According to ManpowerGroup’s research, three-quarters (75%) of employers report difficulty filling open positions, with labor shortages doubling over the past decade. Most companies face similar hiring challenges: the costly and time-consuming process of sourcing talent, high tax burdens, labor law risks, and more.
All of these complexities are forcing companies to rethink their hiring approaches to optimize resources and costs – and maintaining an internal HR department is no longer the only way.
*Are you considering in-house vs outsourced hiring, or looking for alternative solutions? * We’ve got you covered.
In this article, we've summarized all the nuances to take into account when choosing the right approach and provided detailed information on different recruitment models.
Key factors to consider when choosing the hiring model
As you assess the best way to grow your team, several key factors will guide your decision. Each approach has its own strengths and limitations, depending on your specific project needs, team size, and business goals.
Here's a checklist to help you determine which model is best for your situation.
Number of open positions: The fewer people you typically hire, the lower your need for an internal recruiting team. What are the exact numbers? According to SHRM research, the median number of open positions per recruiter at any given time is between 30 and 40. If your hiring needs are below that number, it may make more sense to outsource to a direct hire agency or a freelance IT recruiter.
Urgency of hiring: Recent research indicates that it takes approximately 44 days to fill an open position from the time the job is posted. However, new hires are often needed immediately to fill a gap in an ongoing project or seamlessly replace a departing employee. Don't have that kind of time? Then you'd be better off outsourcing the recruitment process to those who have their own database of pre-screened professionals, such as a PEO employment service or an outstaffing agency.
Geography of search: With direct hire, the candidate pool is limited to the locations where you have legal entities. At the same time, hiring abroad can be more attractive and cost-effective because salary ranges, tax burdens, and availability of skills vary widely around the world. Are you considering hiring beyond your current jurisdictions? That's one reason to work with global PEO services that can legally hire overseas.
Budget considerations: On average, it costs 3 to 4 times the salary of a position to hire a new employee, 60% of which are indirect, including time spent. The more people involved in the recruiting process, the higher the expenses. The investment in onboarding, training, and benefits for new hires can add up quickly. Outsourced HR services such as a remote hiring agency can minimize upfront costs or avoid long-term employment liabilities.
Expected level of control: Direct hire gives you full control over every stage of the recruitment process, but it also increases your time commitment and legal liability. However, administrative tasks such as payroll and compliance can be outsourced while you retain control over day-to-day management.
Most common hiring models: Comparison & overview
How do these factors affect hiring in the real world? Let's start with a high-level comparison of each common model.
Best For: Companies with significant and ongoing hiring needs, starting at around 30 professionals at a time, and having the budget to support a dedicated HR team. A good choice for those who need a high degree of control over the hiring process and want to build long-term teams that are fully aligned with the company culture.
** Freelance recruiters**
This is a common choice for those who don't have enough resources to close a job on their own. The list of reasons may vary. Some companies don't have recruiting specialists on board due to low demand for new hires, while others have a large HR team but are overwhelmed with other responsibilities.
In any case, working with freelance recruiters has some advantages. Because they operate on a project basis, companies can hire them as needed without long-term commitments. You don't have to pay a fixed salary and worry about their training, health insurance, and other aspects associated with full-time employees. This benefit comes along with the niche expertise that every freelance IT recruiter typically has, which is essential when you need to hire an expert in a specific domain or technology.
However, relying on external recruiters means having less control over the hiring process. Be prepared to spend time evaluating the quality of the candidates presented, who may not fully understand the company's expectations or long-term vision, which is especially important for senior positions.
Best For: Organizations with fewer than 10 open positions at any given time, facing sudden hiring needs without the commitment of a full-time HR team. This model fits companies with budget constraints and an urgency to hire where project-based support is sufficient.
Hiring agencies
When companies use a direct hire employment agency, or a freelance recruitment agency, they benefit from a structured approach and established processes that help them source and screen candidates efficiently. These organizations have access to a wider network, which speeds up the hiring process and helps them meet higher demand for new staff.
However, this model comes at a higher cost. While a direct employment agency can provide more comprehensive services than freelancers or even some internal HR teams, the cost can prove prohibitive during rapid growth or expansion. In addition, they are still not fully under your control, and their responsibility ends once a candidate accepts a job offer, creating the risk of subsequent mismatches, even when working with the best hiring agencies.
Best For: Medium to large organizations with 10–50 open positions and an urgent need to scale quickly. This model is appropriate for organizations that are willing to invest in comprehensive services and are looking for expertise in specialized areas.
Outstaffing companies
This approach involves hiring ready-made teams from other companies to work on your behalf. While you simply assign tasks to this pool of specialists, the outstaffing provider acts as their legal employer and takes care of their contracts, wages, equipment, ect.
The big advantage is that you can bring these people in for the duration of the project, avoiding severance payments and other long-term commitments. This model can be much more cost-effective than maintaining a permanent in-house team, especially after peak periods are over.
While outstaffing companies can effectively solve your business goals, there are some risks involved. The main one is quality control. Whether or not it will be a productive collaboration depends largely on your initial choice of provider. Since some of the staff will be taken out of your company, you will have less control over them, as well as over compliance. That's why such a partnership requires strong management on your part. And even then, this approach can result in slow turnaround times, low loyalty and engagement.
Best For: Companies managing temporary projects requiring 5–20 specialists during peak seasons. This option is perfect for those with a limited budget who want to avoid long-term commitments but still need skilled talent.
Professional Employment Organizations (PEO)
This model has become especially popular in recent years. It is estimated that more than 200,000 small and mid-sized businesses in the U.S. alone use PEO solutions. Why and for what?
A Professional Employment Organization, or PEO, is a specialized entity that helps companies reach global markets by providing a wide range of outsourced HR services. A PEO acts as a co-employer, handling not only staffing, but also payroll, tax administration and local employment law compliance. This approach is similar to an outstaffing model, but provides companies with more flexible and comprehensive support.
This method allows for faster global market entry without the administrative burden of establishing local operations. Typically, international PEO providers have a database of pre-vetted professionals, reducing the recruitment process to 1-2 weeks. At GEOR, for example, we have a network of more than 40,000 candidates ready to step in. And even in the event of a later mismatch, we offer the ability to replace a candidate during the 10–20 day probationary period.
There is also a lower risk of non-compliance, as these organizations take care of local legal requirements themselves.
Finally, the overall cost is significantly less than maintaining an internal HR team or hiring outsourced recruiters or direct hiring company. Why? We provide PEO services at a fixed rate per employee, with no additional taxes.
Disadvantages? Certainly, there’s no one-size-fits-all solution. We recommend using PEO for small business, or for medium-sized organizations, as this partnership tends to be the most cost-effective. For large companies that need to hire more than 20 people at a time, the overall cost is comparable to other methods.
Another big thing is that the PEO shares responsibilities with the client company, not replaces it. There are certain tasks related to taxes and insurance that such services cannot handle. These limitations can vary from state to state or country to country and include aspects such as insurance requirements and corporate regulations. For example, they does not act as a tax or legal advisor and is not responsible for completing all of your tax returns.
**Best For: **Small and mid-sized businesses, and start-ups with fewer than 20 positions that need to hire across multiple jurisdictions. This model is ideal for those seeking a quick time to market with less administrative burden, combined with robust compliance support and cost-effective solutions.
How to choose a hiring strategy that works for you
Bookmark this article, share it with colleagues, and return to the checklist above each time you face a new hiring challenge.
Each case should be considered on its own merits, even within the same organization. Depending on what you need to do in a given timeframe, the approach would and should be different.
Factors such as the number of open positions, urgency, financial constraints, and more will help determine the right approach here and now. Whether you develop the team from within or hire consultants, a clear understanding of your organizational context will enable you to effectively assemble a responsive and resilient team capable of dealing with the current realities of the job market.
*Want to learn more about PEO services? * We’ve prepared a comprehensive overview here, and we’re ready to answer any questions you may have in person. To get a free preliminary consultation, please contact us at eor@geomotiv.com.
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