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Recruitment Process Outsourcing (RPO)

2024 Guide to Recruitment Process Outsourcing (RPO)

Table of Contents

Recruitment RPO or recruitment process outsourcing fits into business models where an in-house recruitment team no longer makes sense. Companies may not have the resources to handle these processes in-house or meet the growing demands of the company.

An RPO would be brought into the fold to help fill in this role with a few crucial financial benefits.

What Is Recruitment Process Outsourcing (RPO)

Recruitment Process Outsourcing is not clearly defined, but they are third-party specialists who act as the company’s in-house recruiter. Human resources offload this key role and administrative tasks to the RPO professional.

Hiring a third-party specialist part- or full-time offers many benefits in:

  • Cost
  • Efficiency
  • Quality
  • Service
  • Scalability

Talent acquisition transformation is the goal of an RPO, who fits seamlessly into your operations.

How Does Recruitment Process Outsourcing Work?

Logistically, RPOs work very much the same, but you’ll find key cost benefits, which we’ll discuss in greater detail later on in this guide. Partnering with an RPO helps companies break free from the recruitment struggle, which is seeing 74% of new hires searching for positions within six months of being hired.

Recruitment process outsourcing allows a specialist to find employees who:

  1. Fit into the current work environment
  2. Remain in their positions longer
  3. Fill critical skill gaps 

Blended solutions are available, allowing HR to handle some recruitment and the RPO to handle others, or you can outsource the entirety of the process. Talent acquisition changes occur thanks to working with a specialist who aligns with your hiring manager’s goals.

RPOs first learn the goals and needs of your business and then provide strategic guidance through talent acquisition, which may include:

  • Consulting
  • Onboarding 
  • Talent acquisition
  • Executive search
  • Professional search
  • Project recruitment

Recruitment process outsourcing fills in many holes in organizations and can help find the right talent to fill crucial positions. If companies lack executives to assist in certain roles, it’s possible to hire interim execs or assess key managers.

Specialists in the recruiting process can pinpoint the best candidate with the highest chance of being a long-term fit versus someone searching for a new position within the first few months of being hired. 

Why use RPO?

You have an in-house recruiter who has helped your organization fill roles, so why hire an RPO? Hiring offers many benefits:

The Benefits of Outsourcing Recruitment Process

Every organization has its own reasons for hiring a recruitment RPO, but the key benefits of working with these specialists are:

  • Scalability

Scaling a business is hard. Only 22% of companies in the last 10 years have scaled properly. If you hire in-house, you may be stuck in long-term contracts or have to offer benefits to employees because you may need their services in the short-term future, but not right now.

  • RPO empowers organizations by:
  • Deploying RPOs to help with recruitment when you need fast, immediate employees to fill in key roles.
  • Reduce the number of RPOs working for the company when recruitment levels are more manageable.

Partnering with an RPO puts businesses in control, allowing them to meet recruitment goals and ramp up resources or scale them back based on evolving needs.

  • Cost-savings

RPO costs will be outlined in great detail in the coming sections, and you’ll find numerous pricing models that may fit into your company’s budget. Cost savings will vary based on the recruitment model you used previously, but it’s not uncommon to achieve 30% or more savings on a cost-per-hire basis.

If a business is phasing out an in-house team, the savings may be less, but other benefits will more than offset the reduction in cost savings.

  • Greater Reach

Sourcing new talent is all about reach. If you’re in a niche sector, recruitment is all about reach and having the right network. Specialists in your industry have access to unique talent sources that they can access to help you:

  1. Fill roles rapidly
  2. Access larger talent pools
  3. Shorten hire time

RPOs can tap into talent within the community, at colleges, through network groups and more. If your HR team is struggling to fill talent on top of their other duties, an RPO can help alleviate the hiring burden.

A professional in recruitment has the connections to fill key roles in your business faster because this is the primary focus of their day-to-day tasks. HR is often stretched too thin to fill positions with the same efficiency.

  • Quality of Hire Improvement

Hiring a quality employee is different than hiring any employee. Recruitment outsource processing works to eliminate low-quality hires who:

  • Lack the skills and expertise for the role
  • Demand a lot of training and education
  • Job hop often and are likely to leave your organization quickly

A lot of time and resources are spent on the hiring process. If a low-quality recruitment leads to your team searching for a new employee in the next six months, it leads to additional expenditure on hiring, training and more.

Quality hires will stay in their positions, reducing the overhead costs of hiring new employees often and having to go through the recruitment process again.

Skilled RPOs also offer:

  • Candidate quality assessment
  • Onboarding assistance
  • Greater Transparency

Reporting sheds light on hiring, key positions that are still lacking adequate fits and helps stakeholders know which key performance indicators are being met. RPOs will provide a high level of KPIs and will often come with a service level agreement that must be met.

  • Access to a Seasoned Specialist

RPOs are professionals who specialize in recruitment and know all of the nuances that go along with it. Hiring an RPO to work on your team will provide access to skilled recruitment specialists that:

  • Offer an extension of your existing team and fit seamlessly in your organization
  • Reduce the time it takes to engage with potential candidates so that you have access to them first
  • Leverage existing networks and connections to help you fill roles in your organization

Specialists speed up the recruitment process because they have processes and procedures in place that may not exist in your current organization.

  • Reduced Time-to-Hire

If you have resources tied up in hiring, it will cost your business money in two key areas:

  1. You’ll need to pay HR or recruiters to continue the hiring process
  2. Lost productivity and business potential because key roles aren’t filled

RPOs have their own internal metrics on how much they’re able to reduce the time-to-hire. Depending on the RPO, they may be able to hire good candidates for your organization 30% – 50% faster than an in-house recruiter.

Drawbacks of Recruitment Process Outsourcing

Recruitment RPO is beneficial for many organizations, but there are a few drawbacks, which may make it an unrealistic option for your company. The main drawbacks of an RPO are:

  • Time to Ramp Up

RPOs need to learn the ins and outs of your business. Ramp-up time does exist, which means the professional will need quite some time before they can assist your company to the best of their ability.

You do need to buy-in for a specific period of time to see results, which means that you need to work with the RPO for months – or more – before you realize their true potential.

  • Bad Cultural Fit

An RPO is very unlikely to work with your team on a daily basis, so they aren’t as intertwined into the office culture as some employees. You always risk a bad cultural fit joining your team, and if the RPO has conflicting views with your head of HR, this can impact your working relationship.

  • Lost Control

Hiring an RPO also means handing over control of key recruitment processes to someone else. Some control is lost in the process, which must be accepted by key stakeholders.

What to Look for In Recruitment Process Outsourcing Companies

Selecting recruitment process outsourcing companies is all about finding the right fit for your business. Consider the following:

  • Expertise: What level of experience does the provider have in your industry? Your industry has unique challenges and recruitment requirements that the professional must consider.
  • Scalability: Flexibility and the opportunity to scale services up and down must be considered. If you expect a massive influx of recruits in the near future, will the RPO be able to meet these demands? Customizable options are best because they can fit into your company’s unique needs.
  • Tech and innovation: Recruitment is being driven by state-of-the-art technology. RPO providers should utilize the latest data analytics and applicant tracking systems to help streamline the recruitment process and reduce time-to-fill positions.
  • Talent quality: Hiring an RPO company is all about finding the right talent to fit into your organization. Quality talent is difficult to find, and you should inquire about talent retention rate, satisfaction scores and the time-to-fill positions.
  • ROI vs Cost: Cost and ROI are important metrics to consider, too. What pricing model does the RPO use? How much does it cost? What will your ROI be? You’ll want to go through the numbers and make sure that recruitment process outsourcing is a good choice for your organization.
  • References: What client references can the RPO service provider offer? You’ll want to read through any case studies that are available, view past performance and browse through reviews online.
  • Cultural fit: Your company’s missions, goals and values should be 100% understood. A company that is a good cultural fit will seamlessly meld into your culture and allow you to recruit key employees with greater success.

You’ll also want to consider the cost model of the company and if it fits into your business’s needs.

Recruitment Process Outsourcing Costs

If you’re considering recruitment process outsourcing, costs will likely be a concern. It’s important to understand how much their services will cost before committing. 

Typically, RPO providers will use one of the following pricing models:  

Flat-Fee

Some RPOs charge a flat fee, or a fixed price. The provider charges this fee regardless of the number of people they hire or the scope of the work.

The flat-fee pricing model offers transparency and predictability, which can be a major benefit for businesses that are budget-conscious. 

Cost-Per-Hire

A popular pricing model for RPO providers is cost-per-hire, or CPH. 

To calculate their fee, providers will divide the total cost of the service by the number of hires during a defined period of time.

Many businesses prefer this pricing model because they pay for services based on their actual hiring needs and results.

Percentage of Salary

A percentage of salary structure is one where an RPO will charge based on the hire’s salary. For example, they may charge 30% on a $100,000 salary, or $30,000. The benefit? It’s in the RPO’s best interest to hire the top-tier talent.

Hybrid Pricing

Hybrid pricing models may or may not be beneficial for you. Under this pricing model, you can expect different fee structures for varying services. For example, you may pay a cost-per-hire fee and then a flat-fee for other services.

Using this structure, you can pay for the services you need and avoid unnecessary costs in other areas.

Fee TypeDescription
Flat-fee PricingThe provider charges a fixed fee for specific services, regardless of the scope or number of hires.
Cost-per-hireThe provider is compensated for each successful hire. 
Percentage of SalaryThe provider charges a percentage of the new hire’s salary as a fee.
Hybrid PricingSome providers combine different pricing models. For example, a flat fee for specific services and cost-per-hire for overall recruitment.

MSP vs RPO

Some people use the terms MSP and RPO interchangeably. However, while similar in nature, these are two different roles. 

First:

  • MSP stands for managed service provider. 
  • MSPs deal with contingent workforces. 

MSPs are third-party companies that manage a company’s entire contingent workforce program, from the recruitment to onboarding, payroll and invoicing. These providers have vendor networks for sourcing candidates, whether they’re temporary, freelance or contract.

MSPs are, essentially, a liaison between clients and vendors. They are there to streamline the management process to reduce expenses and improve efficiency. Typically, they rely on technology platforms in their day-to-day work to manage the process, like applicant tracking systems (ATS) and vendor management systems (VMS).

RPOs, on the other hand, manage internal recruitment processes. They can handle sourcing candidates, conducting interviews, onboarding and more. RPOs have their own networks, and their goals are to:

  • Reduce time-to-hire
  • Reduce recruitment expenses

RPOs can deal with contingent workers, but typically, they focus on permanent positions.

One of the biggest differences between RPOs and MSPs is the candidates they work with. 

  • MSPs generally work with organizations with a larger contingent workforce, like those in logistics, healthcare or manufacturing.
  • RPOs generally focus on permanent hiring. These providers can be used by organizations of all sizes.

Another difference is the level of service. RPOs may only provide certain services. MSPs can manage the entire process.

RPO vs BPO

BPO stands for business process outsourcing. It’s the term used when businesses outsource certain processes to a third party. 

RPO is technically a form of BPO. In this case, employers transfer all or part of their recruitment to a third-party service provider.  

But BPO, in general, involves the outsourcing of non-essential business tasks. The BPO industry can be broken down into three categories:

  • Onshore: The BPO provider operates in the same country as the contracting business.
  • Nearshore: The BPO provider operates in a neighboring country to where the contracting business is located. 
  • Offshore: The BPO provider is located in a country outside of where the contracting company is located.

Typically, BPOs focus on manufacturing or customer service, but you may find providers offering other services as well.

Recruitment RPO providers typically work locally and are focused solely on recruitment.

Recruitment Process Outsourcing In Review

An RPO provider can streamline your hiring process and help save on recruitment costs. These providers will save your business time, so you can focus on more important things. However, it’s important to consider your needs and the costs of hiring an RPO to determine whether this is the right option for your business.

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