There are many purported benefits to RPO including reducing cost and time per hire, ‘in-sourcing’ expertise by buying in best practice and even attracting a better quality of candidate. It has been estimated that last year the RPO market was worth £5 billion with organisations such as Vodaphone, BAE Systems and Deloitte all having long term RPO contracts.
Despite the grandiose promises of the RPO providers, from a lawyer's perspective, it is extremely rare to find these backed up by meaningful terms and conditions in the RPO contract. This is due in part to intangible benefits such as best practice being difficult to measure and capture in contractual form but mostly this is due to the inadequacies of standard agreements that aim more at the protection of the supplier than representing the aims and aspirations of the customer.
After all, the RPO relationship is governed by the words in the contract and not the marketing materials that make the deal initially seem so attractive.
RPO providers are rarely ever completely independent from recruitment agencies. The customer should ensure that the RPO provider does not favour agencies that are members of its group or are otherwise affiliated with it. It is a common mis-belief that RPO providers offer favourable rates with agencies due to the volume of work referred. In practice, it is often the case that RPO providers calculate rates on a customer by customer basis, often retaining the benefit of preferential rates and not passing these on to every customer.
Recruiting through agencies is costly. Direct recruitment can be encouraged by contracting a year on year target increase in direct recruitment. A successful increase in direct recruitment would serve as a measure of the RPO provider's success in increasing brand awareness. The contract should ensure that the RPO provider focuses adequate resources on direct recruitment, reducing agency fees and thus producing cost savings for the customer.
Contracts frequently fail to fully capture the essence of the negotiated agreement, representing huge gaps in expectation. For example, the customer may have agreed that two or more representatives of the RPO provider will be on site at all times. However, the RPO provider does not believe this includes absences through sickness or holiday so fails to provide replacement personnel, leaving the customer without the resources they thought had been agreed.
The RPO provider is the representative of the customer, charged with guardianship of the brand. The rules by which the RPO provider is to conduct themselves and how the brand is to be taken to market should be clearly set out in the contract.
Outsourcing is not only an outward process but an ‘in-sourcing’ of expertise. Expertise should be retained by the customer after the RPO contract has ceased. For example, will the customer have access to the contacts databases built up over the duration of the RPO contract? Will this information be delivered to the customer in a usable format at agreement end, and will the customer have access to any new technologies introduced by the RPO provider and the Intellectual property rights to continue using these after the RPO provider has left?
The contract needs to contain suitable exit management provisions to ensure the smooth transition from one RPO provider to another or to bring these services back in-house.
RPO can have many benefits, but as we have seen very briefly in this article, it is vital for the customer that these benefits are translated into meaningful contractual provisions. Unfortunately, when done properly, this gives rise to a complex contract and one for which especially from the customer’s perspective, the supplier's standard precedent is rarely, if ever, suitable.
Sanjay Pritam is partner and Peter Lumley-Savile is associate solicitor at Reynolds Porter Chamberlain
