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How Much Does Outplacement Cost?
January 29, 2024 by Cynthia Orduña
Are you thinking of introducing outplacement services as part of an exit package or severance agreement? If you are, then you probably want to know what those outplacement services cost.
While outplacement programs are not legally required, many companies provide terminated employees with some form of outplacement package. This may be driven by a sense of empathy or as a proactive measure to mitigate the risk of lawsuits and negative publicity.
When looking for outplacement services, it’s important to look at the costs holistically. There are two important questions to be concerned about when trying to establish how much outplacement fees and pricing are.
- How much will the fees be if you hire an outplacement firm?
- How much will it cost if you choose not to offer outplacement services altogether?
How Much Do Outplacement Services Cost?
Contact any outplacement firm and they’ll tell you the same answer–it depends. Namely, outplacement costs depend on the employee’s position in the company and the outplacement services that the organization wishes to provide. You will generally find that hourly employees amount to lower outplacement fees, while senior executives amount to higher outplacement fees.
Here are the main variables that determine the final outplacement cost:
- Skills and experience of career coaches
- Number of terminated employees you’d like to enroll in the program
- Personalized outplacement programs
- Position of the displaced employee within the company
- Level of support offered in the outplacement program
For instance, a cursory look on the internet shows some outplacement services firms that charge $500 per person. However, this is for a basic outplacement package which only includes support with resume updates, cover letters, and job alerts. While these options cover the basics, they don’t effectively assist individuals in discovering new employment opportunities and applying for new jobs.
To get more services, such as one-on-one consulting with specialized career coaches, you may need to pay more–meaning the overall price can go up with add-ons. Other outplacement firms will require a retainer, meaning that you might end up paying them even when you do not use their service.
A 2009 study by The American Management Organization for the Wall Street Journal found that more than two-thirds of 265 US employers with layoffs during the past two years offered outplacement at an average cost of $3,589 per employee, a figure that has recently gone down thanks to the rise of technology and virtual outplacement. Typically, the most technologically-advanced providers have lower overhead costs and, therefore, more affordable services that actually offer more value for the money.
Despite the above cost examples, however, it is not enough to know what a provider’s outplacement services cost from its website. Instead, the most important thing is to figure out your needs as a company and look for an outplacement services firm that can support your goals.
Let’s review a few additional factors to consider when you’re searching for an outplacement provider.
How Do Term Limits Affect Outplacement Cost?
Understanding how the overall outplacement process operates can significantly enhance the value you derive from your investment. However, there’s a crucial aspect to avoid: term limits. With term limits, if your employee isn’t placed in a new job within a specified timeframe (typically around three months), they are removed from the program and left to navigate the job search independently.
This translates to spending money on a service that didn’t yield results. While this is financially unfavorable for you, it’s even more detrimental for the employee who, after three months, finds themselves in urgent need of a paycheck and must now fend for themselves in securing a new job.
At Careerminds, we do not have time limits on our services, meaning that we will work with your employees until they are placed–or as we call it, “until placement.” Unlike other outplacement firms, we believe in investing time in employees facing challenges in finding new work, no matter how long that takes. After all, why pay for a service that you’re uncertain will yield results?
Should You Consider Retainer Fees?
Another common practice among traditional outplacement firms is the use of a retainer fee.
Outplacement firms charge retainer fees to keep your human resources department as a customer over a longer period of time, allowing you the ability to use their services whenever you need them in exchange for a recurring payment.
It’s important to weigh these costs to see if your organization will actually benefit from keeping the outplacement firm on call in the long run.
At Careerminds, we do not charge retainer fees for our services. We will work with your organization when you need us to and charge per service used, not for retaining the option to use it. This strategy conserves a substantial amount of money that can be redirected elsewhere in your organization. Moreover, it positions us as a strategic partner capable of addressing all your future outplacement needs seamlessly and without any drawbacks.
How Much Will Choosing Not to Offer Outplacement Cost?
Providing outplacement services to former employees is often not required by law. It is essentially a ‘free’ service that you can extend to departing employees. This prompts the question: “Why would a company offer a free service, incurring costs for individuals who no longer work for them?”
Despite the apparent cost of outplacement services, there are many compelling benefits that outweigh the alternative of not providing such services. If your aim is to avoid litigation risks and safeguard your business’s reputation, then the expenses associated with outplacement are easily justified. In fact, implementing an outplacement program can yield significant cost savings by mitigating the following risks.
A recently terminated employee may hold feelings of anger and resentment toward your company, regardless of the reasons for their dismissal. While the business rationale for their departure might be clear, the individual, now facing an uncertain future, may perceive it differently and resort to legal action.
Even if your company ultimately prevails in such a lawsuit, the process will be both costly and time-consuming, likely exceeding the cost of outplacement services. When parting ways with employees, it is crucial to ensure that it is done legally, incorporating a severance agreement and adhering to all relevant laws governing the process of employee separation.
Post-Layoff Exit Claims
When employees are laid off without adequate support and guidance, there is an increased likelihood of dissatisfaction and grievances. Unhappy departing employees may experience decreased motivation and productivity in their final days with the company. They also may be less inclined to share their knowledge or contribute to transfer processes, making it difficult to maintain continuity and efficiency.
By providing outplacement services, companies can demonstrate a commitment to supporting departing employees in their transition to new opportunities. This proactive approach not only helps in easing the emotional impact of job loss, but also reduces the likelihood of negative post-layoff exit claims.
Attacks on Brand Reputation
It’s essential to recognize the significant impact that social media can have in today’s digital age, and how quickly it can undo years of dedicated work building a reputable brand that commands respect. A single LinkedIn post highlighting ‘mass layoffs’ has the potential not only to induce panic in the stock market and among investors, but also to portray your company as one that callously discards employees. This can cause irreparable damage to your company branding.
In contrast, a company with a stellar reputation becomes a magnet for top-tier talent seeking new opportunities. This positive image can translate into a more productive and profitable business, as talented individuals are drawn to organizations with a strong and positive public perception. In today’s contemporary landscape, where platforms like Glassdoor play a pivotal role, protecting your company’s reputation with outplacement services can hold immense value.
Tarnished Reputation Among Remaining Employees
The impact of layoffs can extend beyond those directly affected. You will also want to consider the emotional toll on the remaining staff. Lowered morale among your staff can result in decreased efficiency and an uptick in turnover rates, which are both unfavorable outcomes for any reputable business.
By offering outplacement services, you communicate a powerful message to your surviving staff. It reassures them that, in the unfortunate event of a layoff, they would be provided with valuable support. This proactive approach not only addresses the immediate concerns of those still employed, but also fosters a sense of security and loyalty among your workforce.
Impeded Recruitment Process
The ramifications of layoffs go beyond the immediate impact on those already in the company. They also extend to the recruitment process, potentially impeding the organization’s ability to attract and retain top talent. Consider the scenario where news of poorly handled layoffs circulates within the industry or job market. Prospective candidates, upon learning about a company’s recent downsizing, may harbor reservations about the company’s stability and job security.
This hesitancy can impede the recruitment process in several ways. Firstly, talented individuals may be deterred from applying for open positions, fearing a similar fate. Secondly, the company may face challenges in convincing potential hires of its commitment to employee well-being and professional development.
According to a Workforce study, organizations that offer outplacement programs help increase their productivity, profitability, and brand value. The return on investment of outplacement services far outweighs the costs. While many organizations may believe that outplacement is only beneficial for outgoing employees, the truth is that the protection outplacement offers businesses, and their remaining and future employees, is just as substantial. Hence, the outplacement cost is worth every penny an organization spends.
Apart from mitigating common risks of employment termination, there are also numerous benefits for your organization to factor into the value you’ll get for the cost of the outplacement services. Some of the most important benefits worth noting are increasing employee loyalty, retaining quality talent, and upholding a good reputation.
What’s the Next Step?
Once you understand all the possible outplacement costs and benefits, the next step is to locate an outplacement firm with the most effective program while also ensuring it comes at the most economical cost. We’ve compiled some helpful guidelines to follow when choosing an outplacement company.
If you’re on the hunt for an outplacement firm that can offer you valuable advice, ongoing support, and the most affordable program, learn more about our outplacement offerings at Careerminds.
We offer flexible and tailored outplacement services for organizations of all sizes. Schedule a free live demo and see for yourself what puts us a step ahead of the rest.
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At Careerminds, we care about people first. That’s why we offer personalized talent management solutions for every level at lower costs, globally.