Many recruitment companies are rethinking their commission schemes to see if new models will give them more flexibility in tough times, says industry remuneration specialist Chris Hart.

Hart, whose business Hart Consulting has compiled remuneration reports for the RCSA and ITCRA, said around 70% of recruitment companies operated on a traditional commission structure, but these models were not one-size-fits-all, and employers were increasingly exploring new ways of measuring and allocating commission.

"There are a lot of companies making considerable change to their bonus programs on a regular basis and they're doing that, especially at the big end of town, to mitigate their exposure given that there is a downturn in revenue streams," he said.

"It's rare to find people dropping base salaries so ultimately the only thing you've got to flex is the incentive."

Team-based remuneration schemes, under which recruiters were paid a retainer and then earned commission based on group performance, were becoming more popular.

Consultants had to work collaboratively to meet clients' needs, which improved client relationships and retention. If one consultant left the business, others in the team could still provide a consistent service.

Another structure gaining traction was profit-sharing schemes, said Hart. These worked well for SMEs, which needed to do things differently to "the Adeccos, and the Chandlers and the Peoplebanks".

"[Profit sharing] seems to be more successful because [business owners] can then pass out money based on the profitability of the business. After knowing what's actually occurred during the year they can reward people accordingly," he said.

Recruitment companies were also starting to diversify the criteria and thresholds of their schemes, looking at things like profit (rather than just fees), business development, client and contractor satisfaction and regulatory compliance.

Lack of commissions encourages teamwork, says Bayside Group

Hart estimated that around 5% of recruitment companies had no commission structure in place.

Bayside Group does not pay commission and CEO Pamela Dew said this remuneration structure created a team-based culture that was in the best interest of clients and candidates.

"It encourages sharing of information and sharing of candidates," she said.

"The fact that the consultant doesn't make any income from each placement encourages and drives the focus on longer-term benefits, rather than immediate placement [for] financial benefits."

Dew said instead of commissions, Bayside paid its consultants higher base salaries.

While every customer was different, she said Bayside's no-commission policy had helped to secure client wins in the past.

Traditional commission structure provides transparency: Talent2

Talent2 uses a more traditional commission structure, and general manager of recruitment for Australia and New Zealand Paul Jury said this gave consultants visibility on their potential earnings.

He said Talent2 set a monthly retainer "depending on experience, track record and current run", and calculated a break-even point based on this retainer.

"At the end of the quarter we rule a line in the sand and we have a look at the performance against the break-even. You find yourself in a situation where you're over, or you're under," he said.

"People have a clear line of sight, in the sense that if your goal is to [earn] X, once you achieve Y you know that's what you get."

Jury said one of the drawbacks of traditional commission models was the psychological impact on recruiters of failing to reach the threshold.

As an employer, he said, "you've got to be fair and reasonable around the trading environment and also the circumstances [and] the challenges that consultant faces in that marketplace running that desk".

Four elements consultants require: Clennett

Recruitment industry trainer and expert Ross Clennett said there were four elements consultants looked for in a commission scheme:

• Consistency - "Consultants do not like commission schemes that change year-on-year because inevitably the changes don't advantage them."
• Transparency - "[Recruiters] don't like to think that everyone else in the company has a different scheme to them," Clennett said.
• Fairness - Measures such as "clawbacks" evened the playing field so that consultants whose fees "yo-yoed" did not receive more commission than consultants who performed consistently.
• Progression - Commission structures needed to have more than one tier, he said, so that consultants were able to move forward as their skill and experience increased - "the more the consultant bills, the more they can earn".

Clennett said an ineffective commission structure distracted consultants, and was bad for morale.

However, he added, "if someone had come up with a perfect solution that was fair and great for everyone, a lot of people would use it but... there are as many different structures as there are agencies".