I deserve a pay rise!

The question of consultant base salaries in recruitment agency land has always been a controversial one. I started out as a Trainee Consultant in 1999 on $30K + Super.  At that time, even as a Senior Consultant, you could only aspire to reach the heady heights of $50K-$55K. I was inducted into recruitment under the “old school” premise that it is a sales role and your rewards directly correlate to results. “Ignore your base salary and focus on your commission cheques” I was continually told.

Today there is a steady push by consultants to increase the average level of base salaries and in rec2rec land, where we are interviewing hundreds of recruiters per year, we have gained an understanding as to the rationale here.  Some reasons are truly justified; others however, leave me somewhat frustrated.

The justifications?

Rising cost of living: This one I understand. Living in Sydney as I do, I can confirm – $50K does not go very far.  There are some really practical reasons for maintaining a certain level of base salary such as applying for a mortgage or not wanting to be in a position where you can’t pay the rent if you happen to have a bad month.

However, some of the justifications behind the requests for an inflated base salary just don’t add up.  There is a certain commercial reality to any hiring decision and quite simply by demanding a high base salary you may be pricing yourself out of the market.

Mourning the loss of LAFHA:  The argument from our candidates at the beginning of the financial year for pay increases was based on the loss of LAFHA.  The number of people who contacted us asking for $10K + pay rises based purely on losing this tax break was staggering.  We argued against this each and every time.  What about the Aussie sat next to you doing the same job that has never benefitted from subsidised rent and a food allowance? Why should your company have to pick up the tab when the overall Government legislation changes?

No reason other than I expect it each and every time I change jobs:  We have other people who just seem to see a pay rise as a given for moving jobs?  I’m yet to be convinced by this argument.

I need a pay rise as my billings have dropped: My absolute favourite in recent times.  Ok – so let me get this straight…. you are looking to move roles, you are going to commit to providing a company with a smaller return than you did last year and for this you want a company to reward you with a pay rise.  Seriously?  I’m a good sales person but not that good!!

I have a wealth of experience and this should be reflected in my base:  Recently I sat down with a UK recruiter fresh off the boat, who informed me that his base salary expectations were $120K.  I scratched my head, re read his resume and asked him what I was missing.  For the past two years, he had billed the equivalent of $110K per annum.  I politely asked “How do you expect me to approach my clients asking them to pay you more money than, on paper, you are capable of billing”? He got quite defensive with me and replied “do you not know that I have 10 years recruitment experience!!”

There is a certain commercial reality that has to be factored in to any hiring decision and consultants need to understand that there comes a point where quite simply the numbers just don’t add up.  It is an accepted fact that for every $1 a business invests in you, the company is looking for a $3 return.  For a small business the actual cost of a Consultant is more like their package times 2 once you take salary, fixed office costs, marketing and social costs plus everything else into it.  If you are asking for $100K base salary – can you confidently return $300K in this market prior to earning commission?  If not, perhaps you need to think again.

We are trying our best to manage client and candidate expectations around salaries but more often than not we are finding that they both have starting points that are just too far apart.

Some questions that I am asking myself:

• Fundamentally, has there been a permanent shift in the market?

 

• Are the days of low base salary, high commissions a thing of the past?

 

• For our industry to survive and adapt, do we need to move to a completely different rewards model?

 

• Perhaps the traditional recruitment formula just doesn’t equate anymore?

 

I am posing the questions here but I certainly don’t claim to have the answers.  Perhaps with such a fundamental shift in market conditions – the way we remunerate consultants may need to shift too if we are going to address commercial realities, keep our top companies profitable and prevent our top talent from leaving the industry?