Freelance recruiter versus recruitment process outsourcing: Choosing the best fit for your organization

As hiring market volatility, changing workforce dynamics, and ‘do more with less’ becomes the reality for organizations globally, talent acquisition teams are adapting to working with new, more flexible talent models — and that includes from within. Freelance recruiters and contractors can be a helpful way to scale team capacity up or down as hiring needs change, either taking on aspects of the entire end-to-end recruitment process, or jumping in for a more specialist, fractional role to address gaps within the team.

This gives internal talent acquisition teams more flexibility with their dollar and their internal resourcing. So far, so good. But if you’re sensing there’s a ‘but’ coming, you’d be right on the money. Let’s talk about risk.

While outsourcing to a contractor as part of your talent acquisition model may seem like an attractive proposition to solve ongoing resource and budget squeezes, organizations may struggle to see long-term value from this relationship.

From a legal perspective, freelancers work on a project-based or part-time basis, meaning their remit is generally focused on near-term challenges — such as being an extra pair of hands to review inbound applications, or sourcing a candidate for an urgent role. This can make them more of a tactical point solution best deployed for specific needs, rather than as part of a long-term talent strategy — and this can have a downstream impact on talent outcomes:

• Inconsistent hiring processes: When contractors aren’t embedded into your business as usual processes, it makes it harder to benchmark and maintain your entire hiring experience. This could lead to inconsistent sourcing and evaluation criteria, as well as a negative impact on your candidate experience.
• Competing priorities: Freelance recruiters and contractors work for one person: Themselves. And because of this, it’s likely that you’re competing for their availability and resources among their existing clients.

• Focus on outputs, not outcomes: External contractors are often working in a project-based or time-limited capacity. This usually means they’re focused on deliverables (outputs) rather than long-term outcomes and helping the team reach business-critical goals.

• Lack of strategic alignment: Long-term, part-time input could impact talent strategy as your external providers focus on filling near-term gaps, rather than addressing critical skills shortages or capabilities needed to maintain your organization’s competitive advantage in the future.

Because freelancers and contractors aren’t part of your full-time team, it’s much harder to keep them in step with evolving hiring processes and priorities. Over time, this could impact your quality of hire — especially if your ideal candidate profile shifts as the business needs evolve or is preparing to go for an IPO.

A lot of the challenges mentioned above around hiring freelance recruiters can be mitigated with a good onboarding and enablement strategy that keeps them in the loop.

But one of talent acquisition teams’ biggest challenges by far when integrating freelancers as part of their hiring process isn’t alignment or long-term vision — it’s the legal stuff.

Working with independent recruiters can have some huge flexibility and capacity perks for teams — but it can come with a huge legal risk attached if organizations aren’t careful about their terms of engagement with external service providers.

As such, organizations must make sure that they classify any arrangements with external service providers accurately in terms of tax status and employment rights. Because if it looks like employment, and sounds like employment, then organizations might not only get slapped with a penalty and legal proceedings, but also be held retroactively liable for back taxes and benefits including healthcare, retirement plans, and paid leave.

For example, in the US, organizations hiring a recruiter as a 1099 freelancer could be subject to a tax misclassification risk unless they put stringent working conditions in place. This can limit the flexibility that makes the freelance model attractive in the first place, as businesses can only direct the final deliverable, and cannot mandate that freelancers work specific hours or days.

Meanwhile in the UK, the IR-35 law means that if a freelancer works with an organization in a way that could resemble employment — such as working exclusively for one client under conditions similar to their employees, for example — then they are deemed to be working ‘inside IR35’. This means that both organizations and the contractor are liable for income tax and National Insurance penalties. 

These risks can compound if talent acquisition teams hire service providers across state lines or international borders, where laws governing how independent contractors are classified can vary.

Hiring needs can often change quickly — and assembling a team that can adapt and evolve to meet those needs is essential if organizations are going to maintain their competitive advantage long-term.

RPO and embedded recruitment models can be great alternatives to the freelancer model here, as both offer teams a lot of flexibility without the legal risk.

RPO offers organizations the opportunity to offload some or all of their hiring to an external provider. Meanwhile an embedded RPO (like us!) adds in a partnership-led component, with external and internal teams working closely together according to changing hiring needs, culture, and goals. 

Both offer talent acquisition teams more control over their hiring process consistency and flexibility, with a land and expand approach that scales up or down according to changing needs and priorities.

For talent acquisition teams looking to up their capacity in leaner times, outsourcing to external contractors and freelancers can be an effective solution that helps teams address time-critical needs while keeping overhead costs down. But making this model work long-term depends on having structured onboarding processes and risk mitigation strategies in place.

Working with an RPO or embedded recruitment provider can help organizations get the best of both worlds, enabling them to sidestep the legal challenges, while retaining maximum flexibility, scalability, and access to expertise.