Recruiting Myths Debunked

Since I started recruiting I have noticed a common concern among job seekers that Recruiters are somehow incentivized to lowball an offer. While I can’t speak for every recruiter and every company, I would like to speak for what I feel are the majority of recruiters, both in-house and agency, who do not operate this way. I’m sure many people could dig into these general overviews and really pick them apart, but my goal is really to just add some color to this topic. Getting into the nuances and details of it all is a bit like going down a rabbit hole, and I'm no Alice, so I'll avoid Wonderland for now.

Before getting into any perceived incentives it's first important to clarify the fundamental difference between an agency recruiters pay structure and an in-house/ corporate recruiters pay structure. An agency recruiter is generally paid per placement. This means that they get a generally lower base salary and earn the bulk of their take home compensation off of commission. Every recruiting agency does commission differently, but the basic concept is that an agency charges a fee for their service of finding and placing a candidate with a client. You can say that on average this fee is probably somewhere around 18-20% of the placed candidates base salary. This can vary depending on the location - major, coastal cities are more competitive than smaller, rural areas and therefore may charge a higher rate. Either way, of that 18-20% The Recruiter only takes home a small percent of that fee, The Account Owner will take another portion of that fee, and The Company gets the rest as profit.

Corporate/In-house recruiting is a bit different. In-house recruiters obviously only recruits for their company. They are strictly focused on working directly with their hiring teams to fill roles that their company needs filled. From a compensation standpoint they are generally strictly paid a base salary which is generally higher than that of an agency recruiter. Some companies will offer performance bonuses - no different than any other performance bonus offered to other parts of the organization - and are calculated on a variety of things including number of hires, sentiment of their hiring teams, partnerships, program/process improvement, process adoption, etc. In-house recruiters are not paid per placement and they don’t make any commission out of getting you a job at their company, frankly they just get to keep their job.

Debunking this myth that recruiters are somehow incentivized by low balling offers is not going to happen over night, but for starters common sense will tell you the the market itself prevents it. As it stands today, we are in one of the most competitive job markets we have seen. There are more jobs open than there are people looking for them. Its a great place to be as a job seeker, and means that companies have to be more competitive in general in order to “win the war on talent” (ooff I hate that phrase). A lowball offer would do nothing more than hamper the goal to get somebody hired and onboard. Regardless of an Agency or In-House recruiter, the goal is to make the hire, so obviously you’re going to do that with every tool in your tool belt, and your best tool is always cold, hard cash.

Regarding strictly Agency placements, which is where I think most job seekers feel this conundrum could be experienced, the driving factor that prevents an intentional, lowball offer is how budgets work. Generally speaking, every fiscal year, when teams are going through budget planning, there is some amount of money that is set aside to cover the cost of Agency hires. This means that any time you are working with an Agency, they are getting paid out of a different budgetary line item than from where your salary derives. So, with that in mind, the salary band for your role remains the same, regardless of if you are courted by an agency recruiter or an in-house recruiter. Given this is the case, how could an Agency be incentivized to lowball your offer? They are paid by the company from a different line item, so if anything, they are better off negotiating a higher rate for their services than doing anything that would impact the candidate and jeopardize a placement. To that point, if there is any incentive at all, other than keeping a paying client, they would want to increase your offer which would result in a bigger payday for themselves.

So to break this down more simply here it is.

The market drives your offer. If companies are serious about hiring then they are doing themselves a huge disservice by not providing a competitive offer. It is also important to note that competitive could mean different things at different companies so pay attention to benefits and other offer components.
Agencies make money from placing candidates at companies, yes. But, if you have a higher base salary they then make more money; not the other way around. So, logic dictates they should negotiate for a higher compensation for you.
From a pay structure perspective, corporate recruiters have no skin in the game other than keeping their jobs. Obviously, the stronger the offer, the more likely you have an offer accepted, and the more people they hire, the more likely they keep their job.
Everything is driven by budget and compensation ranges. Ninety Nine times out of One Hundred thats the driving factor in what your base salary looks like. There is nothing you, I, your recruiter, or supreme being can do about that.

I get that there are bad apples in the industry, but frankly, there are so many great apples that really want to get you everything they can; they deserve the benefit of the doubt. As a recruiter, it is frustrating when job seekers spread the myth that lowball offers help us. They just don't. As I always say, don't just take it from me, but I bet if you start asking around you'll hear the same thing.

fin.