How Much Does Outplacement Cost?

January 01, 2021 by Miles Charles

You have come to the inevitable conclusion that, as a company, you must lay off some of your employees. It could be a result of redundancy, a merger, or downsizing. Or perhaps you want to have a contingency plan ready in the event that any of the above scenarios happen in the future. You, therefore, need to outsource an outplacement services firm. Logically, the first question you need to ask is – how much does outplacement cost?

Are you in procurement? If you are researching an RPF, check out our link below on how much outplacement costs, or take a look at our comprehensive FAQ page here!

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It is important to look at the outplacement services cost holistically, and there are two important questions to be concerned about when trying to establish how much outplacement fees and pricing are.

One, how much the fees will be if you hire an outplacement agency, and second, how much will it cost if you chose not to offer outplacement services altogether?

Now, let us tackle the second question first: how much will it cost you as a company if you chose not to offer outplacement support and career coaching to employees that you are letting go?

Technically, providing outplacement services to your former employees is not required by law in many cases. As such, it is a ‘free’ service that you offer your departing employees. But why would you as a company offer a free service that costs you money to employees who no longer work for you? There are several good reasons which far outweigh the option of not doing so.

Let’s take a look:

Avoiding Possible Litigation

A former employee who has just been fired for whatever reason can harbor anger and resentment towards your company.

The reasons for letting him go might make business sense, but to a person who suddenly faces an uncertain future, this may not be the case and they might lash out with a lawsuit. While you might eventually win, the lawsuit is costly and time-consuming, and definitely more expensive than outplacement service fees.

An important step of this process is to make sure that when you let your people go you do so in a legal manner, using a severance agreement and adhering to all laws that may impact who you let go and how you let them go. You can read more about outplacement laws here.

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Protecting Your Brand

You have worked hard over the years to build a well-known brand that commands respect. In the age of social media, one Facebook post or a tweet about ‘mass layoffs’ may not only trigger panic in the stock market or in your investors, but it may also paint you as a company that throws employees to the curb, damaging your personal branding irreparably.

At the same time, a company with a great reputation will attract better talent who seek a new position, and, therefore, have a more productive and profitable business.

In the end, your reputation is incredibly important in today’s Glassdoor-based world. Doing everything you can in your power to increase and protect that reputation is vital. This is where making sure you handle layoffs and RIFs by offering outplacement packages and other benefits to terminated employees.

Motivating Your Current Employees

Nothing demoralizes employees faster than knowing that their employer doesn’t care about their welfare. When you lay off employees, the ones who remain watch closely to see what you will do to help the transitioning employees during this difficult time.

If you offer a safety net in the form of outplacement programs, it will motivate them and renew their loyalty and trust towards the company. This contributes to improved productivity in the long run.

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A 2013 study reported by Workforce found that “more than a third of companies offering outplacement services notice an increase in worker productivity within 12 months of a major restructuring.”

No one wants to work for a company that may let them go at the drop of a hat with no support. So, making sure that your remaining employees know they will be okay when a RIF occurs is super important if you want to retain key members of staff.

Saving Money on Unemployment Benefits

The sooner the laid-off employees can get back to work, the sooner you stop paying for unemployment benefits and taxes. You will also be helping put people back to work, playing your moral role in reducing unemployment.

Downsizing and layoffs are typically triggered for financial reasons, which means that saving money is a top priority. So when you ask how much do outplacement services cost, you have to figure in the costs of lawsuits, unemployment benefits, reputation tarnishing, and all of the other negative, cost-heavy things that may come with improperly handling a layoff.

How Much Does Outplacement Cost: The Factors to Consider

Having established that offering outplacement services support is in the best interests of your company; let us ponder the first question. How much does outplacement services actually cost? The answer to this is multifaceted. Outplacement cost depends on several factors such as:

  • Service: What kind of service will your ex-employees be getting? Does the outplacement firm offer one-on-one or group consultations? Will your employees get tailor-made programs and personalized job search coaching service that will land them a new job faster?
  • Terms: Are there term limits to the contract such as 3 or 6 months by the end of which services are terminated? Or do your workers get career transition support until they get another job?
  • Experience: How much experience does the outplacement services firm have and what are their placement numbers like? Do they have experienced staff trained to deal with outplacement counseling even if the employee is highly emotional? Can they handle executive level placements?
  • Technology: Does the firm leverage technology to bring solutions to your impacted employees no matter where they are? What is the outplacement firm’s reputation? What are their numbers? What do other people say about them?

As established above, outplacement cost is dependent on many factors. While you might be interested in seeing the dollar figure to make a decision, it is important to note that different amounts pay for different things and the devil is in the details.

 Details, Details, Details

For instance, a cursory look on the internet shows some outplacement services firms that charge $500 per person- except that this is for a basic outplacement package which includes only help with CV and cover letter writing, and job alerts. These are okay options but they don’t actually help people find new employment opportunities and apply to new jobs.

To get more services, such as one-on-one consulting with specialized career coaches, you will need to pay more. Another company might charge $1800 for the ‘core service’ – meaning the overall price will go up with ad-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 an employee, a figure that has gone up and down thanks to technology. Typically, the most technologically-advanced providers have lower overhead costs and, therefore, a more affordable service that actually offers more for the money.

From the above cost examples, it if not enough to know what an outplacement provider charges from its website and run with this figure.

Instead, the most important thing is to figure out your needs as a company and then look for an outplacement services firm that matches them. This is the surest way to not only end up with a program that outs your people back to work but also to save the much-needed money.

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