What are the costs of outplacement?
August 09, 2024 by Elizabeth Openshaw
If your company is considering including outplacement services as part of a redundancy package for departing members of staff, you’ll want to have some sort of an idea of the costs involved, so you can make a financially viable decision.
Offering outplacement services is not a legal requirement in the UK, but many companies do provide some sort of outplacement package to those employees who are leaving. There are several reasons for this, and they are:
- Realising it’s the best thing to do for those being made redundant
- Mitigating the risk of potential lawsuits
- Avoiding negative publicity
The costs of outplacement should be looked at in the round, so everything is taken into consideration, including what the cost is of not offering outplacement services. And the cost here not only covers the financial cost, but also the cost to your company’s reputation.
How much do outplacement services cost?
As with the cost of anything, it depends. It’s like asking, “How much does a dress cost?” There is no one definitive answer. Ask any outplacement firm this question and they’ll all have the same answer. That’s because there are so many variables when it comes to outplacement services costs, especially when it comes to the employee’s position in the company and the outplacement services the company can afford to provide. Generally, staff on an hourly rate will equal lower outplacement services costs, whereas more executive members of your team who are leaving will command higher outplacement service costs.
The main variables that determine the final costs are:
1. The number of terminated employees you’d like to enrol in the programme
2. Skills and experience of the career coaches required
3. Personalised outplacement programmes
4. Positions of the displaced employees
5. The level of support required within the outplacement programme
For instance, a quick look online reveals an array of prices, from several hundred pounds per employee into the thousands. The lower figure would be for a basic package, which would probably only include support with CVs and cover letters, as well as job alerts. This could be seen as a false economy as they don’t assist individuals effectively in finding new employment opportunities and applying for jobs.
For add-ons, such as personalised coaching, you’d have to shell out more – meaning the overall fee can shoot up without you even realising. Some outplacement firms require a retainer, meaning you end up paying them even when you don’t use their service, which amounts to yet more money wasted.
When it comes to technology and the use of virtual outplacement, the more savvy outplacement firms have lower overheads – and that means more affordable services that offer real value for money.
But it’s not enough to just know the cost of these services. What’s really important is the needs of your outgoing workers and how you can support them during a career transition.
With that in mind, let’s look at more factors you need to consider when choosing an outplacement provider.
Do time limits affect the cost of outplacement services?
The more knowledge you have of a subject, the better placed you are to come to the right conclusion. So understanding the outplacement process and how it works can really enhance the value you extract from any investment into outplacement services.
But there is one aspect you should avoid at all costs.
Term limits.
This is a proviso that some outplacement firms place on their programmes, and means that if your employees haven’t found new roles within a certain time frame, then they are ejected from the outplacement programme and left to fend for themselves. These term limits can vary, but are normally around three months of service, while the average time it takes to get a new job in the UK is currently four months. With these term limits, it means your company will have paid out costs on a service that doesn’t deliver. It certainly doesn’t help your departing employees either, by leaving them high and dry when they need it the most.
We’re not like that at Careerminds. There are no time limits on our services, as we work with your employees until placement ie until they find a new position. It’s a no brainer from your point of view. Why pay for services that don’t deliver, when you can come to Careerminds and rest assured that employees who are affected by redundancy will be well looked after, right up until the time they secure another role?
What about retainer fees?
A retainer fee is basically an upfront cost paid by you to an outplacement firm for services they haven’t delivered yet.
Outplacement firms do this in order to keep your HR department as a customer over a longer period of time, which allows your organisation to use their outplacement services whenever you need them in exchange for continual and regular payments. While this might seem like a good idea, it’s worth weighing up to see if your company will actually benefit from doing this, and if it’s financially viable.
At Careerminds, we don’t charge retainer fees. We work with you and your business when you need us, and charge for the services used, not for retaining the option to use them. This means you don’t have to keep paying for a service that you might not use for a long period of time, and the money saved can be ploughed into another part of your company. A further benefit is that it positions us as a strategic partner who seamlessly addresses all of your outplacement needs, without the drawbacks.
What about not choosing outplacement services?
As mentioned, in the UK providing outplacement services to departing employees is not a legal requirement. It’s like a bonus service, free for them, that really helps in their time of need. This surely prompts the question, “Why would you offer something for free to individuals who no longer work for you, while incurring extra company costs?”
Despite having to pay outplacement services costs, there are many benefits to outplacement that outweigh the alternative of not providing these services. If you want to bypass any potential lawsuits or protect your organisation’s reputation, then the costs associated with outplacement are justified.
Offering outplacement services can yield significant cost savings by mitigating the following risks:
Mitigates any legal action
Being laid off is hard, even if the employee saw it coming. Feelings of sadness can turn to resentment, even anger and frustration. And the target? Your company. While the reasons for this reset might be viable and perfectly reasonable from your point of view, the redundant employee might not see it that way, and take the path of legal action.
Even if your company prevails in a lawsuit, the process will have been time-consuming and probably have cost more than if you’d taken out outplacement services in the first place. When parting ways with employees, it’s important to make sure it’s all above board, incorporating a redundancy package while complying with all relevant UK laws that govern the process of employee separation.
Lessens post-redundancy claims
When employees are made redundant without adequate support or guidance, there can be an increase in grievances or dissatisfaction. Unhappy departing employees will have decreased productivity and motivation in their last days in the job, as the future looks bleak. They may even refuse to share their knowledge or contribute to transfer processes, making it awkward to maintain efficiency and continuity.
Outplacement services can change all of that as, by providing them, it shows the company is committed to supporting those affected employees during their transition to new opportunities. This proactive approach helps to ease the emotional impact of job loss, while greatly reducing the chances of being faced with post-redundancy claims.
Reduces attacks on the company’s reputation
“It takes 20 years to build a reputation and five minutes to ruin it.” So said Warren Buffet, the American businessman and philanthropist. And it’s true, especially with the rise and rise of social media nowadays, and how swiftly it can undo years of hard work in building a brand. Just one post on Glassdoor about “mass redundancies” can potentially panic the stock market and investors, while portraying your organisation as one that discards employees callously. This type of action can cause irreparable damage to your brand.
On the other hand, a company with a sparkling reputation will attract top talent on the lookout for new opportunities. This positive image can escalate into becoming a more profitable and productive business, as talented workers are drawn to organisations that are perceived as having a positive and robust brand. In today’s world of work, where accessible social media plays an integral part, protecting the reputation of your company by providing outplacement services can hold true value.
Reassures remaining members of staff
The impact of redundancies goes way beyond those who are directly affected. Think about the remaining staff. What about them and the emotional toll it takes? Poor morale among staff who are staying can lead to decreased efficiency and an increase in staff turnover – both unfavourable outcomes for any reputable business.
Not to worry though. Outplacement services communicate a powerful message to surviving staff, reassuring them that they would be provided with valuable support in the future if another round of redundancies was announced. This approach addresses the concerns of those still working in the company, while simultaneously fostering a sense of security and loyalty among them.
Frees up the recruitment process
Talk of redundancies can affect the recruitment process, potentially impeding your company’s ability to attract and retain top talent in the future. Consider this scenario – news of a poorly handled round of redundancies circulates within your industry or the job market as a whole. Prospective candidates, learning about the recent headcount streamlining event, harbour reservations about how stable the company is and worry about job security. This hesitancy can impede the recruitment process in two ways.
1. Talented workers might be reluctant to apply for open positions, fearing a similar fate
2. The company faces challenges in convincing potential hires of its commitment to professional development and employee wellbeing
The return on investment of outplacement services far outweighs the costs as companies that provide outplacement services can increase profitability, brand value, and productivity. It might be thought that outplacement programmes only benefit the departing members of staff, but the reality is the protection that outplacement services offer companies, as well as remaining and future employees, is just as significant. Hence, the outplacement cost is worth every penny.
Next steps
Now that you’ve understood what all the possible outplacement costs and benefits are, the next step is to find an outplacement firm that suits you and your requirements, while ensuring it doesn’t cost the earth. Remember that Careerminds doesn’t charge a retainer fee and works with redundant employees until they find their next job – with no hidden costs.
Check out our engagement rates for further information and, if your company is considering working with an outplacement provider, contact us now to find out more.
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