Recruitment agency vs RPO: What is better for hiring?

A 2023 report called ‘Staffing and Recruitment Market Trends and Size 2031’ stated that the recruitment industry is worth $757.56 billion and is expected to rise to $2,031.34 billion by 2031 at a 13.1 percent compound annual growth rate (CAGR). This is why there are now companies whose sole job is to make recruitment as smooth as possible. 

It is here that we are first introduced to the concepts of recruitment agencies and recruitment process outsourcing(RPO). While both these entities work in the recruitment industry, their work is very different. 

It is important for a company to know which of the two services is best suited to its needs. In some situations, the company could deploy the services of both recruitment agencies and RPO. 

What is a recruitment agency 

As the name suggests, the recruitment agency acts as an intermediary between the candidates and the company. Organizations often need to fill a role quickly, and they rely on recruitment agencies to do so. These agencies always have a plethora of candidates in their pipeline, and as soon as they receive a request for a specific role, they provide the suitable candidate. 

So, the recruitment agency is more of an emergency measure when the company needs to fill a specific role in a short time. Most of the time, the roles are assigned on a temporary basis. The company may later convert this position into full-time if they are satisfied with the employee’s performance. Some of the top recruitment agencies across the world are Robert Half, Korn Ferry, Stanton & Chase, ManpowerGroup, and Adecco.

Also Read: Effective strategy for improving slow hiring at workplace

Advantages of recruitment agency 

Companies can access a large talent pool

One of the best pros of going to a recruitment agency is that companies can access a large talent pool. Recruitment agencies always have hundreds of CVs for the same role, allowing companies to pick and choose the most suitable candidate for their job posting. Access to a large talent pool will always ensure that companies are getting the pick from the best candidates out there.

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Saves time

Hiring from a recruitment agency also ensures that companies can save a lot of time. Since recruitment agencies always have several candidates in their pipeline, they can always join the company on short notice, allowing the company to fill the role as quickly as possible. This ensures that the company’s productivity is less affected.

Reduce hiring costs 

Hiring from recruitment agencies also helps companies save costs and manpower that would have been spent on the recruitment process.  In addition, recruitment agencies get paid per-hire, so companies only need to pay for the number of employees they are hiring. Most importantly, hiring from a recruitment agency also reduces the chances of having a bad hire, which costs an employee six to nine months of an employee’s salary.

Also Read: What is the Pareto Principle and why is it important ?

Improved candidate quality 

Hiring from recruitment agencies also ensures that companies get candidates of good quality. A recruitment agency regularly vets candidates, creating a pipeline of talent covering a wide array of jobs and qualifications such as age, years of experience, and cultural fit. This allows the company to have the luxury of choosing the most suitable candidate, and that too on short notice.

Disadvantages of recruitment agency 

Cost for smaller companies 

While recruitment agencies make perfect sense for bigger companies to fill a role on short notice, smaller and midsize companies do not have the same luxury due to the cost involved with each hire. Recruitment agencies also charge a fee, which could include a percentage of the candidate’s annual salary, making it an unfeasible option for companies with lesser financial resources.

Also Read: Dunning-Kruger effect: Definition, causes and how to counter it

Variable quality of service 

Since recruitment agencies cater their services to a wide range of companies and roles, the quality of service can differ for different companies. In addition, most recruitment agencies also get paid by hire, which incentivizes them to fill the roles as quickly as possible. This might lead to a decrease in the quality of candidates who eventually get hired. 

Misrepresentation of roles 

In their bid to fill roles, companies can also oversell the roles advertised for job seekers. This creates a false sense of roles and responsibilities in the minds of job seekers. Agencies can also downplay the challenges that might come with the role to make the job opening more attractive. 

This is also detrimental to the company, which is then faced with having a candidate who was not aware of their roles and responsibilities and may not perform to their expectations.

Also Read: Availability Heuristic: Causes, Merits, Demerits and how it affects interview

Recruitment Process Outsourcing (RPO)

As opposed to a recruitment agency, a Recruitment Process Outsourcing (RPO) takes over the entire or some parts of the recruitment process on behalf of an organization. An RPO works with your company internally to ensure that they understand the company inside and out. This helps them understand the company’s culture and thus hire candidates tailored to fit the workplace environment.

Companies hire an RPO to enhance efficiency, improve candidate quality, and reduce hiring costs. However, having an RPO does not always mean that a company does not have recruiters. In some cases, an RPO is like an extension of the hiring team, acting as a consultant and helping in end-to-end solutions for some parts of the hiring process.

Also Read: Hiring Success Framework: Key Strategies for Effective Recruitment

Advantages of Recruitment Process Outsourcing (RPO)

Cost efficiency 

While recruitment agencies are good at helping fill roles quickly, they are not the way to go when it comes to regular hiring. This is because hiring in bulk from a hiring agency can increase the cost massively. A great way to reduce hiring costs is simple: decrease the number of bad hires, attrition rate, and cost of turnover. This can only be done if the companies have a robust hiring policy, for which RPO is a great asset.

Scalability and Flexibility

Another advantage of using RPO is that companies can scale up or down their hiring speed depending on the situation. For example, if the company suddenly wants to hire more people for a specific project, it can ask for RPO to scale up its hiring process. Another advantage of RPOs is that they can manage hiring across various countries while providing services to multinational organizations.

Also Read: Charthops Approach: Enhance Candidate Experience in Hiring

Access to expertise 

Using RPO, companies also get insights into the market with the latest trends, research, and market compensation. This allows the company to continuously fine-tune its hiring process and make it as perfect as possible. This access to expertise also comes useful when the company is hiring for a new or specialized role for which talent is hard to find.

Compliance and Risk Management

For a multinational corporation, hiring is not only a technical challenge but also a legal one. Different nations have different labor laws, data protection regulations, and industry-specific compliance standards, and thus, RPO can help companies navigate these legalities with their expertise. They can also perform background checks and vet employees on behalf of the organization.

Also Read: Inclusive Language in Hiring: Strategies for a Fairer Workplace

Disadvantages of Recruitment Process Outsourcing (RPO)

Loss of Control

The biggest demerit for a company employing the services of RPO is that it reduces their control on the hiring process. If the RPO is not working efficiently, it will be impossible for the organization to know. In addition, a bad RPO could also not be able to understand the organization’s culture, values, or specific hiring needs, which also increases the chances of a bad hire.

Also Read: What is Job Analysis? A Guide to Effective Hiring and Recruitment

High Initial Investment

Before using RPO, a company also has to invest a large amount in system integration, transition, and training. The RPO staff also needs time to fully understand the company’s culture and work environment, which will help them identify candidates with the skills and character required for the job. However, most companies may not have the financial resources to execute this investment.

In the end, it depends on different parameters such as workforce size, company aim, and recruitment strategies, which may affect whether an RPO or a recruitment agency is required.

However, for companies that do not want either of these two services, there are other services available. These platforms harness the power of Artificial Intelligence to make the recruitment process robust, swifter, and more accurate.

This is where we present to you BarRaiser, a state-of-the-art AI-based interview assistant that will take the quality of your hiring to the next level. With BarRaiser, recruiters can create a detailed interview plan for candidates. The interviewer can give specific instructions to our AI bot to create an interview, such as:

• The questions for the interview 
• The number of rounds for the interview 
• The duration of the interview and its specific sub-parts 
• The number of parts that the interview must be divided into and their durations 
• Must have questions 
• The number of experience required for the job posting 
• Must have skills
• Additional Skills 

Using these instructions, our tool will create a Structured interview format to ensure an unbiased candidate selection process.

After this, our Ai interview copilot assists the interviewer by giving them specific instructions. For example, if the interview exceeds the time limit, the AI bot will alert the recruiter to speed up the process. We are also committed to making our process as unbiased as possible. This is why our AI transcribes and records every interview and immediately raises an alert if the recruiter uses language that might be considered discriminatory to the candidate. 

After the interview, the AI asks for a detailed review of the candidate from the interviewer. We believe that our tool is an assistant and not the decision maker, so it formulates answers only after receiving instructions from the interviewer. While this is happening, the AI is also creating another report that measures the recruiter’s effectiveness and their performance. This report acts as a check and balance to ensure accountability for every stakeholder involved in the recruitment process.

Using BarRaiser, we guarantee Quality hiring that will bolster Diversity and inclusion. BarRaiser is the best AI Interview platform, featuring Structured interviews and tools to ensure quality hiring while eliminating recruitment bias. With BarRaiser’s support, you’ll be well-equipped to build a strong team of sales associates who will drive sales and deliver exceptional customer service.