Adding Recruitment Process Outsourcing (RPO) services to your portfolio can transform your agency from a traditional recruiter to a strategic partner, helping you scale your business while meeting the diverse needs of your clients.
This guide covers the ins and outs of RPO, from different models and benefits to implementation strategies.
What is Recruitment Process Outsourcing (RPO)?
Recruitment Process Outsourcing (RPO) is a strategic business model in which a recruitment agency manages some or all of the recruitment process for its clients. This typically involves:
- Handle the end-to-end recruiting process
- Creating and executing a recruitment plan
- Take over certain recruiting functions, such as job advertising, candidate sourcing, interviewing, and payroll management
Today, RPO has gone beyond simply supporting basic recruiting processes, with many RPO providers eager to offer more holistic expertise, from talent acquisition advice to employer branding and diversity, equity and inclusion (DEI) efforts.
Comparing RPO and other recruitment business models
There are typically two ways that companies partner with recruitment agencies.
- Continuing or contingency fee contracts: The client pays the recruitment agency a commission for each placement (either upfront or upon successful placement). In both models, the recruitment agency pays the recruiter a fixed commission based on the recruitment commission structure, with or without a base salary.
In both models, the recruitment agency pays the recruiter a fixed fee, with or without a base salary, according to a recruitment commission structure. The corporate hiring manager is engaged and responsible for the entire project, while the agency focuses solely on filling the position.
- RPO-based contracts: The main premise in operating the RPO service delivery model is that the RPO service provider acts as an entity that is essentially part of the client organization. Hiring managers are passive and focused on learning the organizational environment of the candidate, understanding the employer organization, and developing and storing HR policies for future use.
In some cases, agencies set a fixed fee for RPO services and opt for a half retainer, half RPO service model, which allows them to offer comprehensive recruiting services that can be adapted to their clients’ specific needs and goals.
Now, here’s the important question to answer. Why would you need to offer RPO services, especially if you have a contingency model?
The answer is simple: the pay-for-success recruiting model becomes difficult to scale beyond a certain point. Because the model is transaction-based, revenue is directly tied to successful recruiting. This can limit growth once an agency reaches the limits of its client management and recruiter capacity.
Additionally, agencies that operate on a contingency fee basis face significant fluctuations in revenue because their income is entirely dependent on the successful placement of candidates. This unpredictability can make financial planning difficult, especially during periods of low recruiting activity.
Adding RPO-based services can help your agency scale and build diversified revenue streams.
“We moved from temp to RPO because we wanted to have enough consistency to add talent to our team, and the only way to do that is through a contract vehicle where we can sign a one-year contract and add more recruiters to our team.”
Susie GriecoCo-Founder of SG2 Recruiting (Guest Speaker) Elite Recruiter Podcast)
Switching to an RPO model for recruiting, as Suzie’s example proves, has huge benefits as it allows recruitment agencies to focus on strategic HR work – meaning they can better organize and strategize to work in line with the company’s long-term goals, rather than meeting the organization’s short-term staffing requirements.
By leveraging technology to improve processes and recruiting practices, agencies can find quality candidates more efficiently, which improves hiring success rates and strengthens client relationships.
Benefits of Recruitment Process Outsourcing for Agencies
Introducing RPO services into your portfolio can benefit your business in many ways.
- Predictable revenue and workload: It is a long-term partnership, which allows for more efficient resource planning and management within the agency.
- Diversified Revenue Streams: RPO services provide additional revenue streams, generate multiple income streams, and provide a line item of income other than traditional recruitment fees, which can prove more effective when traditional recruitment strategies are less active due to economic downturns.
- Attract bigger clients: To make a better transition, agencies need to position recruiting as a strategic partner, not just a department. This will help them target and attract larger clients who need big solutions in recruiting, improving their agency’s status.
How does outsourcing the recruitment process work?
The RPO process involves outsourcing a company’s recruitment process with the assistance of an external vendor that covers both current and future talent acquisition goals.
The process typically unfolds as follows:
- RPO providers start by thoroughly understanding their client’s business, culture, and recruiting needs, which includes assessing current talent requirements and forecasting future demand.
- They develop a customized hiring strategy aligned with the client’s objectives, which outlines the scope of services, timelines, key performance indicators (KPIs), and the technology stack to be used.
- RPO providers integrate with their clients’ existing HR and recruiting teams. They can set up on-site or work remotely, depending on the client’s preference. RPO providers integrate their technology platform with their clients’ systems to ensure seamless data flow and communication.
- From writing offer letters, communicating with candidates, to handling the necessary negotiations to ensure the offer is accepted, they handle everything in between and more.
- We also support the onboarding process to help new employees integrate well into the company’s operations, including liaising with other departments to agree on where and how workspace and IT will be provided, as well as initial training sessions.
- Continuously monitor recruitment metrics and KPIs.
- The most common payment method is monthly, although some contracts allow you to pay a percentage up front and the rest upon hire.
What are the main types of recruitment process outsourcing?
There are many ways in which RPO services can be customized based on client requirements and bandwidth. Each type of RPO service offers unique benefits and is designed to address the specific challenges that organizations face in their talent acquisition efforts.
End-to-end RPO
This is the most common type of RPO outsourcing, where the RPO vendor takes full responsibility for the entire sourcing process and payroll deadlines for a particular job without the involvement of the client’s HR department.
Not only does this make your company the “sole” source of supply for your clients, it also sets you apart from a traditionally defined recruitment agency.
Also note that this model is the most complex to implement of all RPO models. Setting it up can require initial investments in technology, training, and personnel. Additionally, there is a risk of overstretching your agency’s resources as you take on more responsibilities through RPO services. It’s important to manage growth carefully to maintain quality and client satisfaction.
Project-based RPO
Similar to end-to-end RPO, project-based RPO is somewhat similar but the approach is restricted to a business unit or specific role. It is actually a more short-term collaboration where we can provide recruitment services best suited for a specific project like a product launch or expansion to a new branch.
On-Demand Recruiters
Recruiter on-demand is a more flexible and agile solution to meet your clients’ urgent talent needs. It provides instant access to skilled recruiters on your team that seamlessly integrate with your team.
Whether clients need short-term support or long-term recruiting solutions, ROD services can accommodate any volume or urgency of recruitment demand, and are less expensive than traditional recruitment agencies, giving businesses a variety of ways to find talented employees.
Considering the availability of on-demand recruiting tools, agencies can effectively help their clients to significantly reduce the time it takes to recruit, in addition to the costs incurred from vacant positions, which is a key competitive factor.
Hybrid RPO
This is a partial outsourcing option because although a company hires a vendor RPO to help with recruiting, they still have a fully functioning recruiting department in-house. The strengths of both the agency and the in-house team complement each other, allowing them to learn about their client’s in-house team and speed up time to hire.
What services are covered under RPO?
The most common type of RPO service – end-to-end RPO – includes everything from sourcing to payroll, but you can certainly customize your offering by adding the following services to your stack:
- Job advertisement: You will be responsible for advertising job openings for our clients across various channels to attract the right talent. This will include posting well-crafted job listings and promoting these openings across various job sites, social media platforms and other relevant forums.
- Resume Review: I make extensive use of powerful recruiting AI tools and technologies such as artificial intelligence and machine learning, which can help sort through a large number of resumes and shortlist the best candidates, minimizing the chances of selecting the wrong candidate, thus saving a lot of time and resources for the recruiting group.
- Candidate Identification: Candidate source methods include database searches, social networks, and word of mouth to unearth a list of qualified candidates. Such solutions ensure a continuous inflow of talent, increase the chances of attracting candidates for challenging roles, and help organizations maintain their presence in the talent acquisition field.
- Candidate Interviews: You will also be involved in candidate selection to schedule and conduct first round interviews, meet with hiring managers to review standard interview practices and make selections based on competency and company value criteria.
- Candidate Recruitment: Recruitment refers to the process of identifying, attracting, selecting, and placing suitable candidates on an organization’s payroll. Recruiters draft offer letters, conduct reference checks, and manage the process of candidates becoming employees.
- Payroll Management: In this role, you will be solely responsible for the administrative portion of employee compensation or wages, including payroll matters such as calculations, deductions, tax compliance, and labor legal regulations.
Additionally, we can provide additional support with managing your applicant tracking software, your entire recruiting suite, and ensuring regulatory compliance.
Are you ready to offer recruiting process outsourcing to your clients?
As a recruitment agency, implementing recruitment process outsourcing (RPO) services can significantly enhance your service delivery and position you as a strategic partner to your clients.
By integrating RPO into your business model, you can provide a scalable solution that meets your clients’ complex and changing recruiting needs, allowing them to focus on their core business objectives while managing their recruiting challenges.
Are you already thinking about expanding your service offerings?
