In this article, we describe everything you need to know about RPO (Recruitment Process Outsourcing), from models and services to cost and operational benefits!
What is Recruitment Process Outsourcing?
RPO is a form of outsourcing whereby one organisation contracts with a specialist company to handle all or parts of its talent acquisition and hiring process.
As with most outsourcing, the general idea is for the outsourcing partner to completely take ownership of the process, optimise it, and leverage its experience and efficiencies of scale to deliver cost savings and better, faster outcomes.
Unlike a standard recruitment agency, which is basically incentivised just to fill roles as and when the client needs people, an RPO solutions partner is a strategic partner who designs and executes the recruitment process based on the long-term objectives of the client company.
Just like other types of Business Process Outsourcing and HR Outsourcing (of which RPO is a sub-set), the relationship between client and partner can take many forms, depending on the size and needs of the client company. Here we take a deep dive into the various types of RPO, look at the differences between RPO and traditional recruitment agencies, and analyse some of the pros and cons of outsourcing the recruitment process.
Range of RPO services
RPO services can involve the outsourcing of the entire sequence of events that form the recruitment process, or just some of them. Whatever the level of outsourcing, the partner must completely own the outsourced functions and deliver them at least as well as – but preferably a whole lot better than – the internal people and teams who would otherwise be performing those roles.
The services can include many talent acquisition and HR functions, including:
- Talent search and advertising
- Candidate management and communication (with both active and passive candidates)
- Document gathering and processing
- Pre-employment screening
- Application processing and scoring
- Management of the interview process
- Compliance and risk management
- Recruitment analytics and insights
- Employer brand consultation and candidate experience
- Vendor and agency partnering
- Workforce planning
While some specialise in only certain areas, all RPO providers are experts in talent acquisition. That is their core competency. They know and employ the latest recruitment methods, metrics, and technologies at scale.
Whether the entire recruitment process is outsourced, or just some parts of it, the outsourced RPO services can be delivered in a variety of different ways. The model employed will depend on exactly what is outsourced, as well as the size, needs and location of the client company and the types of roles for which the RPO is recruiting. Let’s take a look at some of the options.
End-to-end RPO outsourcing
Organisations generally have three options when it comes to recruitment. The first is to build a dedicated recruitment team in-house which owns and manages the whole process, no matter for which department or division the hiring is being done. The second option is to have a distributed recruitment function, where heads of departments and team managers do their own recruitment, perhaps with support from relevant people at HR (or maybe HR does most of the recruitment with input from departments). In either case, traditional recruitment agencies can be a part of the effort, or it can all be done internally.
The final option is to outsource the whole thing from start to finish. In this instance, when a department finds itself in need of staff the managers, talk to the outsourced recruitment partner. It is then the outsourced team’s job to work with internal stakeholders to define the job specs, source candidates, interview, check references, make offers, and onboard new people.
The crucial point is that the outsourced team acts as a permanent recruitment function, so it is much more embedded in the client company than, say, a traditional agency would be or an RPO that only delivers one or two siloed services. This is the case whether the outsourcer’s staff are based on-site or not. Their role is to take the company’s business strategy and growth predictions, and build a recruitment and talent acquisition plan that ensures the business always has both the headcount and skills needed.
In this model the company keeps some, or even most, of the recruitment process in-house but will engage with one or more providers for specialist services that it cannot easily perform in-house. This could be any part of the recruitment process but is likely to be a part that is non-core and somewhat specialist.
For example, while reference checks are important, it’s quite a tedious, step-by-step process to apply for them, collect them, and then verify them as part of the candidate assessment process. Other admin-related functions such as work permit checking, candidate screening, or candidate communications can also be wholly or partly outsourced while keeping the main recruitment activities – candidate sourcing, interviewing, and onboarding for example – in-house.
Some companies do not need to recruit either constantly or on a large scale. However, if the company experiences large seasonal peaks, or has need to staff up when spinning up new projects, it can choose to employ an RPO to manage the recruitment process during those times.
Traditionally, companies that need to staff up quickly for peaks have used recruitment or labour hire agencies to employ temporary and casual workers. The benefits are that these agencies often have reliable people that they have relationship with on their books, which means they can fill those temporary vacancies quickly and then move the people on to another client when the peak is over or the project completed.
An RPO should be able to meet that need too and can of course work with traditional agencies to get candidates through the door more quickly if necessary.
Similar to working on a project basis, some companies build relationships with RPOs or even keep them on retainer. This brings all the benefit of having a dedicated recruitment function, albeit one that is outsourced, but which can also be turned on and off at will. With this model, the RPO keeps a team of people briefed on the client’s needs so they can swing into action when called upon at a moment’s notice. This model is useful for filling recruitment backlogs, during peak seasons, or when launching new products and services. The RPO might not always be called on to provide a full end-to-end service, it could involve as little as having outsourced recruiters join the internal team for a period of time.
Some RPOs specialise in recruiting for certain types of roles only, for example sales, tech, or C-suite people. When companies have a need to fill those roles, they turn to the RPO they have retained for that purpose. Usually, the RPO will be chosen based on its experience recruiting for specific niches.
Other organisations might choose to retain a recruitment partner for particular countries or regions, perhaps where there is no executive or HR presence.
RPO vs recruitment agencies
There are several major differences between partnering with an RPO and working with traditional recruitment agencies. The first, and probably most important distinction, is in the word used to describe the relationship with an RPO: “partner”. An RPO is a genuine business partner, embedded into the client organisation and seeking constantly to optimise outcomes for the client. As such, an RPO takes complete ownership of the processes that are outsourced to it. In the case of an end-to-end arrangement, this will include the design and management of the entire recruitment process, as well as taking responsibility for the results.
This difference in approach translates into the way the business relationship is structured, how the partner is remunerated, and subsequently what they are incentivised to deliver. A recruitment agency is normally paid a fixed fee per hire, which can be as much as 10% to 25% of the new employee’s starting salary for permanent staff depending on seniority. On the other hand, an RPO is usually paid a monthly fee for managing the recruitment function, possibly with additional bonuses linked to performance and the meeting of certain KPIs. There could even be penalty clauses if the contracted SLA (Service Level Agreement) is not maintained. Overall, the cost of using an RPO could be 50% to 75% less than traditional agencies, though it does depend on the volume, frequency, and type of hires.
A recruitment agency never presents itself to the market as anything other than what it is. While they advertise vacancies on behalf of their clients, they usually do this as themselves. It means that there is no guarantee of a cultural fit with your organisation, and you do not have complete control over your own brand for recruitment advertising as ads either use the agency’s brand or are co-branded. If you do your own recruiting, or an RPO does it for you, the candidate experience from the job ad to the onboarding becomes a chance to demonstrate that your company is an employer of choice and a great place to work. The process with a recruitment agency, on the other hand, is more transactional as ultimately what the agency is trying to do is sell you a placement.
All of this is not to say that traditional recruitment agencies don’t have their place. For organisations that need to cope with large, seasonal spikes a roster of agencies in their sector is likely the only way to fill the vacancies, particularly if they are temp or casual roles. Those that recruit only once or twice a year and for only a handful of roles do not need a dedicated talent acquisition function, whether it is in-house or outsourced, so relationships with recruitment agencies can be invaluable in reaching the widest possible talent pool. As with everything in business, it’s about deploying the right resource to tackle the right challenge, and traditional agencies are very often the right way to go for many organisations.
Cost benefits of RPO
When partnering with an RPO, the client is looking to capitalise on the provider’s experience and expertise, access their network and resources, take advantage of efficiencies of scale, and access improved outcomes at lower cost than they could achieve by carrying out the same activity in-house. The cost benefit is therefore one of the most important ones.
As we have already seen, RPO costs versus using traditional recruitment agencies can be considerably lower. With fewer vendors to pay, clients can save on agency fees as they are not paying per outcome but for the end-to-end recruitment service provided. The cost per hire, particularly for companies that hire large numbers of people – like contact centre operators or retailers – can be much lower with an RPO than paying traditional agency fees on each new hire, plus a conversion fee to take them on full-time. One reason for this is that an RPO can fill multiple different roles at the same time using the same hiring processes and resources, meaning the entire process can be optimised.
An RPO will usually be held to a Service Level Agreement which will cover key metrics including time to hire, cost per hire, candidate satisfaction, and attrition rate.
When it comes to remuneration of the RPO there are several different commercial models that can be put in place. These include:
- Management Fee: The client pays a flat fee per month, usually linked to the number of expected hires. Long-term RPO relationships, where the end-to-end recruitment process is outsourced, are usually based on variations of this model.
- Cost per Hire: In this model the client pays a fee for each new hire, or each candidate offered a position. This model is often a good fit when the RPO is engaged on a project basis or only provides some of the services in the recruitment process. Sometimes a combination of a management fee and a reduced fee per hire can be used, particularly where the volume of hires needed per month cannot be easily predicted.
- Cost per Candidate: This is another model that is more often used when outsourcing is done on a project basis or service-by-service basis. In this case, the RPO is paid to deliver a certain number of screened and qualified candidates and the internal hiring team, or relevant department managers, complete the hiring and onboarding process themselves. The RPO’s function is talent discovery and engagement.
- Cost per Service: When an RPO is engaged on a service-by-service basis these can be charged either by transaction, at an hourly rate, or for each process run.
Operational benefits of RPO
Organisations that have an internal hiring function are able to anticipate their needs and match their recruitment activities to their business strategy and growth plan. When most of the hiring is done department by department, or by the HR team who have other priorities, or by external recruitment agencies, taking this longer-term, more strategic view of the company’s hiring needs is very difficult as nobody really has a top-down, 360-degrees picture of the whole organisation.
Rather than reacting to hiring needs or shortfalls, an RPO that is genuinely embedded in its client’s business can collaborate with all departments and divisions to plan well ahead. This means that job descriptions can be crafted that perfectly reflect the role and express the company’s culture; care can be taken to build and nurture a database of great candidates; relationships can be cultivated with a network of third parties such as industry bodies, government agencies, and local education establishments all of which can be a source of candidates.
When a partner has the luxury of time to plan recruitment and carry it out carefully, candidate quality soars. Other than salary and benefits offered, the best predictors of candidate quality are time to specify a role and plan a campaign before starting to recruit; the quality of database of past candidates available to the hiring team; how wide the team is able to cast its net geographically and demographically; and finally the level of detail and precision the hiring team is able to go into during the screening and interview process – the more stages there are in that process, and the more demanding they are of candidates, the more the very best are given the chance to rise to the top.
At the same time, using an RPO which works for multiple other clients has the potential to amplify those benefits multiple times. With their breadth of experience, RPOs can deliver clients entirely new sources of candidates via their extensive networks. For the same reasons, time to hire great candidates can also be much shorter as the RPO can get people interested in the role and in the door for interviews much more quickly because they are not starting from scratch.
Finally, post recruitment campaign activity can be just as important as preparation or the interview process. An RPO, just like an internal talent acquisition team, will take time to analyse the results of each campaign and the overall hiring activities. In-depth reporting over time can tease out insight into the hiring process which leads to ongoing optimisation of the whole process.
While Recruitment Process Outsourcers can be based, at least some of the time, on a client’s premises, this does not have to be the case. As long as there is a good communication channel between the RPO and internal stakeholders the recruiters can be based anywhere. As counter intuitive as it may seem, most if not all of the above benefits can also be accessed with an RPO that is based in another country.
The offshore RPO model works particularly well when just parts of the recruitment process are outsourced. For example, more routine tasks like communication with candidates, scheduling interviews, conducting remote screenings, gathering and chasing up paperwork, and collecting and processing applications.
Whatever type of organisation you are there is likely an RPO solution that fits. RPOs come in all shapes and sizes today and cover many different niches so there are plenty of players for smaller and medium sized enterprises which do not necessarily have their own dedicated in-house recruitment functions. Traditional recruitment agencies still have their place, of course, and they serve their purpose extremely well in many industries. As always when it comes to business partners and vendors, it’s about selecting the right one for specific needs.