What is Recruitment Process Outsourcing and How Does It Work?

Business is booming and you don’t have the proper time to focus on hiring.

You need to onboard a lot of new hires fast to keep up with seasonal demands. 

Your hiring costs have ballooned without much to show for it. 

If any of these are true, it may be time to outsource your recruiting. We’ll explain how recruitment process outsourcing can help you meet your hiring needs while managing costs and providing a great experience to applicants and new hires alike. 

What is Recruitment Process Outsourcing?

Recruitment process outsourcing, or RPO, is when a third-party service provider takes partial or complete ownership of a company’s recruiting activities. An RPO provider might utilize the company’s existing recruiting staff or provide its own staff and other resources, like technology and workflows. 

RPO gives companies flexibility in hiring and helps them provide a better experience for candidates while offloading most of the administrative and labor-related burdens from the organization.  

RPO is a form of BPO (business process outsourcing), via which nearly any business aspect can be outsourced. Outsourced accounting and HR are two common examples used by many businesses.

How Does RPO Work?

In an RPO arrangement, the provider tackles both day-to-day recruiting tasks and high-level strategy. They handle the full scope of recruiting duties, from developing a staffing plan to sourcing, screening, interviewing, and hiring candidates. They may also be responsible for onboarding new hires and managing aspects of the company’s employer branding. 

An RPO provider’s activities typically occur within an applicant tracking system or ATS. An ATS enables the provider to manage the hiring cycle from start to finish while sharing actions and results with its client. 

All candidates that are sourced and screened by an RPO provider are exclusive to the client. This significantly differs from a traditional staffing company, which often recruits for multiple organizations from the same candidate pool.

When Should I Use Recruitment Process Outsourcing?

There are numerous situations where it might make sense to outsource your recruiting. Here are a few of the most common motivators:

• You’re having trouble hiring efficiently
• Your hiring needs are too much for your internal recruiting staff to handle
• You need to hire for specialized, niche, or hard-to-fill positions
• Your staffing needs fluctuate due to seasonality or other market conditions
• Your industry requires a high level of compliance
• You’re undergoing a period of rapid growth
• You’re struggling to overcome challenges with recruiting technology and data
• You’re having a hard time staying on top of recruiting costs

Benefits of RPO

Recruiting expertise

Working with an RPO provider lets you capitalize on their team’s specialized knowledge, which includes recruiting techniques, technology, and a cultivated talent pool.  

Cost control

RPO partners can be incredibly efficient, allowing you to maximize your recruiting budget while obtaining high-quality results. They can also help you keep costs stable from year to year. 

Speed

With RPO, the time-consuming work of sourcing and interviewing candidates is done for you, freeing up time and labor for business-specific activities. 

Quality 

An RPO provider can increase your hiring accuracy, which not only boosts company performance but helps with employee retention and staff engagement. 

Strategy

Recruitment experts use data to guide their efforts, which can help you make more intelligent decisions about staffing, succession planning, growth activities, and more. 

Risk management

Part of an RPO partner’s job is to stay abreast of the latest rules and regulations for your industry and hiring in general, which takes a big chunk of compliance off your plate. 

Disadvantages of RPO

Culture challenges

While an RPO provider is responsible for a company’s recruiting activities, they aren’t company employees. Thus, they aren’t privy to the day-to-day nuances that make the organization unique. This can make it harder to ensure culture fit with new hires than when you’re using internal recruiters. 

Lack of control

Giving up ownership of your recruiting results is both a blessing and a curse. Some companies struggle with the lack of control. It’s important to select a partner with whom you can communicate easily and have clear expectations in place (more on this below in the section on choosing an RPO provider). 

ROI timeline

Working with an RPO provider is a long-term strategy. It can take time to see meaningful results, which may be frustrating for employers looking for a quick hiring transformation. It typically takes at least a year to get fully into step with a new RPO partner.

What is the Difference Between MSP and RPO?

A managed service provider, or MSP, offers similar services as those provided in RPO, but MSPs deal entirely with non-permanent staff. They find and hire temporary staff, freelancers, contractors, and any other workers who aren’t intended to be long-term, full-time employees of the company. 

MSPs focus primarily on efficiency, helping organizations affordably address short-term hiring needs. RPO focuses on quality, with the ultimate goal of finding the most ideal person to fill each role in a long-term capacity. 

Types of Recruitment Process Outsourcing

Full outsourcing

This is the most straightforward type of RPO. In this arrangement, a provider takes complete control of a company’s sourcing, hiring, and responsibility for the results. This type of solution can be ideal when you need a better solution than handling every single hire yourself but aren’t yet ready to invest in a dedicated internal recruiting staff. 

On-demand

On-demand RPO is great for handling hiring that happens in short bursts. Many companies use it during busy seasonal swings, like during the holidays or tourist seasons. 

Project-based

RPO can be useful for addressing specific one-time staffing needs, like when you need a large amount of one type of talent to launch a new company division, or you’re looking to beef up your workforce in certain skill areas. 

Hybrid

Not sure about totally handing over the reins to someone else? This style of RPO may be for you. Hybrid RPO teams work hand in hand with your in-house staff, tackling recruiting for designated positions or departments while you retain control of others. 

Total talent management

This is an emerging style of outsourcing that combines RPO and MSP. Essentially, a single organization hires every person who does work for your company, including full-time, part-time, temporary, and contract workers. This approach can help prevent your hiring from becoming compartmentalized, which can happen when one agency is handling one type of hiring, and another is handling others. 

Cost of Recruitment Process Outsourcing

The cost of RPO will depend upon the payment structure you agree on with your provider. Here are the typical types of payment structures. 

Per hire

Employers pay an RPO provider an agreed-upon rate for each successful hire. This figure is usually a portion of the employee’s salary. So, if the rate is 10% and the new hire will earn a salary of $70,000, the RPO fee would be $7,000.

Most organizations using RPO prefer this model because it makes for predictable hiring costs. As staffing needs increase or decrease, so do expenses.

Per month

An RPO provider is retained monthly, for a set amount of time, for a monthly fee. While this keeps recruiting costs predictable, it requires the employer to keep close tabs on their partner’s results to ensure they deliver the appropriate ROI. 

Per resource/per slate

In this arrangement, an employer pays per set of candidates offered for a role or series of roles. This type of payment setup isn’t ideal because it isn’t at all tied to the quality of the candidates delivered or their success. 

Per transaction

Employers pay an RPO provider based on each event that takes place, like interviews, onboarding sessions, etc. While this may make sense for employers who only need to hire a handful of employees, it can quickly lead to a disproportionately large bill when you’re hiring for numerous positions.

Related: Tips for Managing Your Recruiting Budget

How to Choose an RPO Provider

When choosing an RPO provider, here are some of the most important qualities to assess.

• Innovation: How does their team stay on the cutting edge in the recruiting world? How do they use data to guide their efforts? Ask questions that will help you gauge these things, as well as how much they understand about the trends and shifts that are currently going on in the market. 
• Proven track record: A reputable RPO provider should easily be able to demonstrate a record of success in your field. Ask for examples of work they’ve done for companies with similar work or similar recruiting needs. 
• Goal alignment: Your chosen RPO partner should be a partner. They should internalize your company mission and make your goals their goals.
• Communication: This one is big. Before you sign a contract, make sure you’re on the same page about how frequently (or infrequently) you’ll hear from them and how involved you’ll be (if at all) in their activities on behalf of your company.  
• Accountability: How will success be measured? Set clear expectations around KPIs and establish a regular cadence for checking in on those metrics. 
• Security: A trustworthy RPO provider should have measures in place to keep your company data and that of your candidates safe.
• Scalability: Finally, the right RPO partner will be able to grow with you, acclimating and adjusting course as your needs and objectives shift over time.