Advantages of RPO

Initial RPO programs typically consisted of companies purchasing lists of potential candidates from RPO vendors. This "search/research" function, as it was called, generated names of competitors' employees for a company and served to augment the pool of potential candidates from which that company could hire. Over time, as business in general embraced the concept of outsourcing more and more, RPO gained favor among Human Resource management: not only did RPO reduce overhead costs from their budgets but it also helped improve the company's competitive advantage in the labor market.

As labor markets became more and more competitive, RPO became more of an acceptable option. Furthermore, through the advent in the 1980's and 1990's of human resources outsourcing (HRO) companies that began taking on the processes associated with benefits, taxes, and payroll, companies began recognizing that recruiting--a significant cost of HR--should also be considered for outsourcing. In the early 2000's more companies began considering the outsourcing of recruitment for major portions of their recruiting need.

RPO's promoters claim that the solution offers improvement in quality, cost, service and speed. RPO providers claim that economies of scale enables them to offer recruitment processes at lower cost while economies of scope allow them to operate as high-quality, specialists. Economies of scale and scope are said to arise from a larger staff of recruiters, databases of candidate resumes, and investment in recruitment tools and networks. RPO solutions are also claimed to change fixed investment costs into variable costs that vary with fluctuation in recruitment activity. Companies may pay by transaction rather than by staff member, thus avoiding under-utilization or forcing costly layoffs of recruitment staff when activity is low.

There have been fundamental changes in the US labor market that serve to reinforce the use of RPO as well. The labor market has become increasingly dynamic: workers today change employers more often than in previous generations. De-regulated labor markets have also created a shift towards contract and part-time labor and shorter work tenures. These trends increase recruitment activity and may encourage the use of RPO.[citation needed] It should also be noted that even in slower economic times or higher unemployment, RPO is still considered by companies to assist in an increasing need to screen through a larger candidate pool.