Define Recruitment Process Outsourcing
Recruitment Process Outsourcing (RPO) is a hiring model used by an employer to outsource the recruitment process. RPO services are performed by external third-party service providers who are coined as RPO providers.
To state that an RPO provider is similar to any workforce/staffing company would be an understatement. Because RPO providers differ profoundly in terms of displaying ownership over the recruitment process. Basically, the RPO providers act as an extended recruitment team that works for your company but are employed under an external service provider.
Recruitment Process Outsourcing Pricing
RPO pricing refers to the monetary transaction made between the employer and the RPO provider to recruit employees per the in-house requirement.
In an ideal world, the RPO charges would vary significantly based on the static recruitment costs besides the variety of additional fees involved to manage the employees. The bandwidth of RPO pricing is relatively vast as there is no median payscale to the RPO services provided. This is because, RPOs are designed to accommodate both small-scale and large-scale recruitment needs.
RPO Pricing models
RPO pricing varies based on the predetermined cost models that depict the services provided. This can be revised based on the term of the RPO contract and the overall number of employees to be hired.
Below enlisted are the most common RPO cost models promoted by the leading RPO providers in the industry. To better understand these RPO pricing examples, let me explain with an analogy.
Imagine yourself as an employer who is on the prowl for new talent for your company. Below are the various RPO cost models you’ll have to have cognizance of before outsourcing your recruitment activity.
Cost Per Hire Model
Per this model, you and the RPO provider mutually agree to a standard cost payable for each successful hire. This cost is generally depicted as a percentage of the annual compensation of an employee. For instance, if an employee is onboarded at an annual compensation of $60,000 and the RPO provider is entitled to receive a 10%; then, you are obliged to pay a recruitment fee of about $6,000 to the RPO provider for that particular resource.
RPO cost per hire model is mutually beneficial. As in, the RPO rates are not affected based on the industry, position, or geographical location of the hire. On the other hand, the amount payable for each hire by the employer is not standard and would vary respectively. This means hiring a staff level candidate would involve relatively affordable RPO fee structure when compared to filling a position to represent the upper management.
Pro benefit: As an employer, you will be paying the RPO provider only if they’re successful in filling the open position at your firm. This model is eagerly sought after during short-terms RPO partnerships like hiring a potential team to accommodate a new project.
Also, have you checked out Multiplier’s pricing per employee? Although we don’t help with sourcing talent, you can use our EOR solution to onboard and employ foreign talent starting from $40/employee into your company, if you have already completed the hiring.
Management fee model
As the name suggests, management fee refers to the cost paid to the RPO provider for managing the hiring requirements of a firm. This will be a recurring fee paid by the employer on a monthly basis to the RPO provider for their consistent support with the recruitment process. Per the agreement, the RPO pricing of this model increases steadily with an increase in the number of new hires.
In addition to the recruitment process, the RPO provider bound under this model would also help with employee retention. This RPO model is usually deployed during a hiring freeze or when the firm experiences low hiring volume. Therefore, this model is appropriate only for long-term recruitment needs of the employer.
Management fee and Cost per-hire model
This hybrid RPO pricing model includes a monthly fee for managing the employees in addition to the percentage of cost agreed upon per the cost-per-hire model. The management fee is rendered to effectively manage the recruitment efforts while an additional RPO cost is provided post onboarding a new hire.
This RPO cost model can be beneficial if you are running a large corporation as you might require constant assistance with employee retention besides onboarding new talent. It is also ideal for long-term recruitment outsourcing which includes end-to-end RPO and other talent solutions.
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Cost-per-slate model
This is referred to as the least favourite model of all employers and the most favourite for RPO providers.
You must’ve guessed why by now!
This model charges a standard fee for each set of candidates who are proposed as an ideal fit for the open positions at your firm. Basically, the RPO provider assists with sourcing the applicants and shortlisting the most promising candidates and further reviewing their profiles.
Let me shed more light on this model.
Let’s consider that you have signed a contract with an RPO provider stating a cost-per-slate model. When you have an open position at your firm, the RPO provider would initially source suitable candidates through talent exchange portals, external job boards and other social platforms. Followed by this, their portfolios are screened to scrutinize only the qualified candidates. This list is further provided to you, the employer, to go ahead with the interview process. This measure reduces the time incurred on interviewing numerous candidates.
Therefore, this RPO pricing model tends to add more value to the recruitment process besides reducing time through this cost-per-slate model. The RPO pricing is subjective to the list of suitable candidates provided by the RPO provider to the employer.
Cost-per-transaction
This RPO pricing model works on project-specific rates. As in, the overall cost is determined based on the time incurred towards completing a project or process.
For instance, when you outsource the interview process for all applicants, the RPO provider would charge a standard fee on a per-candidate basis (i.e. pay for each candidate being interviewed by the RPO provider). This would fall under a process-based costing model.
Now let us consider that, you have instructed your RPO provider to hire 20 new resources to work on an adhoc project. In this case, the RPO provider would charge you a standalone fee, post recruiting the entire project team. This would be categorized as a project-based costing model.
That being said, the cost-per-transaction model is ideal only for short-term hiring initiatives.
RPO Pricing versus In-house recruitment Pricing
In today’s scenario, recruiters face a constant dilemma with choosing between an RPO pricing and fostering an in-house recruitment team. We would like to break this down for you as a step by step process:
If you are tilting more towards fostering an in-house recruiting team, work on your financial structure and determine the budget available to setup and manage the recruitment needs of this team. Ensure to calculate the compensation of the recruiters besides the buffer costs incurred on training and development, travel, software licensing and other miscellaneous expenses.
Since fostering an in-house recruitment team proves to be an expensive measure, most employers have developed a distinct crush for RPO pricing models. However, apart from cost saving, RPO providers are also eagerly sought after for their ability to introduce industry experts to hire the right talent. Additional benefits that could be leveraged by collaborating with an RPO provider includes,
- Corporate Branding
- Access to advanced hiring technologies
- Labour savings and
- Improving the quality of new hires.
Furthermore, if you are an employer looking forward to hiring talent from overseas, you should be equipped to encounter legal uncertainties. The bare minimum would be to set up a local entity which complies with the local state and federal laws in order to employ an international talent. Revisit these pain points and map out the suitable pricing model for your firm both economically and legally based on your requirements.
Still weighing your options? Make the right choice by joining hands with Multiplier! We can lead your way through significant cost-savings on international hiring by managing your workforce diligently. Hit us up to know more about how we can ease your global recruitment process!
Frequently Asked Questions
Q. What is RPO cost?
RPO pricing refers to the monetary transaction made between the employer and the RPO provider to recruit employees per the in-house requirement.
Q. How much does recruitment process outsourcing cost?
RPO pricing varies based on the predetermined cost models that depict the services provided. This can be revised based on the term of the RPO contract and the overall number of employees to be hired.
Q. What are the different types of RPO?
- Cost Per Hire Model
- Management fee model
- Management fee and Cost per-hire model
- Cost-per-slate model
- Cost-per-transaction
