Understanding the cost of a recruitment process outsourcing (RPO) solution is crucial for organizations considering this strategic partnership. While the benefits of RPO are well-known, RPO pricing models can often be complex and challenging to navigate; many RPO providers prefer to keep their pricing hidden from competitors and are unlikely to make their pricing structures known publicly. More significantly, how RPO providers determine the cost of an engagement depends on factors specific to each client's scope and unique talent objectives.
Factors That Influence RPO Pricing
Type of RPO Solution Required
A full-service solution like Enterprise RPO will cost more than a Project RPO or Recruitment on Demand solution.
Length and Urgency of the RPO Engagement
Long-term engagements will typically cost more than short-term ones. Expect to see higher costs for high-volume hiring projects with urgent timelines.
Positions, Skillsets, and Regions Hired for
Hiring for in-demand, hard-to-fill, and senior-level roles, as well as within competitive markets and geographic regions, typically incurs higher costs for the RPO client
Need for Added Services
These include consultative solutions such as employer brand and employer value proposition (EVP) refinements or diversity, equity, and inclusion (DE&I) advisory.
Standard RPO Pricing Models
RPO pricing models are typically customized to each client's project scope. However, there are some standard models to be aware of.
Monthly Management Fee Only
Under this model, the RPO provider charges a recurring monthly management fee that covers the cost of the dedicated RPO team, their, operational expenses, and their profit margin. The monthly management fee ensures that the RPO resources remain available to the client organization, even during periods of low hiring volume. This cost structure allows organizations to forecast exactly how much they will spend on an RPO solution. Moreover, clients are billed a standard rate regardless of the number of candidates closed, meaning this cost model is not directly linked to the RPO team's performance.
Reduced Monthly Management Fee + Success Fee
This hybrid model combines a monthly management fee with an additional success fee for each successful placement. The monthly management fee here is lower compared to the monthly management fee-only model, and the success fee is calculated as a percentage of each hire’s annual base salary. This cost model is favored by most RPO companies, offering clients a dedicated RPO team that delivers continuous recruiting efforts at a reduced monthly management rate. The cost is directly tied to the RPO team's ability to deliver candidates.
Reduced Monthly Management Fee + Flat Rate Fee
In this hybrid cost model, the RPO provider charges a reduced monthly management fee along with a fixed fee for each successful placement. The reduced monthly management fee and flat rate fee model is suitable for companies with high-volume hiring projects where all roles being hired for are similar, within the same industry, or fall within a standard salary range. It offers consistent and simplified budgeting for the client.
Success Fee Only
The success fee-only model is a low-risk pricing option for RPO clients, where payment is made only when a successful placement is made. However, the absence of a monthly management fee means that sustaining the RPO program during periods of low hiring may be challenging, posing a higher risk for the RPO provider. Consequently, expect to see higher success fees in this pricing model compared to the monthly management fee and success fee hybrid models. Additionally, service consistency may vary due to the absence of a monthly management fee, potentially resulting in a weaker partnership between the client and the RPO vendor.
What to Consider When Reviewing an RPO Pricing Proposal
Here are a few additional considerations for employers to keep in mind when discussing pricing options with a potential RPO partner.
RPO Technology Stack
When reviewing an RPO pricing proposal, companies must carefully assess the technology offerings provided by the vendor. Does the proposed pricing include access to the RPO provider's recruitment technology tools? If not, what are the associated costs for utilizing their tech stack?
Internal Mobility, Referrals, and Pre-Identified Talent
Even after partnering with an RPO provider, it may be necessary to fill an open role with an existing employee or through employee referrals; sometimes, hiring managers may directly identify potential candidates. Organizations that frequently source candidates this way should inquire about the pricing structure associated with hiring pre-identified candidates or those sourced through internal mobility and employee referrals.
Implementation and Reporting Fees
Some RPO vendors may charge a one-time implementation fee during the initial setup, which may come as a surprise to clients. It is important to clarify if the cost of implementation is included in the initial program pricing proposal. If not, employers should request a detailed breakdown of implementation resource costs.
When initiating an RPO provider search, employers must conduct a comprehensive assessment of in-house recruitment costs, identify goals, and compare them with the potential impact and cost of engaging an RPO provider. This preparation will lead to accurate cost projections and increased efficiency in the partnership.
When you are ready, begin your RPO provider search.
About LevelUP HCS
LevelUP Human Capital Solutions was founded in 2012 with the mission to modernize talent acquisition. We provide customized, sustainable, and DE&I-forward solutions to help businesses attract, engage, and retain top talent. Utilizing agency search techniques, innovative technology, and enhanced brand management, we pride ourselves on delivering exceptional results tailored to the unique needs of our clients.
Since our first client engagement, we have grown to provide talent solutions across the globe and support some of the best-known companies within technology, ad technology, fin tech, wellness, financial services, management consulting, production, data and analytics, retail, biotechnology, and healthcare.
