Deciding what type of recruitment process to invest in is crucial for every company and organization.
There are many factors to consider such as the total cost of the recruitment process, your company’s specific needs, the time-to-fill, etc. When considering these matters, remember that it’s not just about the current situation of your company but also the long-term value that recruitment brings to you.
In this guide, we compare in-house recruiting and recruitment process outsourcing (RPO) to help you make an informed decision.
Learning more about In-house recruitment
Companies and organizations with in-house recruitment only rely on their internal team for recruiting. Their own human resource department is responsible for finding, shortlisting and conducting the interview for the candidates.
The HR department could also be responsible for other tasks related to the well-being and life cycle of all the employees such as:
- Talent management
- Employee payroll and other compensation
- Incentives and other benefits
- Legal compliance
- Workplace safety
Understanding Recruitment Process Outsource (RPO)
On the other hand, recruitment process outsourcing or RPO means that a company or organization hires an external provider to do the recruitment tasks for them. It simply means to “outsource” the recruiting service from another company or organization.
The role of an RPO provider is a more strategic approach to recruitment. They tailor their recruitment services based on the specific needs of their client and is usually a long term partnership, one of the main goals is to make sure improvement on the recruitment process of their clients is achieved.
Things you need to know about RPO pricing models
RPO providers offer different pricing models to suit various organizational needs, and understanding these models is crucial for making an informed decision. Here are some of the most common models seen in the market today:
- Cost per hire model
By the word itself, “cost per hire” simply means that the RPO provider will charge a fee for every successful hire they make for the client. This payment is a fixed price for every candidate that will become an employee. It’s a popular choice for organizations that want a clear understanding of their recruitment costs and wish to tie RPO expenses directly to their hiring outcomes.
- Management Fee Model
The Management Fee Model involves paying the RPO provider a monthly or quarterly fee for the services they provide. This fee typically covers the entire recruitment process, from sourcing candidates to onboarding. It allows for greater flexibility in terms of how the recruitment process is managed.
With this model, clients pay for the expertise, technology, and resources of the RPO provider, not just for the number of hires. This can be advantageous for organizations that value the ongoing support and expertise of their RPO partner. It also simplifies budgeting, as costs are consistent over time.
However, some organizations might find it less transparent than the Cost Per Hire Model, as it might be challenging to track the direct correlation between the fee paid and the number of hires.
- Management Fee and Cost Per Hire Model
This model combines elements of both the Cost Per Hire and Management Fee models. Organizations pay a management fee for the ongoing services provided by the RPO partner and an additional cost for each hire made.
This model offers the advantages of both transparency and ongoing support. It allows organizations to predict their costs with the management fee while also maintaining an incentive for the RPO provider to make efficient, quality hires.
The Management Fee and Cost Per Hire Model are suitable for organizations that want a balance between cost predictability and aligning their RPO partner’s interests with their own.
Differences and Similarities of In-House Recruitment and RPO
Both In-house Recruitment and RPO play crucial roles for every company. While they share the common goal of finding and hiring the best talent, there are significant differences and notable similarities between these two approaches.
To make this comparison better, we list the differences and similarities between in-house recruitment and RPO.
Differences of In-house Recruitment and RPO:
Ownership and Control
When a company or organization does their recruitment in-house through human resources and talent acquisition, they have full ownership and control over the whole process.
While on RPO, both the external provider and the client share the control of the process.
In-house recruitment typically involves fixed costs such as salaries, benefits, and overhead. The organization incurs these costs regardless of the number of hires made (cost per hire payment model).
RPO often uses variable or scalable cost models, where organizations pay for the services they use. The cost can be more directly tied to the number of hires made.
Also read: How to save big on your hiring costs
Expertise and Resources
In-house HR or Talent Acquisition teams are generally focused solely on the hiring needs of their organization. The expertise and resources are dedicated to that specific company.
RPO providers specialize in recruitment and often serve multiple clients, bringing in-depth industry knowledge and a broader talent network.
Similarities of In-house Recruitment and RPO
Hiring the Right Talent
Both in-house recruitment and RPO share the common goal of finding and attracting the right talent to support the organization’s growth and success.
Compliance and Legal Requirements
Both in-house and RPO recruiters must adhere to legal and compliance standards when sourcing, evaluating, and hiring candidates.
Maintaining a strong employer brand and reputation is important for attracting top talent, regardless of whether recruitment is handled in-house or through RPO.
Cost Comparison: In-house Recruiters vs. Recruitment Process Outsourcing
Below is a list of the most common cost factors you must consider when choosing between In-house recruiters and RPO:
Establishing an in-house recruitment team means hiring dedicated staff, setting up HR departments, and investing in software, job boards, and other resources. The initial setup cost can be significant for the company because every employee has their own salary and compensation packages.
On the other hand, RPO providers already have the infrastructure in place. While there might be setup costs involved in customizing their services, these are often lower compared to in-house recruitment because RPO providers have their own team of experts ready to get the job done.
The ongoing operational costs of maintaining an in-house recruitment team include salaries, benefits, training, and overhead. This can increase yearly depending on their contract which makes it more expensive in the long run.
With RPO, you pay for the services you use, whether its cost per hire, management fee or both. This can result in more flexibility and scalability, allowing you to control your costs based on your hiring needs.
Quality of Candidates
Although this factor could change depending on the situation of every company, in an in-house recruitment setup the quality of candidates depends on the expertise and experience of your internal recruiters, which can be inconsistent.
While compared to RPO providers who specialize in recruiting, they often have access to a larger talent pool and can use data-driven strategies to find the best candidates.
In-house recruiters may take longer to fill positions due to their workload and internal processes because they could be also responsible for other areas of the company.
RPO providers are often more efficient, reducing time-to-fill and helping you acquire talent more quickly.