The Conundrum of Collector Compensation

How to compensate collectors has been an issue during all of my 20 plus years in the Collection Industry. The addition of automated dialing and other technology has caused some agencies and firms to change compensation policies in order to get the most benefit out of their new collection tools. Some are concerned with employee attrition and motivation. The question of how to fairly compensate collectors and, at the same time, motivate them to stay on the job and do their best within the law is still an open one. After you read what a few people in the industry have to say about what they do, please take a minute and comment on what you do and why.

A Question & an Answer

We found an interesting question online that, at some point, you might have asked: “We are revamping our compensation package. [I’m] looking specifically at salary base plus commission for collectors. Does anyone care to divulge the amount of commission (%) they are currently offering and what percentage of the static annual base that comprises? I’m looking for a ballpark figure. It doesn’t have to be your precise number.”

Brad J. Lohner, President & CEO of Priority Credit Recovery, gave us permission to share his answer: “At Priority Credit Recovery, we strive to maintain a budget of 30-32% wage cost/revenue ratio. Our collector incomes are a combination of salary and commission with the salary ranging between $3500-$4000/mth and a breakeven of 3.5 times salary. Anything over the breakeven is paid a commission of 20%. So for example, if we pay a collector $4000.00/mth, their breakeven is $14,000.00 in earned revenue. If the collector generates $20,000.00 in fees, then their commission is $1200.00 (20% of $6000), for a total compensation of $5200.00, which is 26% of revenue generated.”

Median Salary by Job

This very current chart showing Median Debt Collection Agency Salary by Job was also online at the link below:

United States»Industry»Debt Collection Agency Overview

Industry: Debt Collection Agency, Median Salary by Job

Credit / Collections Manager $41,377
Bill / Account Collector $28,486
Attorney / Lawyer $72,936
Debt Collector $34,286
Human Resources (HR) Manager $43,483
Credit / Collections Supervisor $37,015
Collections Specialist $32,565

Updated 12/8/11

“Cradle-to-Grave” vs. “Pooled”

Often times, the way collectors are compensated is based on if they handle a claim from receipt to collection (often called “cradle-to-grave”) or if, when a debtor calls in, the call is sent to the first available collector (often called “pooled.”) For example, if an agency is using automated dialing technology, and a debtor returns a call, the call might be—for efficiency’s sake—sent to the first available collector. The same collector does not handle the claim from beginning to end. In a pooled environment, collectors are usually paid a higher base salary and then may get a commission based on the total amount collected by the team or the agency. Some firms consider it an advantage to market themselves as “cradle-to-grave,” while others point out the possibly more rapid recovery of debt through using a pooled method of collection.

Pros and Cons of Contests

Collecting can be stressful, discouraging work. Many collectors say that contests, pay bonuses and other commission incentives help to motivate them and to make the time pass more quickly. These additions to base pay are essentially “won” by competing in games and contests. Some relate to achieving a quota of customer payoffs; others are gained by splitting the workplace into teams that encourage each other to collect more. The underlying motive is the same: the more money collectors bring in, the more money they will earn. Some fear that, with programs like these, the collector maintains a mindset of “collect money at all costs,” and may overstep their boundaries and break a FDCPA guideline. Tell us what you think about the value or dangers inherent in contests.

What 2010 “Best Place to Work” Doesn’t Do

Employees like Theresa Key, an account representative with Receivable Recovery Partners, LLC (RRP) say it’s not just what her employer does for employees; it’s what it doesn’t do. Key, a nearly 40-year veteran of debt collections, notes that her supervisor does not impose artificial expectations about revenue goals or micro-manage her work. She also likes that her Indianapolis-based employer – the top-ranked agency in the Best Places to Work in Collections 2010 small business category — promotes ethical behavior and pays its employees a set salary. “Commissions sometimes make it more of a personal thing between a manager and a collector. The manager is trying to control her paycheck and doesn’t stay far enough back from the gray line,” Key said. “If you’ve done collections, you already know what kind of stress is involved. The place where you work can add or detract from that. Where I work, they leave me alone and let me do my job.” Click here to read the rest of the article.

Compensation and Retention Related

Employee turnover is a problem in many collection organizations. Compensation, benefits and flex-time often play a role in retention. We found an interesting article on Employee Retention Tools based on information from a CR Software Conference workshop. Attendees stated that “fair and competitive salaries and benefits are very important. They also cited many examples of improving workplace quality as important; including employee recognition plans, fun events and contests at work, and comprehensive communication strategies with their employees, to make sure that employees felt valued and appreciated. Comprehensive training, both for new collectors and ongoing training for all employees, was also suggested as a powerful retention tool.”

People brainstorming together often yield the best ideas on how to fairly compensate collectors in a variety of workplace environments. From the comfort of your office, please take a minute or two to comment and let others know what compensation strategies have worked in your organization. We’d like nothing more than to have enough ideas to fill another blog.

by Nancy Lender, National List



Categories: Business Relationships, NL Insider

Tags: , , ,

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