Recruiters are likely underpaid by about $45,000/year

It’s a unique role that recruiters play really.

We justify our existence by making placements — yet we are objectified by the very customers that we support.

We are needed, until we are not, then tossed away for a few months while the company determines what the hell they are going to do to fix the precarious position their middle management had put them in, and that’s when the phone rings.

I have never understood how a CEO can get a gig like they do; leading a company, not listening to its employees, and only watching the ticker tape numbers fall and cut so-called overhead becomes a sad deliverance.

We, as recruiters and sourcers are not overhead. We are not dead weight, and if our skills are used in the right capacity, we could do so much to support and help drive the business forward — not drive it down.

I believe that the root to solving a problem is knowing that you have one — and then furnishing your arguments with concrete facts and figures that can paint not only a story but show proof positive that we make companies money.

Now, this post is not going to probably vex if not annoy third-party recruiters and that is not its intention at all.

I am all for the third-party recruiting, and it has its place in the Parthenon for sure.

This is treatise is for the in-house corporate recruiter or sourcer: the one that has suffered the slings and arrows and who is so often maligned by both managers as being incompetent or expendable.  

So, what is overhead?

An overhead employee is someone who does not generate revenue for the company but is still needed by the corporation.  They maintain a level of required skills, but it drains the bottom line. You need these folks however to maintain order. Groups that fall under this umbrella are Accounting, Secretarial, Custodial, and Human Resources, to name a few.

Recruiting seems to always fall under HR, even though that structure makes little sense.

While there should be a dotted line to HR for compliance issues, recruiting should actually reside in business development. Aren’t people who develop the business? So wouldn’t the acquisition of people be business development? Seems logical, right?

The developers I find or the DBA’s are billable towards the work we are doing — and therefore are helping the profitability to the company for a flat fee.  The flat fee is our salary. We are not on commission, and thus we are not looking at low-hanging fruit for easy hires to pad our numbers to make more money in commission.

We are the grinders that take on any task and work tirelessly to make that placement with the only incentive is if we do poorly we are out the door.

PIP, PIP, hooray?

Let’s do some math

Now, like any argument, you have to have facts to get your point to get your point across with facts and figures, or graphs with lovely colors. C-suite folks love that shite, right?

The first thing to do is determine the valuation of fees. Most agencies charge a standard flat fee for a permanent placement of 20% or close to it — so for our equation this is a good round number to work with.  

With this in place, we look at the math. Let’s say that your company makes 50 placements a year, or a recruiter within your enterprise is averaging roughly 4 hires per month. The average salary for these placements are 80K so your equation would look like this:

((50 x 80,000) x .20) = (80,000) + ($25,000 x 50)) = $2,050,000

People x Salary x Fee = Y +benefits x people hired = X

$800,000 in operations fees to get these folks hired that is just in the door. This is on top of the cost of ramp up time, benefits, holidays, sick leave, vacation pay, and the money that may be lost for.

Costly endeavors are galore!

Now let’s see what a competent corporate recruiter’s numbers would be with the same salary, less the fees with a little different formula based on an in-house formula:

(($80,000 + $25,000)/50 = $2500 x 50) = ($125,000) + X = 135,000

Salary + Benefits/people =  Y x people hired + tool costs (hiretual) for example

Just in case you missed this or bad at math, this is a cost differential of $1,915,000 towards an average company’s bottom line.  No wonder everyone wants into the staffing business. The margins are outstanding and the profits innumerable for an agency.

I have to say that a CFO that is looking at the bottom line might want to aptly look at these figures. Not every company look at this in this way and does invest in its staff, and yes some crap recruiters cost companies money because they do the very least needed.

We are looking at a substantial monetary difference that is not easily explained. There are a handful of companies that I know of that would even pay a rate like this for a recruiter, even senior, outside of major markets, and even then the money is not there.  

One, in fact, could say that the company is MAKING money off of the corporate recruiter if they are paid less than the salary of $125,000.

The average compensation for a corporate recruiter, via indeed in the US, is $80,000, well under the math shown above.

Even with the benefits at $25,000 in this scenario at this average, the recruiter is not in fact, overhead. Based on this scenario, we are actually grossly underpaid for the amount of talent brought to the table on top of all the other craptastic garbage we have to do and are chastised for by our management as being overhead?

Yes, this would be considered somewhat fuzzy math, and I am no mathematician, but I have friends that are.  Wealth distribution in this country has become fuzzy math as well as companies are more focused on the bottom line for investors and stockholders than their own people.

Authors

Derek Zeller

Derek Zeller draws from over 20 years in the recruiting industry, and he currently is the Director of Recruiting Solutions and Channels with Engage Talent. The last 16 years he has been involved with federal government recruiting specializing within the cleared IT space under OFCCP compliancy. He has experience with both third party agency and in-house recruiting for multiple disciplines. Using out-of-the-box tactics and strategies to identify and engage talent, he has had significant experience in building referral and social media programs, the implementation of Applicant Tracking Systems, technology evaluation, and the development of sourcing, employment branding, and military and college recruiting strategies. Derek currently lives in the Portland, Oregon area. Follow Derek on Twitter @Derdiver or connect with him on LinkedIn.