Recruitment Process Outsourcing (RPO) Market

Market Overview

The global recruitment process outsourcing (RPO) market size was valued at USD 8.82 billion in 2022. It is estimated to reach USD 36.79 billion by 2031, growing at a CAGR of 17.2% during the forecast period (2023–2031).

Recruitment Process Outsourcing (RPO) refers to an employer delegating the task of locating potential employees to a third-party service provider. With little assistance from human resources (HR) employees, the RPO method is intended to deliver qualified candidates to a potential employer. An RPO provider enters into a contract with a business wanting to fill unfilled positions, delegating to it the duty of finding, screening, and evaluating qualified candidates.

Outsourcing of business processes gave rise to RPO. Most customers are medium- and large-sized businesses and RPO is frequently preferred for employers looking to hire people in specialized or technical fields. RPO can contribute diverse viewpoints, talents, and attention to workforce planning in a competitive labor market where it might be challenging to attract potential new hires. At the same time, it frees up HR workers to concentrate on internal activities and other business objectives.

Highlights

• Enterprise-based RPO dominates the type segment
• Offsite dominates the service segment
• BFSI dominates the end-user segment
• North America is the highest shareholder in the global market

Market Dynamics

Global Recruitment Process Outsourcing (RPO) Market Drivers

Growing Need for an Efficient, Centralized, and Standard Recruiting Process

Recruiting the right candidate is a tedious job requiring much energy and time. The organization must provide a dedicated team or resource for the hiring intent. Internal recruiting can work to a certain extent, but it limits the candidate's choices and may create conflicts among colleagues. Consequently, organizations seek a standardized recruiting solution to streamline the hiring process. Organizations are looking towards RPO to necessitate innovative, proactive, and flexible workforce management strategies to get the best out of talent acquisition.

RPO providers work closely with the internal HR team of the organization to improve the efficiencies of quality of hires, speed of delivery, and cost containment. Beyond the recruiting, the RPO provider understands the strategic initiative of the client and business outcomes. It seeks and delivers an effective sourcing and hiring process and enhances employment branding to align with the organization's culture. As a result, RPO is establishing itself as an integral part of business operations and involves proactively in the decision-making process, in turn driving market growth.

Lack of Basic Employment Metrics

The Recruitment Process Outsourcing Association (RPOA) states that many employers lack basic employment metrics. Companies are forward-thinking in implementing new recruiting technologies and aligning their employee value proposition with their social strategy. However, HR managers and TA leaders sometimes are unclear on basic recruitment metrics such as sourcing rate quality, throughput ratios, satisfactory internal ratings, and net promoter scores.

Additionally, RPO providers help the TA and HR leaders to focus on recruiting KPIs. RPO provider governs the engagement with the client and focuses on the outcome. Recruiting firms follow a solid recruiting methodology that allows scoping with target outcomes. RPO vendors work with employers to provide effective results by keeping transparency and engagement high. The vendors also help the client to gain strategic value in the employer market. As a result, the employer opts for an outsourced recruitment activity to put KPI measurements and risk-mitigating plans in hiring activity, increasing the demand for RPO services.

Global Recruitment Process Outsourcing (RPO) Market Restraint

Invasion of Unconventional Players in the RPO Ecosystem

Recently, companies operating outside the ecosystem invaded the RPO space. Earlier, Xerox's provision of outplacement, training, and HR services, IBM's HR services, HR consulting, training, and testing, and Google's roll-out of Google for jobs were some examples that gave the fierce competition to the traditional players. Moreover, in September 2019, Amazon launched AWS IQ, a marketplace for third-party cloud experts for on-demand projects. It enables clients to find, collaborate, and hire an AWS-certified workforce for their projects.

Similarly, in October 2019, Uber launched its industrial recruiting app in Chicago and Miami for Just-in-Time staffing. Besides, they partnered with TrueBlue company, the U.S.-based staffing, recruiting, and workforce management company. These new market entrants have deep wallets and a disruptive nature that might severely threaten traditional players, hampering the market growth.

Global Recruitment Process Outsourcing (RPO) Market Opportunities

Rising Demand for RPO due to its Cost-Efficiency

In today's complex economic environment, organizations in all sectors and industries are stressing cost efficiency. The global pandemic brought a wave of uncertainty among many business operations and changed the dynamics of how companies manage and reevaluate their recruitment process and associated cost. The process generates costs at every step of the recruitment process, from resume sourcing and screening to conducting interviews, selection, and negotiating job offers. The process needs a lot of money and time for the organizations.

In order to bring substantial savings in money and time, organizations across industries turn towards outsourcing the recruitment process. It is observed that companies are experiencing nearly 30%-40% cost savings after outsourcing the recruitment process. Moreover, RPO improves the talent acquisition results and enhances the productivity of HR staff, subsequently increasing the ROI. The cost per hire priced by the RPO vendor is comparatively less than employing recruiters directly. In many instances, the RPO model is more cost-effective than paying fees to permanent vendors, creating market expansion opportunities.

Regional Analysis

North America Dominates the Global Market

Based on region, the global recruitment process outsourcing (RPO) market is bifurcated into North America, Europe, Asia-Pacific, South America, and the Middle East and Africa.

North America is the most significant global recruitment process outsourcing (RPO) market shareholder and is estimated to exhibit a CAGR of 15.61% over the forecast period. North America includes the U.S. and Canada. The U.S. economy is returning to normalcy, characterized by an increasing employment rate and demand for higher education credentials and upskilling across new fields. Moreover, the healthcare and manufacturing sectors are generating new employment opportunities across the country, with healthcare as one of the fastest-growing sectors. In addition, government initiatives and favorable conditions have helped pull the U.S. manufacturing sector back on track, resulting in new jobs. According to the U.S. Bureau of Labor Statistics (BLS), employment in the U.S. is projected to grow from 8.4 million jobs to 169.4 million from 2018 to 2028.

Canada's four provinces, Ontario, Alberta, British Columbia, and Quebec, contribute significantly to the North America RPO market. These provinces mostly outsource their hiring needs, generating more than 55% of revenue in Canada. Mexico showed optimistic growth over the last few years owing to the increased inflow of migrants from other South American countries. In addition, employers in Mexico are planning to increase their staffing levels and maintain a stable hiring process, which has resulted in generating promising growth opportunities for service providers.

In Asia-Pacific, the number of RPO service providers is growing rapidly. The expansion is driven by increased expenditures made by multinational organizations across various sectors, as these businesses are constantly looking for ways to stay competitive in the market. Several recruiting outsourcing transactions have been observed due to the region's expanding labor markets, including those in China and India. In addition, Asia-Pacific is envisaged to experience a significant increase throughout the anticipated period due to the region's growing number of small, medium, and large-scale businesses. The rise of multinational firms is also anticipated to fuel the regional market. India's economy is predicted to develop significantly over the next seven years due to rapid expansion in industries, including manufacturing, healthcare, and information technology.

In addition, many small and medium-sized logistics businesses lack in-house HR departments in Asia-Pacific. One person handles every HR-related task, including hiring, payroll, and administrative work. These businesses frequently lack digital resources, so they conduct business the old-fashioned way. Owing to the time, money, and resources required to change the supply chain management system, some businesses choose not to do so. As a result, the logistics industry did not initially benefit from the benefits provided by RPO services.

Segmental Analysis

The global recruitment process outsourcing (RPO) market is bifurcated into type, indication, organization size, and end-user.

Based on type, the global recruitment process outsourcing (RPO) market is bifurcated into on-demand, function-based, and enterprise-based RPOs. 

The enterprise-based RPO segment owns the highest market share and is predicted to exhibit a CAGR of 17.5% over the forecast period. Enterprise engagement RPO, or full-scale or end-to-end recruitment process outsourcing, is a complete outsourced recruitment solution generally provided for multi-year contracts. It is a versatile solution that includes services such as candidate sourcing, screening, scheduling interviews, onboarding, monitoring, and conducting interviews. It also reduces the burden of talent pooling, allowing businesses to concentrate on their primary business activities. In the developed economies of the U.S. and the U.K., the demand for a full-scale RPO model for hiring against targeted competencies is high in Fortune 500 companies.

Based on service, the global recruitment process outsourcing (RPO) market is divided into onsite and offsite services. 

The offsite service segment is the most significant contributor to the market and is estimated to exhibit a CAGR of 16.4% over the forecast period. Offsite recruitment outsourcing provides a centralized approach to client hiring for various locations. The recruitment firms work with clients to provide the best talent globally. In this process, recruitment firms follow the best practices and personalized approaches to drive optimal results and encourage more diverse hiring. Countries have different employment laws and hiring cultures, which must be considered in recruitment. In addition, RPO firms play a crucial role in the international hiring process because of their sound knowledge of the region and its culture and expertise in labor laws and standards. These firms follow proper record-keeping, compliance regulations, and auditable processes and methods. As a result, multinational companies are embracing RPO services for their global recruitment programs.

Based on organization size, the global recruitment process outsourcing (RPO) market is bifurcated into large enterprises and small and medium enterprises. 

The large enterprise segment dominates the global market and is predicted to exhibit a CAGR of 16.7% during the forecast period. The large enterprise segment captured a significant revenue share of the recruitment process outsourcing market. There is an enormous demand for outsourced recruitment services in large enterprises across the manufacturing, financial services, and healthcare sectors. Most of this demand comes from Greenfield projects, wherein companies have limitations in establishing full-fledged HR departments and are looking for staffing partners that can offer end-to-end recruitment solutions. Moreover, large firms have a higher budget and require sophisticated services, including recruitment and other HR functions, 360-degree interviewing, recruitment audits, and applications.

Based on end-user, the global recruitment process outsourcing (RPO) market is segmented into BFSI, healthcare, manufacturing, IT and telecom, and education. 

The BFSI segment is the largest contributor to the market and is projected to exhibit a CAGR of 18.3% over the forecast period. The financial sector is evolving rapidly owing to digital disruptions, changing operating models, and new firms entering the market. Owing to the challenges associated with hiring and developing people with the required skills and knowledge base, financial institutes prioritize recruitment process outsourcing for recruiting top talent. The sector comprises insurance companies, commercial banks, co-operatives, asset management firms, venture capitalists, and other small financial bodies. In addition, the growth of these entities translates into substantial economic activities, leading to direct or indirect job creation. The stable economic growth and rising per capita income of developing countries also drive the demand for financial services. As a result, credit, insurance, and investment penetration are rising among the lower-income group, signifying the sector's strong growth.

Recent Developments

• March 2023- Recruiter.com Group, Inc. (NASDAQ: RCRT) (NASDAQ: RCRTW), a leading supplier of on-demand recruiting solutions, partnered with Job Mobz, a prominent recruitment process outsourcing ("RPO") firm, to provide enterprise OnDemand solutions and services. Job Mobz, selected by HRO as a leading RPO for 2022, has a track record of delivering effective and innovative solutions that strategically meet clients' ever-changing requirements.
• April 2023- Lockstep Technology Group and Naviga Recruiting announced an RPO partnership to accelerate hiring and growth plans. The Atlanta, Georgia-based Lockstep Technology Group has recently acquired two complementary businesses: BridgeTek Solutions of Piedmont, South Carolina, and Transformyx of Baton Rouge, Louisiana. Lockstep has identified a compelling need to outsource its talent acquisition systems and recruiting processes as it manages the typical transformational changes that follow acquisitions.