How Do Recruiters Get Paid?
If you’re currently going through the job search process and you’ve been communicating with recruiters, you might be wondering: how do recruiters get paid?
It’s helpful to know the monetary incentives that recruiters might have to convince you to accept one job offer instead of another. If you understand their incentives, you’ll have the wisdom to take their advice with a grain of salt.
First, let’s explain the difference between the two types of recruiters you’ll be working with.
Internal versus external recruiters
There are generally two different kinds of recruiters: internal and external. ✌️
An internal recruiter is a full-time employee of the company for which they are recruiting. They recruit for that one company and no other companies. They are likely very familiar with the culture and inner workings of the company and have a good sense of the types of candidates that fit with the company’s values and expectations.
An external recruiter (also known as an “agency recruiter” or an “independent recruiter”) recruits for a number of different companies. External recruiters can work independently as contractors or as employees of recruiting firms.
The most important difference between internal and external recruiters is that internal recruiters can only submit candidates to one company, whereas external recruiters can submit candidates to an unlimited number of companies.
For example, if I’m an internal recruiter for Google, I can only submit a candidate to jobs at Google. But if I’m an external recruiter, I can submit a candidate to jobs at Apple, Microsoft, Amazon Facebook, and any other company.
In your job search, you’ll inevitably work with internal recruiters. These are the recruiters who will respond when you submit an application directly to a company.
Whether or not you work with external recruiters is up to you. There are two ways you can work with external recruiters: if a company is using external recruiters and they find your profile and decide to reach out to you, or if you proactively reach out to external recruiters to help you with your job search. If you’re looking for a job in software sales, here are some of the best external recruiters specifically for software sales.
How do internal recruiters get paid?
An internal recruiter is an employee of the company for which they are recruiting. Like any other employee of the company, they will receive a salary. In some cases, internal recruiters are also eligible to receive a performance bonus, in addition to their salary.
Even if an internal recruiter doesn’t receive a bonus for each hire, they are still motivated to convince you to work for their company because it’s their job to fill positions in a timely manner.
With internal recruiters, their motivations are fairly straightforward: they want you to accept an offer to work at their company.
With external recruiters, on the other hand, their motivations can be more complex.
How do external recruiters get paid?
External recruiters earn a placement fee or recruitment fee based on a commission structure. The most common fee structure is a percentage of the employee’s first-year salary. The exact percentage can vary based on market conditions, negotiations between the employer and the recruiter, and the difficulty of filling the role (e.g., more senior roles can have higher recruiting fees). According to Indeed, this fee can be as high as 40%. Or the fee can be as low as 10%. Here’s a thread on Reddit with recruiters disclosing their fee structures.
Remember, this fee isn’t subtracted from the employee’s salary. The employee still gets 100% of their salary. The employer pays the fee to the recruiter in addition to the employee’s salary.
Also, the fee is a percentage of base salary, not including commission. This is particularly important for sales roles. For example, if the recruitment fee is 25% and the employer hires a candidate submitted by the recruiter whose total compensation package is $100k base salary and $100k on-target commissions ($200k OTE), then the employer would pay the recruiter $25,000 for that hire, which is 25% of that hire’s base salary.
Potential conflicts of interest
Now, as a job seeker, you’re just concerned about your salary, right? Why should you care how much the employer is paying the recruiter?
Well, because it helps to understand the recruiter’s motivations, especially in situations where you have to choose between multiple job offers. Here are a couple of scenarios where you might have a conflict of interest with an external recruiter, based on how they’re paid.
Scenario #1:
- You have two job offers,
- One is with a company that you found yourself.
- And the other is with a company that the external recruiter found for you.
- The recruiter might try to convince you to take the offer from the company they found for you.
- Because the recruiter will only get paid if you take that offer.
Scenario #2:
- You have two job offers.
- Both offers are from companies that the external recruiter found for you.
- But one offer has a higher base salary.
- The recruiter might try to convince you to take the offer with the higher salary.
- Even though you might prefer the culture of the company with the lower salary.
- Because the recruiter will get a higher fee as a percentage of the higher base salary.
These situations might not come up in your experience working with recruiters, but now you know, just in case.
Still want to work with external recruiters?
The job search process can feel like a full-time job. There’s a lot of work involved in doing research, sending applications, scheduling interviews, etc. An external recruiter will do some of the work by finding jobs for you and fast-tracking you in the interview processes. They can also sometimes give you honest feedback from the employer after your interviews.
As long as you’re aware of when you might have a conflict of interest with an external recruiter, it’s still a great idea to involve them in your job search process.
Click here for a list of the best software sales recruiters.
Click here to learn how to reach out to recruiters on LinkedIn.