Recruitment Process Outsourcing (RPO) - definition, functions, benefits
RPO - Introduction
RPO services are becoming increasingly popular. I first encountered them in 2018 while managing a staffing agency. We were hiring a recruiter for an American corporation for 20,000 PLN per month – a substantial sum and a fantastic experience at the time.
Before that, I had only heard of RPO, primarily through Alexander Mann Solutions, the first company I was aware of that provided such services on a large scale.
But what exactly is RPO? And why should one consider this service as an alternative to expanding your own team of recruiters or working with a recruitment agency that operates on a success fee basis?
RPO - Definition
I looked into the HR services dictionary of the Polish HR Forum and found a definition for Outsourcing, which forms the foundation of RPO.
Outsourcing is defined as the delegation of certain tasks, functions, or processes to an external entity (the outsourcer) by the contracting entity (the insourcer). The insourcer and the individual actually performing the work are not in any legal relationship. The outsourcer assumes the management function associated with the execution of the given task by the team performing the work.
So here is the definition of RPO:
Recruitment Process Outsourcing (RPO) is a specific form of business process outsourcing where an employer transfers all or part of its recruitment processes to an external service provider. An RPO provider can utilize its own resources or may adopt the company’s staff, technology, methodologies, and reporting. In all instances, RPO significantly differs from providers such as staffing companies and contingent/retained search providers, as it assumes ownership of the design and management of the recruitment process and bears responsibility for the results.
While this may sound similar to the traditional cooperation with a recruitment agency, where an employer outsources the search for candidates, there are numerous differences.
Agency model vs. RPO
So, what exactly distinguishes RPO from the traditional request for candidate search commissioned to a recruitment agency? After all, whenever an employer engages an agency to find candidates, they are outsourcing a part of the recruitment process. While reading online definitions and articles on RPO (often published by recruitment agencies themselves), I noticed that they usually lack a clear explanation of the difference between RPO and traditional cooperation with a recruitment agency.
Traditional cooperation with a recruitment agency involves the agency being tasked with searching for and presenting the employer with suitable candidates for employment. This service is often referred to as search & selection. This form of cooperation is usually settled on an advance payment and a success fee basis (the so-called retainer and success fee). Success is defined as the employer selecting a candidate presented by the agency for employment. This is known as the agency model of cooperation.
In the RPO model, the recruitment agency becomes a significant part of the employer’s recruitment department. The agency, and specifically the recruiter or recruiters within it, take over all or most of the duties associated with the recruitment process for the employer. It is therefore a much broader service than just searching for and presenting candidates.
The agency’s recruiter, acting as part of the RPO service, operates as if they were employed by the employer and usually manages the entire recruitment process. The recruiter within the RPO typically administers the recruitment process, organizes and participates in candidate meetings, collects and provides feedback, advises on decision-making, and communicates directly with decision-makers on the employer’s side.
An employer using the RPO service “hires” a recruiter (one or more) for a certain period of time and uses their services as if they were an employee. There is, of course, no employment relationship or any other direct agreement between the employer and the recruiter. Cooperation is regulated by a contract between the employer and the agency.
The difference between the agency model and the RPO model is therefore clear. This difference also brings numerous benefits (primarily financial) for customers ready for such a service.
How can you tell if the recruiter is actually an employee of the employer or a recruiter hired for the RPO service? The easiest way is to check the recruiter’s LinkedIn profile. On the profile, you can see that the recruiter is employed in recruitment agency X, but their current position is, for example, Recruiter at Y, meaning that company Y hires a recruiter from company X.
In summary, Recruitment Process Outsourcing (RPO) is the outsourcing of recruitment processes to an external company, usually a specialized recruitment agency, for the execution of all or part of a company’s recruitment processes. The parties to such cooperation may individually determine how far the recruitment agency enters the recruitment area, as well as tasks related to recruitment, such as employer branding.
Benefits of the RPO model
To be honest, the list of benefits of the RPO service is extensive. Here is my list, which I could probably still expand (if you come up with something, please let me know):
- No need to create a new position in the employer’s recruitment team. This is unnecessary since the required recruiter will be hired, not employed. Thus, we put the “employment cost” in the invoice.
- No need to create a workstation at the client’s office – the recruiter can also work fully remotely.
- No need to finance work tools. The hired recruiter is provided with a full set of necessary tools by their employer – the recruitment agency. However, there is no problem for them to work on the employer’s tools. Among the key tools, the cost of which can be saved under RPO, it is worth mentioning:
- LinkedIn premium account (the price of the LinkedIn premium account starts from several hundred zlotys, the LinkedIn basic account is free but has very limited functionality);
- the cost of the ATS system.
- No recruiter training is required. Using the services of a recruitment agency, we receive a recruiter trained and specialized in recruiting candidates for specific job positions.
- No need to support the recruiter during their work. This recruiter, if needed, has access to the support of the recruiting agency from which they were borrowed.
- No need to manage recruitment, as the responsibility for this area can be transferred to the recruiter and the supporting agency.
- Access to the recruitment agency’s candidate database.
- Flexibility in setting the duration of the service. The RPO contract parties have complete freedom to determine how long the cooperation should last. For one recruitment? For half a year? Indefinitely until cancellation? There are no limitations here.
- Flexibility to determine the scope of services delegated to the RPO. This scope can be defined by both the stages of the processes or areas of operation (e.g. only acquiring and pre-selecting candidates, conducting a complete recruitment process, tasks related to employer branding, etc.), as well as by defining a list of positions or specializations that the hired recruiter will handle (e.g. IT recruitment, engineering, blue collars).
- A hired recruiter works exclusively for the employer. This is an advantage over the standard cooperation with a recruitment agency, during which the recruiter usually handles many projects for many clients at the same time.
- A beneficial way of settling the service, which usually consists of monthly payments of a “subscription” for hiring a recruiter. There are also mixed models, where a certain part of the agency’s remuneration is settled on a success fee basis.
RPO – For Whom, and How Much Does It Cost?
The list of benefits is quite extensive and encouraging. Therefore, the outsourcing of recruitment processes will be particularly attractive to employers who:
- Have increased recruitment needs.
- Do not want or cannot create more positions in the recruitment team.
A typical example would be an employer who plans to expand their team by several dozen or more people within six months. The employer realizes that hiring so many people in such a short time will exceed the capabilities of their current recruitment team. They have three options:
- Expand the recruitment team, increasing fixed costs and risking the need to eliminate new positions in the recruitment team after the project is completed.
- Outsource the search for candidates to a recruitment company on a retention+success fee basis.
- Outsource the entire recruitment process to an RPO provider.
Out of these three options, the RPO service seems to be the most financially advantageous. This is because the success fees are likely to exceed the subscription related to the RPO. This can be easily calculated, for example, in the case of hiring 20 programmers:
Assuming that the success fee for recruiting one programmer is relatively low, at 30,000 PLN (often fees are much higher), the recruitment of 20 programmers would cost 600,000 PLN.
Let’s assume that a proficient recruiter can hire 2 programmers per month. 20 programmers will be hired in about 10 months. The project is to last 6 months, so we will hire 2 recruiters.
Let’s assume that the monthly subscription fee for RPO service is 30,000 PLN per recruiter. After 6 months, the total recruitment cost would be 360,000 PLN instead of 600,000 PLN.
The numbers speak for themselves. Therefore, if your company’s recruitment needs are growing, and you are considering using the agency’s services, please let us know. As I mentioned at the beginning – I can recommend at least one efficient team of recruiters open to work in both the RPO and agency models.
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