Commission Basics

Overview

This article contains information on the basic concepts Bullhorn Back Office uses to calculate commissions.

The concepts presented in this article are for informational purposes. Bullhorn Back Office will perform all of the calculations for you.

Understanding how commissions are calculated can help you with troubleshooting should you encounter any issues.

Before You Begin

See Setting Up Internal Employees to Receive Commissions for information on how to set up employees with commission plans.

Commission Components

The components listed here make up the backbone of how Bullhorn Back Office calculates commissions. Each component works together to determine a rep's commission payout.

  • Spread - The gross margin earned on a placement. See Spread Calculation below.

  • Rep Spread % or Split - The pre-commissionable amount of the spread a rep is entitled to. If more than one role is involved with the placement, such as recruiting and sales, each of those roles may receive a percentage, or split, of the total spread.

  • Total Rep Spread - the sum of the spread earned from all of a rep's assigned placements for a period.

  • Commission - The portion of the total rep spread, either a percentage or a fixed rate, that is used to determine the payout to a rep. A tier structure can be created so reps will receive varying percentages of the spread based on how much spread is generated.

  • Payout - The amount of money the representative has earned.

Spread Calculation

The below equation is how Bullhorn Back Office determines spread on a placement:

(Bill Rate - ((Pay Rate * Burden) + Additional Hourly Costs & Hourly Per Diem)) * Hours Worked = Spread

Example: A placement has an $80 bill rate, a $40 pay rate, $12 in hourly per diem, a 20% burden, and 40 hours were worked for the week. The spread calculation would be:

($80 - (($40 * 1.20)) + 12)) * 40

($80 - ($48 + 12)) * 40

($80 - $60) * 40

$20 * 40 = $800 spread

What about overtime?

Spread on overtime (OT) and doubletime (DT) hours are calculated separately and totaled with the regular spread hours.

Example: A placement has a $50 regular bill rate ($75 OT, $100 DT), a $25 regular pay rate (37.50 OT, $50 DT), a 20% burden, and 50 hours were worked for the week. Of the 50 hours, 40 were regular, 8 were OT, and 2 were DT:

Regular Hours:

($50 - ($25 * 1.20)) * 40

($50 - $30) * 40

$20 * 40 = $800 regular spread

Overtime Hours:

($75 - ($37.50 * 1.20)) * 8

($75 - $45) * 8

$30 * 8 = $240 OT spread

Doubletime Hours:

($100 - ($50 * 1.20)) * 2

($100 - $60) * 2

$40 * 2 = $80 DT spread

Total Spread:

$800 + $240 + $80 = $1,120 total spread

Rep Spread Credit / Split

The Rep Spread Credit is located in the Credit section toward the bottom of the placement record. It is used to divvy up, or split, the spread among credit recipients, such as recruiters and account/sales managers.

In this example, the Recruiter and the Account Manager each receive 50% of the spread.

$800 * 0.50 = $400 Rep Credit

Total Spread Credit

A Rep's Total Spread Credit is the sum of the spread from all of the placements for a commission period.

For our example, the recruiter has received credit for 75 similar placements:

$400 x 75 = $30,000 total spread credit

Commission Payouts

A rep's commission is a percentage or fixed amount that a rep receives based on their total spread credit. You can set up commission plans that use a single percentage to apply to a rep's spread or you can set up a Commission Tier to apply a range of percentages to pay out different amounts as spread targets are hit.

This example shows a simple 5% commission plan.

On this plan, the rep would receive a payout of 5% of their total spread:

$30,000 @ 5% = $1,500 payout

Understanding Tiers

Commission tiers can help incentivize reps to make more placements by rewarding a larger spread with a larger commission.

It may be helpful to picture commission tiers as a series of buckets. As lower tiered buckets are filled, reps will earn commissions at the next tier level.

Example: A recruiter has $30,000 in spread and their commission plan has the following tier structure set up:

$0.00 to $5,000 = 2%

$5,001 to $10,000 = 4%

$10,001 to $15,000 = 6%

$15,001 to $20,000 = 8%

$20,001 to No Limit = 10%

You might think that the full $30,000 spread would be calculated at 10% (for a payout of $3,000) since the spread is over $20,001, but because the lowered tiered buckets need to be filled first, the breakdown would be:

$5,000 @ 2% = $100

$5,000 @ 4% = $200

$5,000 @ 6% = $300

$5,000 @ 8% = $400

$10,000 @ 10% = $1,000

$100 + $200+ $300+ $400 + $1,000 = $2,000 total payout

The Short Version

  1. Calculate the spread: (Bill Rate - ((Pay Rate * Burden) + Add'l Costs)) * Hours

  2. Determine the Rep Spread Credit: Spread * Rep Split % from placement

  3. Get the Total Rep Spread: Total spread credit from all placements for the period

  4. Determine the Payout: Total Rep Spread * Commission % or Tier Structure

Additional Information

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