How Much Does Outplacement Cost?
Outplacement is generally sold to companies as employee packages. The cost of outplacement varies depending on the specific needs of the company and the professional level of the impacted employees. Some variables that determine the cost of outplacement include:
- Number of impacted employees
- Levels of services offered to employees – more or less coaching time, resume critique or resume writing, length of time services are available, etc..
- Other services and programs – additional workshops, career development, programs for remaining employees, and others
- Discounts offered by the outplacement provider – generally based on volume
- Special programs designed for small to medium businesses – such as RiseSmart’s SMB program
Based on these variables, the cost of outplacement services varies quite a bit. It can range from several hundred to several thousand dollars per employee. While it seems counter-intuitive that a company looking to cut costs would spend the money to help individuals whose roles are being eliminated find new jobs, there are many compelling business reasons for every company to offer outplacement to every impacted employee. Instead of asking, “How much does outplacement cost,” companies considering layoffs should ask themselves, “What is the cost of not providing outplacement services to impacted employees.” The answer to that question partially comes from learning from other’s mistakes.
For those organizations that have decided not to take care of their impacted employees, the cost has sometimes been dear. These are the layoffs that make the news. These are the companies that find themselves inundated with negative media coverage and scathing reviews on Glassdoor. And, believe it or not, there are financial consequences to not offering outplacement that may far outweigh the cost of the packages. And lastly, let’s face it, taking care of employees who have been loyal to your company, have helped the organization achieve business success, and are losing their jobs through no fault of their own is simply the right thing to do.
The real cost of NOT offering outplacement services
There’s no law requiring employers to help laid-off employees transition to new jobs, so not offering outplacement is an option. But as with any consequential choice, it makes sense to weigh the costs of either course of action and to make sure you understand the ramifications of opting out.
There is considerable evidence that the cost of not offering transitioning employees help can be higher than what you’d pay for a well-designed outplacement service, but the cost isn’t always measured in an immediate cost. Some costs accrue over time.
The cost of negative alumni employee sentiment
Former employees often go on to become customers, competitors, business partners, and have the possibility of becoming boomerang employees (returning to the company in a slightly different capacity after gaining further experience elsewhere), or consultants.
In a time when trust and transparency are the currency of employers of choice, damage to the brand can be costly. When employees feel disrespected — when they believe a company has treated them like a disposable asset — they’re likely to share those feelings with their peers on social media as well as with their family and friends. The costs of negative alumni sentiment may not be measured in reputational damage alone. It can also generate significant monetary damage caused by negative comments on sites like Glassdoor which discourage future hires, cause longer recruiting cycles and expenses, or lost business opportunities due to difficulties filling key roles.
The financial cost of a layoff
Future unemployment charges are another direct cost that can rise higher without outplacement services. Company leaders don’t tend to think about the rise in UI expenses as an immediate consequence. However, the costs can be considerable especially if laid-off staff remain unemployed for a lengthy period of time before landing another job.
While unemployment costs will not be impacted immediately, if enough employees remain unemployed or underemployed for a long enough period of time, the employer’s unemployment claims drawdown can increase significantly over the next several years, resulting in large financial costs. The savings in unemployment claims drawdown over several years will far outweigh the cost of outplacement packages for impacted employees.
When layoffs aren’t handled properly and managers have not been trained by outplacement professionals to deliver notifications, lawsuits can drain the company of valuable resources, both time and money. Massive lawsuits and accusations of wrongful termination are the types of events that make the news and cause investors and customers to doubt the integrity of the company, leading to further loss of income.
The cost of lost productivity and employee engagement
It’s also important to remember that deciding not to offer outplacement services doesn’t just affect departing employees. An often-overlooked consequence of a layoff is the effect on productivity and engagement of the remaining employees. Change is hard and watching your friends and colleagues lose their jobs can be traumatic in many ways. First, the remaining employee may begin to feel insecure about their own position in the company and second, those employees who aren’t impacted will be watching to see how the company treats the employees who are let go.
When impacted employees aren’t provided the support they need to find new employment, the remaining employees hear about it and will react with their own negative views of the organization.
Besides lowering the morale among staff who are staying at the company and creating a dip in productivity, if surviving employees perceive that they aren’t valued by the employer, they may start looking for another job. Although the object of the layoff is to reduce staff, continued churn of key personnel is extremely harmful to the company’s bottom line.
Getting value from outplacement
It’s clear that there are real costs associated with NOT offering outplacement services to employees. If you add them up, it’s easy to conclude that an outplacement service can actually save money by protecting the brand and reducing recruiting expenses, lowering UI taxes, avoiding legal fees, preventing productivity decreases and averting employee churn. These are all great reasons to consider an outplacement service, but choosing the right partner is the key to reaping the benefits.
The costs can differ considerably among outplacement service providers, as can the breadth of services offered and the quality and expertise providers are capable of delivering. So, it makes sense to evaluate your options carefully, consider your company’s unique needs and choose your outplacement services partner accordingly.
As with most things in life, you get what you pay for with outplacement services. Outplacement offerings available from a boutique outplacement provider may be limited to help with résumés and electronic job alerts, which may or may not help employees find a job faster. On the other hand, a full-service outplacement provider can offer professional branding, career coaching, job concierge services, access to advanced technology and more.
When it comes to dollars-and-cents costs, it’s a good idea to look at the outplacement provider’s track record. Can they produce metrics demonstrating that the outplacement investment pays off? Do they offer a broad range of services, and do they provide packages geared toward companies of different sizes with diverse needs? Are the rates they offer fixed, or are they negotiable? Perhaps most importantly, how personalized are the services they provide? Does the HR professional have a team of professionals to support them? How are impacted employees engaged for services? Does the technology used by the company replace or support the human touch? Before you sign an outplacement contract, you’ll want to know the answers to these questions and more.
Once you have an outplacement services agreement in place, it’s also a good idea to evaluate its value on an ongoing basis. Companies are more data-driven today, and you’ll want to make sure you can demonstrate that your outplacement services are delivering value. Among the key metrics to monitor are landing rates, which measure how many transitioning employees found work during the program and how long it took them to find a new job.
The employer-employee relationship is radically different today than it was even a generation or two ago. Workers generally don’t expect to stay with one company for their entire career. Employers need to retool and resize more frequently to respond to rapidly changing market demands. Employees leave and return, either as rehired employees or as customers or decision-makers at companies you do business with in the years to come. Relationships matter, so taking the long view and offering transitioning employees assistance with an outplacement service can pay dividends today — and well into the future.