What is outsourcing and what does it mean for companies?

In the context of workforce management, outsourcing involves a company hiring a third-party talent management partner to perform recruitment and HR activity that is traditionally delivered in-house. Over recent decades, outsourcing — whether in the form of Recruitment Process Outsourcing (RPO), Managed Service Programs (MSP) or Statement of Work (SoW) — has become increasingly attractive. This is especially true for businesses that are growing and consequently need seasonal or limited time/project boosts in staffing levels, specialist skills, expertise and technology that are either difficult to obtain or expensive.

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Why do businesses choose to outsource recruitment?

The most obvious reason why businesses choose to outsource their recruitment is that it leads to cost savings. According to Brandon Gaille, 46% of companies outsource to reduce operating costs.

The talent market today is also more competitive than ever. With global skills shortages, new ways of working, and technological disruption, attracting and retaining the right skillsets a business needs to grow is fraught with difficulty. But through purchasing an MSP, RPO or SoW solution, a business can lean on the expertise of their staffing partner who can utilise their world-class capabilities to attract the best candidates — even for difficult to fill positions.

See how businesses are benefiting from outsourcing here

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How does outsourcing recruitment work?

Outsourcing, specifically related to outsourced recruitment, changes the way businesses attract talent. Traditionally, when a business needs new staff, it uses its internal HR or talent acquisition teams, or quite often, hiring managers contact a traditional staffing recruitment agency, to find people for the job in hand.

Outsourcing recruitment under an MSP, RPO or SoW solution is similar to recruitment, except a workforce solution provider tackles every aspect of the recruitment process, and often at scale.

Whereas a traditional recruitment company works on a role-by-role basis, a workforce solution provider over time develops talent pools that are ideally aligned with a business’ needs. And under an outsourced recruitment model, people doing the same job are always paid at the same rate, increasing pay consistency throughout a business. Similarly staffing agencies engaged by the outsourced recruitment provider are each paid the same rate, saving the client company money and increasing agency fee rate consistency throughout the business.

Moreover, an end-to-end outsourcing solution takes on other beneficial purposes. From designing the onboarding process to using data analytics to predict future hiring needs, an outsourced workforce solution enables hiring to be strategic, improves a business’ employer brand, and ultimately gets the best talent at speed whenever a business needs it.

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The benefits of outsourcing

Though cost savings are often the primary driver for business looking to outsource recruitment, there are other major advantages of buying a staffing solution from a workforce solution provider.

For global businesses, one of the main advantages of outsourcing staffing is compliance. Two workers doing the same job in two different countries will likely be held to different employment laws. When you expand this situation across thousands of workers in numerous territories, the situation can become complex. With an MSP, RPO or SoW solution, however, a business can outsource this complexity knowing full-well that every worker will be compliant — whether they’re a software development professional in Seattle or a project management expert in London.

Unsure what RPO is? Find out here

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Outsourcing recruitment benefits existing teams

Cost savings and improved efficiency are, of course, the two main drivers for acquiring workforce solutions. But another aspect often gets overlooked. By outsourcing recruitment, HR teams are set free to work on other important tasks.

Often, these projects can lead to greater creativity, happier teams, and reduced attrition, not only within HR functions but company-wide. Though attracting the right talent is the most difficult aspects of modern business, retaining talent is equally important.

Outsourced workforce solutions tackle both attraction and retention head-on, but HR teams with greater time resource can also engage the remaining workforce (who are not engaged by the workforce solution provider) in new and innovative ways. For a business, a workforce solution is a genuine win-win.

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Guide to workforce solutions terminology

As with many industries, the workforce solutions industry uses a lot of terminologies that can confuse even experienced contingent workforce and resourcing professionals. RPO, SoW, MSP, VMS — it can get complicated. To clear up any confusion, we’ve clarified what the top terms most commonly used across the workforce solutions ecosystem actually mean.

Take a look at our terminology guide

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