How Recruiters Get Compensated

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As a recruiter, I’m compensated based on the portion my company takes in. My current company handles both contract and direct hire work and I’ll explain details for both of these.

For direct hire work, we charge our clients a percentage of a candidates first year salary. These percentages range from 15% up to 25%, with the occasional 30% mixed in. For example, if your first year salary would be $100,000 and we had a 20% agreement with our client, they would pay us $20,000. Most of the time, this $20,000 would be paid between 30-90 days of employment. Of course, if you were to quit, get fired, etc, we would pay back a pro-rated portion of that fee.

Now, of that 20%, most recruiters would see somewhere around 10% of that. So, on a $20,000 fee, a recruiter would see $2,000. An account manager would see a similar amount.

Contract work is a bit different. Most of the time, our client will tell us what they need as far as skills go, and then tell us a bill rate that they’ll pay us, per hour. Let’s just say that’s $100/HR. My job at that point, is to go find someone with that skillset. Let’s say I do just that, and that person is asking for $60/HR. Assuming this person works on my company’s W2 (and not as an independent consultant), we incur an additional burden, somewhere between 15% and 20%. Add that in and that candidate’s total cost to us could be as high as $72/HR. At this point, the difference between the bill rate and the pay rate (what we call, the spread) is $28/HR.

Recruiting companies compensate contract placements differently. Some companies make tiers out of it. For example, a $5 spread earns you 3%, a $7 spread earns you 5%, a $10 spread earns you 7%, so on and so forth. Some companies will compensate you based on how much you’ve built up. For example, if you’re making $100/HR in spread, a company will pay you 5%, if you’re making $200/HR in spread, you’ll be compensated at $7%, etc. Another way to compensate it is based on the margin %. If my margin is 30% (Pay Rate * 130% = Bill Rate), then perhaps I’ll get a certain percentage. If my margin is 40%, then I’ll get a higher percentage. There’s just a wide variety of ways of doing things.

Now, admittedly, recruiters have an incentive to lower your contract dollars in order to make more money. It happens. It’s a practice. We’re not trying to hurt anyone. It’s just a practice that’s taught and we’re just trying to do the best for our company. But personally, I’d much rather keep a $10 spread, keep you as a candidate happy, and make a placement, instead of haggling with you for an extra few dollars, leave a bad taste in your mouth, and you look for a new job two months into a contract. That’s just me though.

Jacob Smith

Jacob Smith / @jacobsjobs

Technical Recruiter, currently in Atlanta, GA

Get the Right Recruiters to Find You

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As I mentioned in “What Recruiters Do,” there is a wide spread in the quality of recruiters out there. As long as you have a resume somewhere, or information about you online somewhere, recruiters are going to be looking for you.

A recruiter I’ve e-mailed with said:

Sometimes its a numbers game, and we eventually bump into someone actively looking to relocate, etc.

It is a numbers game, and typically the more people a recruiter can get in touch with, the better the chances are for them that they’ll find the person for a position they are trying to fill.

In “Technical Recruiters: How to Select a Good One” Ari talked about how to pick a good recruiter based on the way they contact you, so here are some things you can do to market yourself so that more good recruiters will find you.

#1 Have a meaningful LinkedIn intoductory paragraph

Several recruiters have told me that LinkedIn is where they live (and based on the volume of contacts I get, I believe them!) Possibly the single most important thing you can do to get good recruiters to find you is to have a LinkedIn profile, and have a good introductory paragraph about yourself. The good recruiters use this to find out what you’re passionate about, what you’re currently doing, and what would be interesting enough to get you to change jobs.

Job Tips For Geeks has a little more to say about using LinkedIn too: “LinkedIn Spam (?) and Recruiters: A Guide for Geeks

#2 Tell Recruiters What You Want

When recruiters contact you, tell them what you want. Have a canned response that tells them exactly what you’re looking for (or what kind of crazy thing you’d have to see to even consider moving), and they won’t bug you again until they have it for you. Job Tips For Geeks sums this this up nicely

If you don’t want recruiters to waste your time contacting you about every job order that comes across their desk, politely let recruiters know what type of job would interest you.

(From: “Why Recruiters Suck, And What You Can Do About It”)

Recruiters have massive databases and tools at their disposal, (a recruiter just recently pointed me to a new (to me) one: Connectifier, started by some ex-Googlers), and once they know what you’re looking for, your chances of hearing about something great go way up.

There are even things out there as crazy as “Do Not Hire” lists. The Wall Street Journal talked about this in 2010: How a Black Mark Can Derail a Job Search.

Or don’t

To the celebratory cheers of your co-workers and friends, delete your LinkedIn account due to ‘Recruiter Spam’. You won’t get any more InMails, but the bad recruiters are going to find your Github username, your e-mail address, your unlisted phone number, your Grandmother’s address, and they aren’t going to leave you alone.

Chris Kelly

Chris Kelly / @ckdake

Curator of The Recruiter Project

Developers Respond

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Recruiters are continually looking for technical talent, and they know it’s overwhelming. Just yesterday one opened an e-mail to me with:

“I am a recruiter, and I am guessing you receive a dozen messages every day from people like me trying to convince you that their company is the best place in the world.”

Developers are overwhelmed, and because of their frustration with the process, they are trying to work around it. The first thing they do is complain, to their friends, coworkers, and the internet in general. Here are the first 3 Hacker News threads I found about it:

Go search Hacker News (a place where lots of smart people tend to be highly opinionated about technical things and their industry) or the rest of the internet and you’ll find more examples than you have time to read.

Occasionally, they start to actually do something about it. The first one I saw was

“Do you hate getting spam from Recruiters? Me too! Send your unwanted recruiter email to Recruiter Spam and we can collect data and study their habits.”

There, developers forward e-mails from recruiters they receive and they generate some statistics on recruiters. It never really got up much steam, but has made the rounds several times.

“We have a database of over four million developers, and let you cut & slice that data in various ways, such as filtering by engineers by skill, location, whether they work at a top company, or are connected to someone in your team.”

The team at built a better database for recruiters to help targeting work better.

“The best way to find a job is to meet a smart colleague, and to hear the words “We’d love it if you’d come work for us.” FiveYearItch is dedicated to making that happen.”

The team at Five Year Itch built a better database of job postings for developers to poke through, and just announced “Developers recruiting developers” which allows candidates to ask questions to developers working at a company they are considering.

“Hired is the first two-sided marketplace created specifically for Engineers, Data Scientists, Designers and Product Managers who are overwhelmed with job opportunities.”

The team at built a way for tech companies to bypass recruiters and compete to give offer directly to technical people.

And of course here at The Recruiter Project I’m trying to share information that’ll make it easier for developers and recruiters to work together.

Have you found any other ‘responses’ to recruiting pressure?

Chris Kelly

Chris Kelly / @ckdake

Curator of The Recruiter Project

Technical Recruiters: How to Select a Good One

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Your phone rings, again, and you regret the day you ever posted your cell phone number on Monster three years ago. Without even listening to your voicemail, you are able to repeat the message verbatim since you have heard it some many times, from so many different recruiters.

“Hi Bill, my name is Tom from ABC Technology, and I have a copy of your resume. I have a great Ruby opportunity for you, so call me back.”

For many, these messages have simply become pure voice spam. When you couple this with the telemarketing component and the typical general job description “email blasts”, it complicates it even more. Never mind the fact that you’re a C# developer and it doesn’t sound like they read your resume anyway. However, despite some of the annoyances created by the supply and demand of the IT Technical talent today, working with a good technical recruiter does have its advantages. After all, the technical recruiter probably works for a company that invests a significant amount of money annually to build relationships with the managers that want to hire you.

Choosing a good recruiter requires a similar approach one would take in choosing a doctor, lawyer or tax advisor. If you determine that including a technical recruiter, or two, in your career search activities could potentially provide value, it is very important that you spend a few minutes to qualify the individuals you will be working with. After all, most people spend the majority of their life engaged in the workplace and it is important to ensure the person representing you acknowledges this- and can best represent you. Here are some qualifiers to consider.

Consider the level of sophistication of the recruiter’s initial approach. So you received a voicemail from a technical recruiter that clearly stood out to you in a positive way. Maybe they sent you an email that addressed items that were important to you because they took the time to review your blog or contributions on Stack Overflow. It would stand to reason that if this recruiter was professional enough to take the time to research you and prepare an appropriate and relevant introduction, that there may be value in getting back to them. While you should still interview the recruiter, you just narrowed down the pool to the most detailed oriented recruiters who clearly “get it” when trying to reach out appropriately to potential candidates.

Ask your colleagues for a recruiter referral. A recruiter recommendation from a colleague is a great place to start. In the recruiting industry, the candidates we receive as a referral for a job well done are our most valuable resource. With the large number of candidates that technical recruiters work with, extra time and attention is typically given to the referrals we receive from our consultants and former placements. While there is no guarantee you will get placed, any recruiter worth engaging with will ensure they will do the best they can as a result of how they were introduced. Even if they don’t have the perfect job for you, the recruiter you were referred to will typically want to be there for you for objective counseling throughout your job search process. Keep in mind that while most technical recruiters will not provide you a great definition of polymorphism, anyone worth working with will know which organizations in your geographic area are looking for the specific talents you possess.

Linkedin Recommendations. While there may be exceptions, technical recruiters with multiple LinkedIn recommendations are another good place to start. I am not referring to the “quick click” endorsements that have been adopted on LinkedIn recently, but rather the complete written recommendation where someone has taken the time write their perspective on how the recruiter (and their organization) provided value to them. If you don’t see any recommendations, it does not mean the recruiter is not a good one. However, if they have been in the industry for a while and know their trade, it would be a flag if there were none. While the recruiter certainly controls which recommendations will appear on their LinkedIn profile, you can certainly detect the level of sincerity from what is written. Just like the generic job descriptions you may receive, it will not be difficult to read through the fluff. Also, if you see recommendations from other software developers and hiring managers that speak to their expertise, you are probably looking at someone who knows their stuff. One of my favorite types of LinkedIn recommendations comes from those individuals the recruiter never placed at all. This speaks volumes.

Breaking the ice quickly. The relationship between the technical recruiter and their software developer really needs to be a trusted partnership. That means that open and honest dialogue is the key to a successful relationship. Once you break down the barriers, you both can determine very quickly whether an opportunity exists to move forward on a particular job. It really comes down to breaking the defenses quickly with someone you just met over the phone. That is why professionalism and credibility is so important. The recruiter’s biggest fear is that you will be given the name of their client (that their company invests many thousands of dollars per year building a relationship with) and approach them on your own, or refer a friend to them directly. By letting the recruiter you are speaking with know up front that you are a person of integrity and you promise not to approach their client on your own, it will certainly break down one of the major walls. Getting this out of the way quickly will bring forward a lot of the specific details about the culture, compensation and career path you were looking to evaluate. On the recruiting side, letting us know what your biggest motivators are in your career change is the only way we can ensure your time is best utilized. No recruiter wants to send you on interviews for jobs that would not interest you based on information that should have been discussed about your desires from the beginning.

Interview the technical recruiter. Recruiters tend to ask some very bold questions about your current job and compensation, etc… It is ok to ask some tough questions yourself. I have heard some teach their recruiting teams over the years that it is extremely important to have “control” over their candidates throughout the process. This methodology sends the wrong message to new recruiters starting out. In interviewing scores of recruiters over the years, I have noticed that one of the typical signs you are talking to an inexperienced recruiter is that they begin by asking fast and direct questions to qualify you for one job. Instead of a professional discussion about what you are looking for overall, they jump right to compensation and negotiation, without even knowing what is important to you in your next role. Some good questions to ask a recruiter are:

“How many software engineers have you placed in the last two years?”
“What were their specific skill sets?”
“How many of them were software engineers with my skill set?” “How long have you made IT placements with the client company you called me about?” “You said in your message this was a good job for my career, explain why please.” “What can you tell me about the Software Engineering market in Atlanta?

Keep in mind, it is not just whether a recruiter answers the questions you ask correctly, but how they answer the question. Do you sense a passion for serving their candidates well? Can you sense that they go above and beyond the norm when it comes to their knowledge about their client specifics and details? In other words, do their answers display a depth and breadth of knowledge about the career market in your discipline to be an asset to you? If so, then you may have found a good technical recruiter to build a relationship with.

Ari Waller

Ari Waller / @ariwaller

Ari started his career at Thompson Technologies as a Technical Recruiter nearly 18 years ago, and is currently the Vice President of Recruiting and Sourcing. Despite the fancy title, Ari is passionate about technical recruiting, and takes a very “hands on approach” in the quest to effectively attract top IT Talent.

Excuse Me, but Your Automated Email Is Showing

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A lot of good guidence is provided in “Making First Contact” without it turning into a laundry list of things NOT to do. However, one “don’t” is so rampant that it warrants its own post: don’t automate your emails. (Especially don’t auto-send emails to every developer within the same company.)

Automated emails are pretty easy to spot: there is nothing personal in them except a name change in the greeting, and they are generally written in an overly chatty manner (probably to make up for there being aboslutely nothing pertaining to the recipient in its contents). This comes across as acutely disingenuous and typically elicits a quick delete.

I recently received two such emails back-to-back:

what the diff?

Now perhaps this company’s need for filling its Cloud IT and Research seats with “talent IT professionals [sic]” is so urgent that this recruiter does not have time to write a personalized email to each developer he or she contacts, but I would wager that the fruit of said emails would be more replies and fewer blog posts. Not only was I bothered at work, I was bothered at work twice by virtually the same soulless email. The only impressions made by these emails are that

  • there are empty seats for this company that urgently need filling and
  • this recruiter is extremely lazy.

This reflects poorly on both the company and the recruiter which provides neither with any gain. A recruiter for any company should strive for a few things:

  1. Find fitting candidates for open roles
  2. Present the desirable qualities of the hiring company
  3. Appear informed of the role and the candidate so that (1) and (2) seem earnest.

An automated email accomplishes none of these goals and wastes the time of all three parties (while only appearing to save the time of a single party).

Pamela Overman

Pamela Overman / @pwnela

Developer at Big Nerd Ranch.
Deep abiding appreciation of well-written emails.