What do outplacement services cost?
August 05, 2024 by Jen David
If a reduction in headcount is on the cards, you may be considering providing outplacement services as part of the severance package. If so, you probably have questions about the costs involved.
Outplacement provision is not a legal requirement, although the Ministry of Manpower advises that, during retrenchment exercises, companies should “help affected employees look for alternative jobs in associate companies, other companies, or through outplacement assistance programmes.” Offering outplacement also helps to mitigate the risk of lawsuits, negative publicity, and low morale among retained employees. For these reasons, it’s important to take a holistic view of the costs involved.
The two questions a company needs to ask about costs, at the start of a retrenchment process, are:
- How much does it cost to work with an outplacement provider?
- What costs and risks are involved with not offering outplacement services?
What do outplacement services cost?
Well, unfortunately there’s no straightforward answer to this question. The cost of outplacement will be determined by the seniority of affected employees and the level of outplacement service the company chooses to offer.
As a general rule of thumb, employees paid by the hour tend to incur lower outplacement fees while senior executives will incur higher fees.
The key variables influencing the total cost include:
- The seniority of the retrenched employees
- The skill level and experience of the career coaches
- How many employees you wish to participate in the programme
- Whether the outplacement programme is personalised
- How much support the programme provides
Additional services, such as one-to-one coaching with a careers specialist, will increase the cost. And don’t forget that with paid retainer services, you may end up paying for services that you don’t ultimately use.
As you’ll see from this list, and from your own research, the cost of different outplacement companies varies depending on multiple factors. At Careerminds, however, we consistently hear that our fees are 20% to 40% lower than other outplacement companies.
Modern outplacement providers, who use the latest technology to deliver their services, tend to have lower overhead costs and therefore offer more value for money.
It’s not just the basic cost that you need to factor into your calculations, though. You also need to find a provider that can partner with you to achieve your business goals and can provide the level of service that you need.
But what other factors come into play when considering the costs of outplacement? Let’s take a closer look.
What is the impact of term limits on outplacement cost?
To get maximum value from your investment in outplacement services, it helps to fully understand the process. Many outplacement providers will impose term limits on their offering. That means that, if your employee doesn’t secure a new job within their specified timeframe (usually a few months), the programme comes to an end. This is obviously unhelpful for the retrenched employee, who is left to navigate the job search alone from that point. It’s also unhelpful for the company, who have spent the money yet not achieved the desired results.
Here at Careerminds, we do things differently. We don’t place a limit on the time a retrenched employee spends in our programme – we work with them until they are placed in a new role. We call this service “until placement.” We commit our time to achieving results for both the individual and the business.
What about retainer fees?
Careerminds is also different in its approach to retainer fees. Traditional outplacement providers will charge a retainer fee, enabling your business to use their outplacement services whenever they’re needed – for a recurring payment. We don’t do that.
Careerminds will work with you when you need us, and charge only for the service you actually use. We don’t charge you for retaining the option to use our services. This will save you a significant amount, enabling you to channel the money elsewhere in the business.
Would your business benefit from keeping an outplacement provider on call long-term? As your strategic partner, we can offer you immediate outplacement services without costly disadvantages.
What is the cost of choosing not to offer outplacement?
An obvious next question, when asking “what do outplacement services cost?” is why you should pay for a service and incur costs on behalf of individuals that you no longer employ. It’s a reasonable question.
Despite the costs involved with outplacement, the advantages actually outweigh the disadvantages. In fact, the expense is easily justified when you look at the potential for litigation and reputational damage. Paying for outplacement services can actually save your business money, when you consider these risks:
Law suits
Regardless of the actual reason for termination, and however clear the business case is, individuals may feel resentful and cheated when they lose their job. With an uncertain future ahead of them, they may resort, with cause or not, to legal action.
If the process has been handled properly, the company is likely to win in any case – but the process is costly in terms of legal expenses, time, and brand reputation. These costs are likely to far exceed the cost of providing outplacement services, which will support the disaffected employee into new, meaningful employment.
When managing a headcount reduction, legal compliance must be a priority for this reason.
Employee grievances
Grievances can arise from terminated employees if they are retrenched without adequate support. Their final days are likely to be notable for their decreased motivation and productivity, and they may be less than willing to share their expertise or contribute to a knowledge transfer process. Efficiency and business continuity start to suffer.
Outplacement services can help you to avoid these problems. By demonstrating a commitment to supporting your departing staff, you’ll ease their transition into a new role and minimise any business impact from discontent and disengagement. Taking this proactive approach helps the business to stay productive whilst minimising stress on the individual.
Reputational damage
Your brand reputation is hard won, but easily lost. It’s important to realise the impact that the internet and social media can have on your brand credibility. Imagine a LinkedIn post from an affected employee about “large-scale redundancies” – it could not only reach investors and impact the stock market, it could also affect your ability to attract talent and hire in other areas. Your business may gain a reputation for thoughtlessly discarding unwanted staff.
Now imagine another scenario. A retrenched employee leaves a review of the company on Glassdoor… but instead of coming across as a disaffected employee, they are praising the business for the on-going support they are receiving at a difficult time. Your company is now a magnet for attracting top talent, leading to your business becoming ever-more productive and profitable. You maintain your hard-won brand image and positive public perception.
Outplacement services such as Careerminds can help to protect your company’s reputation, and the cost of this must be factored into any calculation regarding outplacement costs.
Disillusionment among retained employees
It’s not just your departing staff who are affected during a retrenchment exercise – there’s also an emotional impact on retained staff. Uncertainty and low morale can negatively affect productivity and retention – which no business wants.
Offering outplacement services sends a strong message to your remaining staff. They can rest assured that, should they find themselves in the same position, you would provide a robust package of support. This will address their immediate concerns and ultimately lead to a greater sense of loyalty and security.
Recruitment blocks
Redundancies and retrenchment can impact more than just your existing staff. The effects extend to the next generation of talent, impeding the company’s ability to attract and retain top staff. News of badly handled downsizing will spread quickly within the industry and the local job market. Candidates who learn about the reduction in headcount may have reservations about the stability of the company and their long-term job security.
This may deter them from applying to vacancies in the first place. If they do apply, they may need reassurance about your commitment to employee well-being.
However, outplacement can help you mitigate this. By offering outplacement services and keeping a provider on a retainer (remember that Careerminds don’t charge for this!), you can reassure potential staff that you place employee well-being at the heart of everything you do. You could even differentiate yourself from your competition by offering outplacement as an employment benefit.
Securing a return on your investment
Outplacement can improve an organisation’s productivity, profitability, and brand value. When considering what outplacement services cost, the benefits far outweigh the cost outlay. It’s not just about helping your departing employees, it’s also about protecting your business, its retained staff, and its future talent. For these reasons, a good outplacement provider is worth every cent.
You’ll mitigate the most common risks associated with headcount reductions and provide additional benefits that must also be factored into the cost-vs-return calculation. These include talent retention, employee loyalty, reputational protection, and reduced legal costs.
Choosing the right outplacement provider
Now that you know about outplacement services cost and why the investment is worth it, you need to know about your next steps. You’ll want to choose a cost-effective provider with a broad, innovative programme.
We’ve compiled a guide to choosing the best outplacement services, and can offer an affordable programme with support until placement.
Find out more about our bespoke outplacement services or schedule a free demo to see why our modern approach puts us ahead of traditional providers.
In need of outplacement assistance?
At Careerminds, we care about people first. That’s why we offer personalized talent management solutions for every level at lower costs, globally.