RPO Pricing Models
RPO pricing models and comparison
WHAT'S THE COST?
One common question that arises when clients are deciding whether to leverage a recruitment process outsourcing partner is: how much does an RPO cost? However, there’s no one-size-fits-all answer to the question. Many RPO providers keep their pricing hidden from their competitors and will not make their pricing structures known publicly. But, more significantly, RPO providers determine the cost of the specific solutions depending on factors specific to each project and their unique goals. Some of the factors include:
The type of RPO solution required
Typically, a full-service solution like end-to-end RPO has a higher value than a project RPO.
The length and urgency of the RPO solution
Long-term contracts typically has a better ROI for all parties and one can expect to see higher costs for high-volume hiring projects with urgent deadlines, especially if there is a shortage of candidates in the geographical area where the client operates.
The positions and skillsets that are being hired for
In-demand, hard-to-fill, and senior-level roles will most likely result in higher costs.
The need for added services
These include consultative solutions such as employer branding efforts and candidate marketing.
WHAT YOU SHOULD CONSIDER IN PROCUREMENT
With that said, almost all cases require a pre-study to create profitable pricing models for both parties. This article is meant to provide an overview of some of the standard pricing models and terminology used by RPO providers to help you gain a better picture of how different RPO solutions are priced.
Monthly Management Fee Only
With this model, the RPO provider charges a set management fee each month, covering the cost of the assigned recruitment and marketing team plus calculated profit. This payment set up is used to maintain the RPO resources fully dedicated to your business, even during potential periods of low recruitment needs volume, which ultimately provides a baseline for the RPO team to perform continuous recruiting efforts throughout the partnership.
One of the benefits of this pricing structure is that it allows you to forecast exact spend on your RPO solution. However, the monthly management fee is usually somewhat higher with this model than in hybrid models (as described below). You should also consider that you’re billed a standard rate regardless of how many candidates are actually recruited, which means this pricing model has no direct alignment to the RPO team’s performance.
Reduced Monthly Management Fee plus Success Fee (hybrid)
This pricing model consists of a set management fee for each month plus a success fee for each successful recruitment made. Usually, the monthly management fee is lower than in a pricing model that only has a monthly management fee.
Success Fee Calculation
Usually, the success fee is calculated as a percentage or multiple of each hire’s monthly salary. If the RPO solution includes hiring for several different positions, the success fees will commonly vary depending on role based on how challenging each role is to recruit for.
This pricing model is usually favoured as it offers the client a dedicated RPO team that continuously perform recruiting efforts, but at a lower monthly management fee. Furthermore, the price is directly linked to the RPO team’s performance.
Reduced Monthly Management Fee plus Flat Rate Fee (hybrid)
In this hybrid pricing model, the RPO provider charges a monthly reduced management fee plus a fixed fee for each successful recruited candidate.
This pricing model is commonly used for clients who have high-volume hiring needs where all roles being recruited for are the same with a standard salary range. This offers consistent and simplified budgeting for the client.
Success Fee Only
Success-fee-only pricing models are the low-risk option for RPO clients, who only pays for successful recruitments. However, the lack of a monthly management fee also means that the marketing and recruitment efforts can be hard to sustain during low season, making it high-risk for the RPO provider. Therefore, you can expect higher success fees with this model than in the pricing models which include a monthly management fee. Furthermore, keeping consistency in the candidate flow will be challenging which will result in a weaker partnership due to longer lead time for each recruitment.
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