According to Staffing Industry Analysts, 50% of companies that implement recruitment process outsourcing (RPO) do so to reduce their overall hiring expenses. A reliable offshore RPO can indeed shrink the cost of hiring high-quality candidates while providing clients with high levels of service, sector expertise, and scale opportunities on par with or superior to onshore resources. This eBook will help break down and quantify what drives this relative cost efficiency, which spans not just lower base salaries for individual recruiters but broad differences in compensation practices, legal obligations, and operating costs.
Below we look at two primary categories of costs that drive the total costs for each of your recruiters and the recruiting activities they perform:
Individual Employee Costs – Wages and Labor Burden
Wages include the base pay and any bonuses or commissions paid to your employee as part of their salary. Base pay and any performance bonuses typically represent approximately 70% of the total labor cost for an employee. The remaining 30%, referred to as the labor burden, includes all other costs that are not part of a recruiter’s salary. Typically, those costs include payroll taxes, retirement benefits, health insurance, dental insurance, facility and real estate expenses, and technology costs. In a cost comparison of onshore recruiters vs offshore recruiters, there are significant cost savings through offshore RPO services.
Program costs are those costs necessary to complete a specified amount of work, whether hiring a defined number of candidates or completing a certain amount of recruiting activities. Offshoring can reduce program costs by easing the management burden and absorbing any attrition expenses.
Management costs are different when offshoring since an onshore manager typically works with an offshore point-of-contact (POC) to manage workloads. This reduces the amount of time invested in hands-on recruiter management compared to managing individual recruiters onshore. Additionally, attrition costs are lower since the offshore partner absorbs any costs related to hiring and onboarding new employees. Looking across our portfolio of clients, we estimate that program costs for an onshore team translates to roughly 15% of the base pay of each team member.
The Cost Difference of Onshore Recruiters vs Offshore Recruiters
Looking at an onshore recruiter who costs $15.00 per hour in base wages and an offshore recruiter with a fully loaded cost of $15.00 per hour, the fully loaded cost of the onshore recruiter is typically 45% higher after accounting for labor burden and program costs.
|Onshore Costs||Offshore Costs|
|Total Hourly Cost||$21.75||$15.00|
|Additional Cost in $ Per Hour for Onshore||$6.75|
|Additional Cost in % Per Hour for Onshore||45%|
|Labor Burden Rate||30%|