So you want to be a recruiter?

It sounds like a lucrative job. After all Mila Kunis played an Executive Recruiter who snagged Justine Timberlake as a candidate for an Arts Director job with GQ magazine (and more) in the 2011 RomCom 'Friends with Benefits'.

In Singapore, Executive Recruiters (or Headhunters, Professional Recruiters, or however you like to call them) are regulated by the Ministry of Manpower. And there are many of them - 6,671 to be exact.

Firstly you need to know that MOM puts all executive recruitment agencies, foreign domestic workers agencies, and foreign worker agencies within the same category. And the search engine doesn't come with a selection that permits to zero in just on the ones that do only executive recruitment.

But if we use elimination method and filter down to the ones we just want to look at (the executive recruitment agencies), I found out that there are:

- 1,194 foreign domestic workers agencies
- 2,269 foreign workers agencies

Subtract that from 6,671, we are looking at 3,208 executive recruitment agencies. And we are talking about the number of companies, not the actual headcount of recruiters they hired. That could range from 1 to as many as 200.

There is no way the search engine can filter to show just executive recruiters, so we can only do a best guess. Assuming each of them hire 15 recruiters, there are 48,120 of them in the market right this instant. That's a lot of competition.

Segmentation

To differentiate from one another, executive recruitment agencies will target on specific area(s). E.g. you would have Spencer Odgen that only focuses on the Oil & Gas industry, and Medacs that works solely in the healthcare space.

There are others that go by level, which is why there are two categories of license that MOM issues.

- Comprehensive License
- Select License

Select License allows you to place candidates that are going to make at least $7,000 per month. Comprehensive License do not have that salary restriction. But this also means more compliance and recruiters who are hired by agencies with Comprehensive License would need to pass a test (Certificate of Employment Intermediaries).

It's a multiple choice questionnaire that tests one's understanding of the various legislative acts surrounding manpower. Unfortunately this includes foreign domestic and non-domestic workers legislation even if you are joining an executive recruitment agency.

And the test is really hard to pass now ever since a grading adjustment kicked in over April 2014. You could try to take the test as a private candidate but that is restricted to the first attempt only. If you fail, you have to go through either of the two designated schools to undergo formal classroom-based training before you can take subsequent tests.

Sales commission

Sure, it is a sales job with pretty good job prospects and benefits (we are not talking about what Mila and Justin had). It is a relatively comfortable job, desk-bound, you meet people, and people want to meet you. We are also here for the bread and butter, so let's get to the bread.

Commission structure

It is a sales job, there are numbers to meet, sales target to hit. As a business, any recruitment boss is only concerned with two things, cost and profit. So economics 101 tells us, the lower the cost, the better the profit, in a simplistic sense. So they have to cut their pie carefully, to make sure profits are maximised, and costs are covered.

Quota and threshold

Different agencies cut their pies differently. But it is mostly pegged to a consultant's basic salary. This is to cover the basic fixed cost of an office rental, water and electricity, and of course the consultant's salary, and other essentials.

Some agencies will put their threshold at three to four times the basic salary. So if you take a salary of $1,000, any typical agency has to make $3000-$4000 at minimum to cover everything, before making a profit. So if your placement fee and billing does not cover $4000 monthly, you're losing money for the agency.

Wait, it gets better, some companies have a practise of 'rolling over' the deficit, if your billing is about $500 shy from the $4,000, you not only do not get your commissions, your shortfall will rollover to the new month.

Talking about billing, most agencies bill their clients on the candidate's first day of work, so a noob consultant has to take into consideration a candidate's commencement date. If your candidate has to serve two months' notice, you can only consider your sales to be projected two months ahead.

Good news and bad news, the good news is your sales is hypothetically secure two months into the future. Bad news is if your sales suck this month, this candidate's placement, no matter how big the billing is, is next to useless in helping you get your commissions for this month.

Commission schemes

Speaking of commissions, this is where the thick of the action is. Most agencies use commissions to drive and motivate their consultants. And most bosses will only pay commissions when the consultant has covered the threshold.

This is, again, a no-brainer. If you cannot cover costs, how to pay extra? Most pay a tiered, percentage scheme that is tied to the closures, so the more you close the better the dollar.

The percentage ranges, the tier ranges, there is no market standard and it all depends on how the boss wants their recruitment business to make money. Some pay their commissions on a monthly basis, some on a quarterly basis, so pace your placements promptly to keep the pipeline filled.

The complicated part

Here comes the complicated part, which is actually not that complicated. Some pay in a 'zero dollar up' approach.

Back to our earlier 4x threshold, if a consultant earns $1000 salary, and he/she needs to close $4000 as a minimum threshold, upon hitting $4001, the consultants will start to earn the commissions.

That means the entire '$4001' sales is up for a percentage of commissions. If we take a hypothetical 10%, that would translate to $400.10 worth of incentive.

Another way is to calculate commissions after you've met the threshold. Back to your $4001 sales, only the $1 is entitled a percentage of commissions.

Pros and cons

There are not really pros and cons, because it all depends on how the boss wants to run it. Some make their threshold really low so that they can run the latter scheme. Say if your threshold is $2000 and your sales is $4001, you get 30% of the difference of $2001, which would translate to a commission of $600.30. It is still not a bad deal.

Billing and commissions payout

As mentioned, billing is only upon the candidate's commencement date. Payment is another matter. Some companies will pay you the commissions immediately upon closure and billing; more often than not, they will hold the commissions' payout until the client pays up.

So if your payment terms with the client is 30 days and the client takes a full one month to pay, you'll need to wait for the payment to clear before getting the real ka-ching!, in your bank account. Worse, if your client delays the payment, your commissions will be affected. Another big thing that will jeopardize your commissions.

Guarantee

Usually, agencies will give clients a guarantee clause for successful candidate placement, which means if the candidate you placed decides to quit, say two weeks into the job, you will need to find one free replacement candidate, and if you cannot find a replacement in a stipulated time, you will have to refund a part of your billing.

Guarantee periods can last from 30 days to as long as 90 days. So while you take your commissions and enjoy the fruits, you have to brace for any fallout within that period, and part of whatever commissions you have earned will be taken back in the event of a refund. Your sales will be affected by any candidate fallout.

Co-broke

There is another way to earn a quick buck for a noob. That is to work on your colleagues' existing job orders. That means your current colleague will have a client, say looking for an accountant. And you happen to know an accountant looking for a job. You place your accountant in your colleague's client, both get a cut.

The all's fair can be 50/50. Some place cuts it 70/30- 70% of the billing goes to the candidate holder, 30% goes to the client holder. There is rationale for doing things differently as it will affect the morale and dynamics of the team.

Other places, there is no co-broke scheme. If you place your accountant with your colleague's client, you get the full billing, all 100%, just as much as when your colleague placed an accountant with your client, you get no billing. So you do all the work in coordination with your client and your colleague gets the sales.

This is of course working on the basis of quid pro quo; your colleague will be inclined to help you with all the legwork if you close your candidate with your colleague’s client.

Tools

Some companies will subscribe to ALL job portals: Jobstreet, JobsDB, Jobs Central, Monster, LinkedIn, you name it, and they've got it. And they give their consultants a free-for-all, unlimited job posts; you have an opening for an accountant, wham! Post on every job portal known to the universe, as often as you like.

Then you sit back and screen the candidates responding to these ads. It just like fishing, with a lot of rods. Just like fishing, more often than not, there is only one rod; at best, two. So you need to understand the limits set within the company on job ad posting policies.

Some do not subscribe to Monster, and if you like to use Monster, too bad. Some have Linkedin Recruiter’s account, that is great! Others use Jobstreet for certain roles. The posting policies and strategies will affect your candidate yield and your closures.

Some agencies impose limits, like a single consultant can only post two advertisements per week, per portal, so use your 'bullets' prudently.

If you do sourcing from job portals, you need to know that some job portals have a 'credit' system. The more candidate profiles you open, the more credit you use up. Some agencies impose the number of job applications you can open, as a cost control measure.

Warm seat

Some agencies will tell you that you will be inheriting some clients which previous consultant(s) has worked on, resigned, and the relationship has gone dormant. And with you joining the company, you can cosy up to these clients again, and milk them for job orders which you can work on.

This is a fallacy, as dormant clients are called 'dormant' for a reason. They might warm up to you, they might not. You cannot bank on these clients to close sales, you have to constantly be on the hunt, bring in new clients, and build your own base.

Network on your own, look into converting candidates to becoming your clients, and if they have a hiring need they will come to you.

Conclusion

It may seem like a career covered with gold glitter, and it can be. But like any other jobs in the market, you need to work your ass off to get there.

A recruitment guru said it best:

Success = Activity x Quality x Target Market

Apply the above consistently and you can reach the level of enviable recruitment success in less than 12 to 18 months.