What Is A Draw System? Why are they super bad for The Recruitment Industry? Apart from protecting recruitment firms balance sheets who else do they serve or help?
A draw system used by recruitment firms is typically where a recruiter employed is paid a monthly sum of money by their employer which is then subtracted from their commission once an assignment is successfully completed and the client has paid the recruitment fee to their employer. Therefore although different companies have different levels , percentages and time frames the bottom line is most if not all recruitment firms implement a draw system of some kind which simply put is a loan that recruiters pay back. In most cases the draw system will accumulate after normally the first 1-2 months which is seen as a debt free period.
RJM & Associates Limited placed a number of sales and business development professionals last year. When asking the client to run me through the sales commission the successful candidate could expect to receive pending their sales performance it got me thinking in comparison recruiters are on a below par remuneration in the world of sales. Taking down the information from the client as expected there was no draw system of any sort, that a salary is a salary (yes really), bonuses are paid on top of the salary which is a straight percentage of the total project value. This is paid quarterly upon being logged regardless of whether the client had paid or not. In addition another end of year bonus would be paid if exceeded the overall annual target as an extra incentive. Also the employer was more focused on the activity and effort displayed by the new sales hire taking a look at their overall sales result at the end of the year. I noticed a massive contrast between this reward system and that what most recruiters receive. This is not the first time , we have dealt with such roles in multiple industries and locations around the world with sizeable companies. For many recruiters there is unreasonable month end/quarter end pressure, constant reporting and forecasting accompanied by heavy criticism when inevitably there is a delay in a placement , updating re late client payments and for team leaders this is all before addressing each of their team members situation. Yes OK this is the job but sounds like a rough deal and a lot of risk sharing for minimum rewards. Why would a recruiter want to pay tax on a draw that they have to return to their employer anyway…why is it accepted? For rookies I can understand it more, they are getting training in an industry they have no track record in and need to start somewhere …don’t we all. However an A-Z seasoned recruiter with their own network of relationships, key accounts who have made real life full cycle placements (not just developed a lead or found a candidate online but actually and independently glued the whole placement together and truly added value to both client and candidate)or developed and manage a system that achieves this may want to ask themselves if they are involved in a draw system why they agree to it. Do you really need the recruitment company behind you when you have clearly and successfully developed the skills and network required?
It should also be asked apart from serving a recruitment companies balance sheet and being used as an effective tool for financial defense who else is a draw system good for?
There are two sides to every story and I am looking at it more from the recruiters side of the fence. Would be interested to learn about the opinions others have regarding the draw system in the recruitment industry …