Structuring a staffing company can be more challenging then ever due to the “great resignation”, Covid, a scarcity of good talent and the associated high cost. There are options to consider in adding staff as explained below.
Here are the going annual rates for IT contract recruiter last year (2020), before burden:
· New York City the average cost is $87, +/- $23 to $33K, and someone with 10+ years of experience, the top quartile would cost $163K
· Austin, TX. would be some 65K, +/- $16-$25K, and a person with 10+ years of experience or more the top quartile would cost one $123K
· Jefferson, MO. its approx. $48K, +/- $13-$18K and a recruiter with over 10 years of experience the top quartile would cost one $90K
And the market is highly competitive, to find and retain someone is hard to do these days and the turnover can be higher than in previous years due the shortage of quality personnel. Then there is the question for the RPO as to: management, controls, communications, dedication, confidentiality, etc., which must be assured, and economics alone are not used to make a decision.
For comparison one can use a recruitment process offshoring operation (RPO). This is mainly done using India, with a lesser number of recruiting operations in The Philippines, Eastern Europe, and many other countries around the world. One can operate through a third part who serves many staffing clients or set up a captive RPO which one owns to serve their need alone.
· This service ranges from sources (who find and do preliminary screening of candidates)
· To contract recruiters ( who are responsible for recruiting and match candidates to job orders)
· To higher level talent who often work as a team on deliverables (this is called consulting or projects).
The cost of these functions can vary widely. For a third-party IT contract RPO this can range from as low as $8K to $30K/year billed monthly. The savings for an IT recruiter, depending on their function can be sizable, but is typically anywhere from 2.5:1 to 9:1, with a mean of around 4 or 5:1. For an internal RPO the direct cost savings can be up to twice this amount, with overhead (rent, accounting, outside services, management, and other indirect cost) factored in this savings and depend on size and economies of scale. And productivity must of course be factored in as well. A typical increase in productivity is 25% for a W2 internal recruiter vs. an RPO but this can vary widely. However, at a 25% rate the economics would go from 4 or 5:1 to 3-3¾:1 using a third party.
At the other end of the spectrum is LI recruiters. Here are last year’s annual numbers for an RPO, before burden:
· New York City the average cost is $62, +/- $10 to $16K and someone with 10+ years of experience or more the top quartile would cost one $80K
· Austin, TX. would be some 47K, +/- $8-$12K, and a person with 10+ years of experience or more the top quartile would cost one $68K
· Jefferson, MO. its approx. $34K, +/- $5-$9K and a recruiter with over 10 years of experience the top quartile would cost one $49K
The relative savings for a LI temp RPO would not be as great but would still be less expensive than a domestic recruiter, before factoring in their productivity. Again, this value can be very depending on the specifics.
In summary, the advantages for an RPO for domestic IT contract recruiters has declined, but they still exist for LI temps. This of course depends upon the specific RPO, their cost and relative productivity vs. domestics W2 recruiters.
