Finding Success in the Recruiting Industry

The question of how recruiters are compensated and how they turn a profit is complex. This is conditional on a wide range of variables and particular circumstances.

To begin with, if we’re discussing internal or external recruitment.

First, let’s talk about the differences between internal and external hiring.

Independent or agency recruiters are other names for external recruiters. That means they are self-employed and not affiliated with any one company. They fill vacancies for a variety of companies and organizations.

Indeed, internal recruiters are precisely what their name implies: company employees. They work for a corporation in reality. That’s why they only work with that one group while looking for new members.

What’s the point of making that distinction, then? There is a significant pay gap between internal and external recruiters, which is the main reason. This is because most internal recruiters are paid a standard rate. Pay for them is capped at a certain level. It’s not like that with outside recruiters. It’s more akin to working with a sales team paid on commission. The amount of money they can make is essentially unlimited.

The average income for an internal recruiter is $79,956 per year, as reported by www.glassdoor.com. Thus, we will focus on external recruiters for the remainder of this piece (or agency recruiters).

Making Money: The Role of Recruiting Agencies

We’ve investigated individual recruiters, but what about staffing firms? How much do staffing and recruitment firms typically earn annually? It’s almost impossible to cap the amount of money that individual agency recruiters can make since there is no limit on the number of placements made by any given recruiter, the same holds for placement firms.

This is, however, where the agency owner stands to gain the most. For illustration’s sake, assume a headhunter has his shop. He’s a solitary practitioner or the lone person at the agency. This doctor charges $300,000 annually, as we saw above. As a result of the company’s rapid expansion, its founder has to bring on additional recruiters to meet demand.

Suppose the business owner employs three more headhunters and their combined annual billings are as follows:

#1 Recruiter: $100,000

#2 Finder- $200,000

#3 Recruiter—$300,000

An executive recruiter does not need a four-year degree to enter the field. So, it’s common for business owners to provide formal training for new recruiters. In addition to being given access to their recruiting database and job orders, they also offer the new recruiter training on outreach tactics and recruiting software.

For all of this, the agency’s owner will deduct a fee from each placement made by the recruiter. That percentage is not consistent across businesses. Moreover, other additional variables may affect the outcome. One such consideration is whether or not the firm’s owner provides base compensation to their recruiters. Let’s pretend there is no base payment being made by the owner for the sake of this illustration. All of the recruiters are paid entirely through commission. Instead of a regular wage, the recruiters get half the placement fee revenue they help bring in. Of course, the other 50% goes to the agency’s owner. Let’s multiply the numbers by that proportion.

Conclusion:

Recruiter #1 $50,000 ($100,000 multiplied by 0.5)

Recruiter #2 $200,000 x.50 = $100,000

Recruiter #3 $500,000 x.50 = $150,000

Here is how to figure out the agency owner’s first year’s earnings:

Billings of $300,000 + $50,000 from Recruiter #1 + $100,000 from Recruiter #2 + $150,000 from Recruiter #3 = $600,000.

At least two of the three recruits made six figures. By contrast, by adding three recruiters to their team, the agency’s owner was able to double the company’s billings. Profits for staffing companies typically increase annually.