Three RPO Pricing Structures to be Aware of for Negotiations

The most important thing you can do when reviewing pricing and negotiating with an RPO services provider is to remember that you are trying to align the price that you pay with the results that you hope to achieve.

Surprisingly many organizations forget this and end up disappointed in the long-run. For example, charging a lower cost-per-hire while clearly desirable fall apart if a provider cannot keep up with the hiring volumes required, or if retention rates materially go down due to where the provider is finding the talent.

That said, here are the three most common pricing structures. Many successful RPO providers combine these three pricing structures into favorable arrangements for both sides.

Fixed Fee: Typically this is a set payment made monthly, or quarterly

Pros: 

  • Simple budgeting
  • Enables consistency of service

Cons:

  • Difficult to scale up
  • Difficult to scale down

Transactional: A success-based fee is paid for each hire.

Pros:

  • Scales with volume easily as no extra cost required upfront.
  • Easy to conceptualize payment model

Cons:

  • Misaligned incentive.
  • Hard to sustain in times of low volume.

Performance-based: This is where a provider receives a portion of the amount saved or generated. Usually tied to key KPI’s.

Pros:

  • Easy incorporation into Fixed Fee or Transactional pricing.
  • Aligns rewards with objectives.

Cons:

  • A 100% performance model can be difficult to calculate and leads to surprises in pricing for both sides.