚀 The best agencies constantly refine their commission models—are you ready to optimise yours?