In-House Hiring Vs. Outsourcing Recruiting Services: Which Option Should You Choose to Scale Your Business?

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With unemployment rates at a 50-year low  in the United States, one of the biggest obstacles small and medium businesses face is finding the right talent to join their organization.

Small businesses and startups need talented, reliable employees who will help contribute to business success quickly with their own ambition more than established players within any niche. Usually, such businesses either work with a job recruiting service, also known as a staffing agency, or develop their hiring process by hiring in-house recruiter/s.

Keep reading to discover the difficulties small and medium-sized businesses face when filling positions. We’ll also provide a detailed comparison of working with a recruiting service and hiring employees yourself so you can figure out which option is suitable for your business.

Recruitment Challenges Faced by Small and Medium-Sized Enterprises

1. External Challenges

Many companies have faced unprecedented challenges during COVID-19to attract and retain talent. It comes across as no surprise that those small and medium-sized enterprises (SMEs) have had the most difficulty navigating this pandemic. They don’t have the resources and, in many cases, the business experience or bench strength that larger companies have.

Kia Roberts, Founder and Principal of Triangle Investigations, in one recent article , points to a significant challenge being faced by small businesses as they emerge from the pandemic:

“Expectations about diversity, equity, and inclusion (DE&I), and overall fairness within the workplace are changing. Most small businesses do not have the internal bandwidth to have a designated person working on equity efforts within their organization. Still, there are things they can do. Small businesses can hire a DE&I consultant to work on an hourly basis, or can dig into books containing actionable tips on creating equitable and fair workplaces.”

It is important to note that external recruitment challenges aren’t the only thing that are keeping small and medium-sized companies at their toes amid COVID-19. There are various internal hiring challenges too.

2. Internal Challenges

ExpertHR’s 2020 survey of the Biggest HR Challenges found that most respondents (66%) believed hiring and recruiting the right candidates would be the top concern of HR leaders in 2021. The next major challenge cited by nearly 59% of respondents was workforce planning.

In another recent article published in Northern Insight, Andrew Mackay, Managing Director at Coleman James Ltd., highlights costs as the most significant internal barrier for SMEs looking to compete in the local as well as global marketplaces:

“Reluctance to invest can be detrimental as forming a partnership with a niche recruiter will save both time and money in the long run and deliver candidates that give SMEs a competitive edge. In addition, the hiring process should be thorough, consistent, and timely. Procrastination and lack of ability to make quick decisions often means SMEs lose out because exceptional talent doesn’t hang around.”

Now that you have a brief overview of some of the common challenges faced by small and medium-sized enterprises in the present times let us quickly get to understand both the advantages and pitfalls of in-house hiring and outsourced recruiting services.

In-House Hiring

In-house hiring equates to either interviewing and employing suitable candidates on your team on your own or getting a hiring manager/recruiter on board as a permanent employee to take care of your talent acquisition needs.

Advantages of In-House Hiring

Some of the common benefits that come alongside leveraging in-house hiring for your company are:

  • Enhanced Scope of Customization

Hiring candidates in-house lets you customize various processes within your hiring model if and when needed.

For instance, if your hiring experience tells you that you’re seeing more positive candidate responses on LinkedIn, you can slightly adjust your strategy to focus on that channel more than others to source candidates.

  • The Ability to Communicate on a One-to-One Basis

When you recruit in-house, you can easily personalize your communications and add that human touch to your recruitment process.

This becomes difficult when you leverage outsourced recruiting services since many of the hiring process procedures are automated (e.g., email automation to reach out to candidates, applicant tracking systems to shortlist and update candidate status’ within the hiring funnel, etc.).

Pitfalls of In-House Hiring

Some of the common pitfalls of leveraging in-house hiring for your company are:

  • Limited Reach and Exposure

One of the biggest problems of in-house recruitment is that since you’re usually working with a limited number of resources, you’ll miss out on many good candidates regularly.

Compared with outsourced recruitment services, in-house hiring falls significantly behind in terms of reach and exposure.

  • An Increased Time-to-Hire

In line with the previous point, since you can reach out to only a limited number of candidates daily with in-house recruiting, your time-to-hire also gets impacted.

Outsourced Recruitment Services

Outsourcing recruiting services for your company directly translates to either hiring a freelance recruiter  who can source, interview, shortlist, and onboard candidates for you, or working with a recruitment agency on a contract basis to fill open positions at your company.

Advantages of Outsourcing Recruitment

Some of the common advantages of outsourcing staffing services for your company are:

  • Mitigated Cost-Per-Hire

One research whitepaper analyzed an established company’s recruitment outsourcing process from beginning to end. The study found that outsourcing can significantly benefit firms byfacilitating cost savings, providing access to top talent markets, and improving hiring efficiency.

Due to the saved costs, outsourcing recruitment can be highly advantageous for small and medium-sized businesses.

  • Enhanced Reach

Another visible benefit of leveraging outsourced recruiting services is that this model can significantly enhance candidate reach.

Recruiting agencies usually rely on more than one sourcing channel (e.g., job portals, social networking sites, existing talent pipelines, professional recruiter networks, etc.) to advertise open positions at your company.

  • Better Employer Branding

Your employer brand is essentially the identity of your company as an employer. Close to 75% of active job seekers  are likely to apply for an open position if the organization’s employer brand is actively managed.

Recruitment service providers use various tools such as advanced analytics, chatbots, social media channels, and mobile solutions to build a company’s reputation in the job market. These efforts indirectly contribute toward improving the quality of candidates attracted, which goes a long way in building a brand reputation for other prospective candidates.

  • Greater Exposure to Specialized and Top Talent

Recruiting agencies and professional recruiters usually keep in touch with many professionals in the talent acquisition industry. They also maintain robust talent pipelines.

Therefore, external recruiters can easily and quickly get specialized individuals your way who have a fair understanding of your local market and hold an informed perspective of the developments happening in the recruiting sphere.

Pitfalls of Outsourcing Recruitment

Some of the common pitfalls of outsourcing recruitment services for your company are:

  • Decreased Flexibility within the Recruitment Process

When you leverage an outsourced recruitment service model, you mostly have to follow a hands-off approach since the recruiter you hire will execute the entire process.

Therefore, the only downside of this hiring approach is that you don’t get to have as much flexibility as you’d otherwise have had you opted for in-house hiring.

  • Limited Scope for One-to-One Communication

As mentioned in the previous point, outsourcing recruitment services is equivalent to taking a hands-off approach to hiring.

Hence, there’s limited scope for one-to-one communication with potential candidates when you opt for this model. Of course, the recruiter will send the shortlisted candidates to you for a personal interview in the final round if you ask them to. Still, they usually handle everything themselves from start to finish.

Which Hiring Model Should You Choose to Scale Your Business?

Depending on the industry your business functions in, you may face competition from your counterparts for the best talent, especially from well-established enterprises.

If you’re in a niche where good talent is in short supply, finding qualified candidates can be daunting, especially when you’ve decided to carry out hiring yourself. You don’t want to start the recruiting process and fill the position with any warm body who does the bare minimum, so you’ll need to read dozens of resumes and schedule time to conduct interviews. This can drag HR resources if you or your other managers are the only ones qualified to interview and hire applicants.

Filling a position can take up a lot of your own time that you could better spend on other aspects of the business. If you’re not experienced in hiring new help, you could end up with someone who doesn’t live up to their application.

This is when you definitely would want to outsource recruiting services with a staffing agency.

At, we’ve got an extensive network of freelance and full-time recruitment professionals spread across the US that are ready to help you.

We can help you meet your hiring needs effectively and optimize your recruiting process within no time.Contact us today  to find out more if you want to enhance your recruitment process.

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