One of the most common questions, if not the most common question, is how much does an RPO solution cost. It's a fair question, since many potential RPO buyers want a solution that is cheaper than their current in-house recruiting costs, or are looking for a solution that will reduce in-house costs. But the short answer is that it depends. There isn't a flat industry-based fee for specific RPO services, and there isn't a price range for small businesses or large enterprises. How much an RPO solution costs will depend on your company's specific needs and goals as well as your RPO provider.
However, RPO providers aren't charging different prices for different customers simply because they can, or because they want to squeeze more money out of certain clients. Part of the reason why prices depend on the provider is that providers employ various cost models, models that depend on the services provided and the length of the contract. Below are five common RPO cost models used by RPO providers:
- Management Fee Model (typically monthly) - A fee is paid to the RPO provider for working on an agreed-upon number of positions. The fee may change depending on the agreement or may have escalation factors if the number of hires increases over a period of time. The cost model is associated with enterprise RPO services and some emerging RPO services, such as white label RPO.
- Cost Per Hire Model - A fee is paid for each candidate who is successfully brought through the program and hired (or other action such as offered a position) by the customer. The cost-per-hire model may be used for short-term project RPO, where the solution is based on accomplishing certain results or the solution is only needed for a few months. This model is also a good fit for point-of-service RPO, where a specific recruiting function (like filling the candidate pipeline) is outsourced to the provider.
- Management Fee Plus Cost Per Hire - This is a combination of the above two. This combines the consistent recruiting effort under the management fee, with payments for the success (hires) of the program. This is another cost model that's appropriate for enterprise RPO and point-of-service RPO.
- Cost Per Slate - This is a sourcing model where the RPO provider charges a fee for a set number of sourced, screened and qualified candidates for each open position. From there, the candidates are provided to the internal recruiters for continuation of the recruiting and hiring processes. Cost per slate is another cost model that's well-suited for short-term project RPO solutions and point-of-service RPO.
- Cost Per Transaction - A fee is charged for a specific process to be completed by the RPO provider, such as initial screening or reference checks. Buyers opting for on-demand RPO services or even consulting RPO services may be charged per transaction, whether it's an hourly rate or for each process or successful candidate.
The only RPO service that isn't covered with these cost models is co-sourcing, which engages multiple RPO providers for one solution. Co-sourcing could utilize any one of these cost models, or could use a customized cost model that suits every provider involved.
Comparing Internal and RPO Costs
Of course, the RPO cost models don't mean anything if they don't improve your company's recruiting costs. However, comparing costs is much more than looking at what your company's recruiting budget versus the price of outsourcing to an RPO provider. When calculating your recruiting costs, the calculations also need to include resources needed for onboarding and data entry as well as the office space and utilities.
But, your company also needs to consider the increased focus your recruiting staff will gain by outsourcing some or all of your recruiting functions to an RPO providers. To determine those benefits, it's important to ask the following questions:
- Do you have dedicated resources or are some functions spread among generalists?
- Do you hold your internal recruiters to Service Level Agreements (SLA’s) or performance metrics?
- Do you get specific reporting and tracking related to internal recruiting?
- Do recruiters specialize in specific areas or have technical knowledge?
- Who owns your internal recruiting function?
Essentially, comparing the costs between RPO and your internal recruiting is much more than looking at the dollar amounts and monetary savings. It also means looking at the value of allowing specialists to take on certain functions so your current staff can focus on fewer tasks and better own their roles in the recruiting process.