Working out the cost of recruitment process outsourcing

Historically, the pricing for recruitment process outsourcing (RPO) contracts tended to be worked out on a per-transaction basis, also known as “pay per hire”. Where a supplier is sourcing a large volume of staff for generic, easy-to-fill roles, this model can work well.

Many deals now tend to consist of a mixture of transactional pricing and costs based on other metrics, for example, employee retention or payment for additional services, such as candidate testing. In some cases, suppliers charge a basic management fee and add the transactional costs on top.

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Additionally, some organisations are now looking at gain-sharing with their RPO provider. This is where the customer agrees to share a percentage of savings made as a result of outsourcing aspects of recruitment with their outsourcing partner.

However, it is important that both sides agree on how to define savings: is it against historic spend? Is it on a per-transaction basis? This definition, as well as clear indications of how and when these dividends will be paid out, should be spelled out in the contract to avoid confusion.