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.
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.
✅ 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.
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.
✅ 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.
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:
🚨 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
✅ 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.
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.
✅ 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.
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.
✅ 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.
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.
✅ 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.
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.
✅ 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.
📈 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.
🚀 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?