The sharp economic downturn has been reflected in falling profits at many of the leading recruitment firms over the past year, but the majority of chief executives have still enjoyed inflation-busting pay hikes.

Indeed, boardroom salaries almost universally increased across the sector with decreases in remuneration due to directors receiving reduced or even no bonuses often because their companies failed to meet their requisite performance targets.

Direct comparisons do need to be treated with caution, however, as the different accounting periods using by individual companies mean that not all of their results show the effects of the market carnage seen in the second half of 2008.

As Kellan Group non-executive chairman Tony Reeves points out: “Last year really was a year of two distinct halves. The first half saw revenue and profits substantially up on the previous year. In the second half we were hit by the global economic downturn.”

As a case in point, the chief executives at all of the companies that reported before 31 December 2008 saw their remuneration rise, whereas the picture is mixed for those at companies whose accounts run until the year end.

Michael Page is a prime example of this, although its three executives were once again the top earners in the industry, each pulling in more than £1.6m apiece.

The trio all earned a bonus that matched their salaries, the maximum the company allowed in its last accounting period, for the fourth consecutive year.

Michael Page delivered record-breaking gross profits of £552.7m but its pre-tax profits slipped from £147.4m in 2007 to £140.1m last year and this took its toll on the executive bonus pool, which fell from £3m to £1.4m, and halved chief executive Steve Ingham’s deferred bonus entitlement.

He still took home £1.98m, keeping him well ahead of his peers, although this was down from a whopping £2.63m last year. Ingham’s
salary, which rose by £11,000 to £371,000, again made up less than a fifth of his overall package.

Colleagues Charles Henri-Dumon, managing director, Europe and the Americas, and Stephen Puckett, group finance director, earned £1.71m and £1.69m, with both seeing their remuneration fall by £500,000 year-on-year.

Clearly, the reduction in their bonuses has irked the trio as Michael Page has changed its policy this year to enable its executives to pocket up to 1.5 times their basic salary in the form of a cash bonus.

The overhauling of bonus structures was not uncommon and Hays followed suit. Curiously, it is placing the emphasis on short-term performance with the maximum directors can earn through its three-year incentive scheme being chopped from 150% to 50% of their salaries while increasing their potential entitlements for hitting 12-month targets to a massive 240%

As last year, Hays was the only other company to reward its chief executive with a seven figure package. Alastair Cox received £1.48m, up from the £728,000 he took home in his last year at Xansa. This also eclipsed his predecessor Dennis Waxman’s £1.2m remuneration as the group posted impressive results with pre-tax profits up 25% from £211.7m to £264.4m.

For all of the winners in the pay stakes, there were also a number of losers, albeit in a relative sense. Robert Walters’ eponymous chief executive remained third in the premier league of pay but saw his earnings fall by over £130,000 year on year. Although his base salary rose from £440,000 to £475,000, his cash bonus more than halved from £440,000 to £190,000 as the company’s operating profits dived by 29%.

Francesca Robinson at OPD took a much bigger hit with her overall package down by over £310,000, dropping from £821,000 to £510,000. The firm made a £1.4m loss which saw her bonus carved down to £64,000, compared to £395,000 the previous year. Robinson also lost her crown as the top earning female in the sector to her colleague Baroness Virginia Bottomley. The former health minister again earned £562,000, comprising a £280,000 salary, matching bonus and a £2,000 benefits in kind payment. In truth, Alexander Mann Solutions founder and chief executive Rosaleen Blair is likely to have earned higher, but since she led a management buyout and took the company private in 2007, her remuneration is known to few except her and her bank manager.

Robinson’s financial pain was shared by a number of her peers, however, reflecting the dismal trading environment. Peter Searle, chief executive at Spring, gained the unwanted title of biggest relative loser after his remuneration more than halved year on year. His package slumped from £706,000 to £322,000 because he received no cash bonus last year. Similarly, Andy Hogarth saw his pay packet trimmed from £284,000 to £187,000 as he received no bonus either while Morson’s Ged Mason also missed out, which also lopped £100,000 off his remuneration.

The numbers really do underline what a massive proportion of executives’ annual earnings are made up by bonuses and the dangers to those involved of coming to rely on them as part of their overall package year in year out.

This trend of zero or falling bonuses also looks set to continue at certain firms with several already having confirmed that their executives will be facing pay freezes in 2009.

Robert Walters has said that its executives are waiving any salary hikes or bonus payments this year and Harvey Nash is taking a similar approach with its executives also set to take shares in lieu of pension contributions.

If the outlook for this part of executives’ remuneration is rather downbeat, the share options most receive could prove more lucrative this year.

Share options give the holder the right but not the obligation to buy shares at a predetermined price but these are not included in the table. Although they can be very valuable when the market is strong, the depressed prices seen over the past year have understandably resulted in very few executives choosing to exercise them. Robert Walters was one notable exception. He cashed in 421,000 shares, which made him £373,884 on top of his remuneration. This may sound a healthy sum but it is small fry compared to the £3.27m he netted in 2007 and the staggering £9m he made in 2006. Giles Daubeney, the group’s chief operating officer, made a cool £1.8m from his share options in 2007, while over at Michael Page, Dumon bagged £1.7m. Significantly, neither exercised any last year.

But, with share prices having rebounded sharply from the lows of last year, options granted near the trough of the market could already be worth substantial sums. Robert Walters is up more than 100% from its April 2008 lows and many firms across the sector have seen share
price gains in excess of 25%. Recruitment stocks are traditionally high beta stocks that outperform the broader stockmarket, especially in the early stages of a rally. If the fabled ‘green shoots’ of recovery take hold the sector is well-positioned. Recruiters are certainly emerging from the downturn leaner and meaner.

Cost-cutting has understandably been the order of the day at many companies as they scrambled to reduce overheads and there have been a swathe of job cuts over the past year. The Kellan Group has reduced its headcount by 20% and Michael Page has made 10% of its staff redundant to give but two examples. Those in the boardroom have not been immune either and there have been some high profile casualties.

At Adecco, the head of UK and Ireland operations René Schuster lost his job last year. As compensation, he received a severance payment of €1m, equivalent to £848,930.

Over at Impellam, sketchy details of Tony Martin’s payoff came to light after the group reported in its results that in total it shelled out £546,000 in compensation for loss of office last year. Exactly how much of this went to Martin is not clear. Impellam says that one departed director received more than chief executive Desmond Doyle’s £288,000 earnings. John Rowley, who is now a non-executive director at the firm, received £15,000 paid into his pension fund as compensation for losing his executive status, but how much of the remaining £531,000 of severance payouts went to Martin is not known.

Elsewhere, Kelly Services UK managing director Chris Moore was also made redundant. The firm is similarly sketchy on the details of his pay-off but admits it forked out $1.5m (£0.92m) severance costs in the UK and Ireland in the fourth quarter as it started to scale down its operations. Again, how much of this Moore received is being kept under wraps.

Other moves included Kellan Group’s John Rose, who defected over to private equity-backed FiveTen Group with InterQuest’s Ross Eades switching companies to replace him.

Although it was a difficult year for recruiters, the hope is that the economy really has turned a corner. The sector has once again proven its resilience, not least in the boardroom pay stakes.