Good or Bad Compensation Plan?

A colleague of my mine just received this offer from a firm.  He's bran new to IT recruiting and wanted some advice.  Any thoughts on this compensation program?  Pros...Cons?  He's located in NC.  Thanks in advance.

Annualized base salary paid twice monthly: $40,000

Incentive components:

1. RECRUITING Target 24 Hires

3% of Direct Profit
Direct Profit is the difference between revenue generated and the total cost of the staff
generating that revenue as computed by the ‘Profit Calculator’.

Example: $30/hr direct profit X .03 recruiting incentive = .90/hr
.90/hr X 170 hours/month = $153 per consultant

Average length of contract is 6 months: 6 months X $153 per consultant = $918 income
24 consultants X $918 $22,032

$500 per hire bonus
Paid after 160 hours for rates of $51 and above and 480 hours (160 increments)
for bill rates of $50 and below.

Target: Hires $12,000

2. SALES/ACCOUNT MANAGEMENT

8% of Direct Profit
Direct Profit is the difference between revenue generated and the total cost of the
staff generating that revenue as computed by the ‘Profit Calculator’.

Target: $1.0 million in revenue
(10 consultants hired into your accounts for 6 month contracts) @ 30% Direct Profit $24,000

3. NEW ACCOUNT BONUS-Target 2 new accounts

Bonus of $2,000 paid for any New Customer Account.
$1,000 paid after 120 days of billing and $1,000 paid after 240 days of billing $4,000

4. PERM PLACEMENT

30% of perm placement revenue

Target: 2 perm placements at $100K with 25% fee $15,000

Note: if a recruiter other than you provides the candidate, the 30% fee will be split 50/50

TOTAL TARGETED COMPENSATION: $117,032

Views: 4124

▶ Reply to This

Replies to This Discussion

Permalink Reply by pam claughton on January 6, 2013 at 7:53pm

The percentage on the recruiting piece seems low to me and the target compensation seems high. I think it's rare that a new IT recruiter will do that well in their first year. I'd suggest that he ask how their other new people did last year, did they come close to hitting their target comp? If it's a good company, solid reputation, and he's getting a 40k base, it may be a good opportunity for him to learn the business and if the rest of the team is good and their clients are also strong, then he could do well. 

Permalink Reply by Bryan Keith on January 6, 2013 at 8:36pm

I thought the percentages were low as well.  He said that the company is small with limited reqs., so it's unlikely that he hit those marks in the first year.  Thanks for your input.

Permalink Reply by Megan Bell on January 8, 2013 at 1:02pm

Hmmm, brand new to recruiting and a $40K salary...must be nice!  If he got an offer for $40K + commission (especially in this economy), why would he even think about it?  Plus, as Pam mentioned, it could be a great place to get his feet wet and learn from others.    

Permalink Reply by Daniel A Healy IV on January 10, 2013 at 11:18pm
Bryan - 40k is a nice base but the structure looks like the person would be doing IT recruiting & Sales/account management - if that is the case it would be very difficult to attain those numbers because your working both sides of the desk.

I would get more clarity on direct profit. If the company has a high cost of doing business- it might be tough to get $30/hr direct profit on a single consultant.

The total targeted compensation sounds great on paper but if the person needs to find the business then fill it the metrics they listed are unrealistic
Permalink Reply by Bryan Keith on January 10, 2013 at 11:43pm

Daniel,

I was thinking the same thing -- Great base salary, but utterly impossible for a first time recruiter to make those numbers their first year.  Thanks for your input.

Bryan

Daniel A Healy IV said:

Bryan - 40k is a nice base but the structure looks like the person would be doing IT recruiting & Sales/account management - if that is the case it would be very difficult to attain those numbers because your working both sides of the desk.

I would get more clarity on direct profit. If the company has a high cost of doing business- it might be tough to get $30/hr direct profit on a single consultant.

The total targeted compensation sounds great on paper but if the person needs to find the business then fill it the metrics they listed are unrealistic
Permalink Reply by Ashley Barker on January 11, 2013 at 10:06am

If he/she is new to recruiting or sales or just the basic split desk, I would say ask them how they plan to get him/her there? Ask about the training process. Look other current employees up on LinkedIn and reach out to them behind the scenes for some real information. I, too, have received something similar but it was for all perm placement. When you are first starting this business it is best to know something about it so finding out about how they plan to train is a good strategy. Getting the opinion of others who are currently with the company is great too! But, first, it must be decided how long you can survive on $40,000. Crunch all numbers for bills and what not. See if there can be a draw in order to make up for anything you may need that could be outstanding. Negotiate.

Best wishes to your friend!

Permalink Reply by Mike on January 11, 2013 at 1:28pm

This plan is way to complicated.......first of the rate is VERY low.  It should be just the % of the GP that is it. For example if you place one consultant you get 10% of the GP, no splits with account mangers (like some companies do than you are really only getting 5%, what a joke.  Companies that offer such crazy comp plans need to really take a look at changing their plan.  "Less is more" and it is easier to figure out. Just my 2cents. 

Permalink Reply by Bryan Keith on January 11, 2013 at 3:32pm

Ashley,

My colleague said that the company is very small, with little to no training.  I suspect that she'll have a hard time making those number initially.  Thanks for your input. 

Bryan Keith

Ashley Barker said:

If he/she is new to recruiting or sales or just the basic split desk, I would say ask them how they plan to get him/her there? Ask about the training process. Look other current employees up on LinkedIn and reach out to them behind the scenes for some real information. I, too, have received something similar but it was for all perm placement. When you are first starting this business it is best to know something about it so finding out about how they plan to train is a good strategy. Getting the opinion of others who are currently with the company is great too! But, first, it must be decided how long you can survive on $40,000. Crunch all numbers for bills and what not. See if there can be a draw in order to make up for anything you may need that could be outstanding. Negotiate.

Best wishes to your friend!

Permalink Reply by Bryan Keith on January 11, 2013 at 3:37pm

Thanks Mike.

I agree that the rates are low.  I assume the base of 40K is suppose to make up for the low rates.  That will work initially, but after the recruiter gets up to speed, they'll probably leave.  I prefer a more aggressive commission structure vs. a higher base. 

Bryan Keith

Mike said:

This plan is way to complicated.......first of the rate is VERY low.  It should be just the % of the GP that is it. For example if you place one consultant you get 10% of the GP, no splits with account mangers (like some companies do than you are really only getting 5%, what a joke.  Companies that offer such crazy comp plans need to really take a look at changing their plan.  "Less is more" and it is easier to figure out. Just my 2cents. 

▶ Reply to Discussion

RSS

Subscribe

All the recruiting news you see here, delivered straight to your inbox.

Just enter your e-mail address below

Webinar


Glassdoor Webinar

RecruitingBlogs on Twitter

Groups

© 2024   All Rights Reserved   Powered by

Badges  |  Report an Issue  |  Privacy Policy  |  Terms of Service