HR Mavericks

Eddy’s HR Mavericks Encyclopedia

Outplacement Firm

Layoffs are not fun for anyone, but outplacement firms can make them less expensive and less stressful for everyone. Investing in outplacement firms can save companies a small fortune by reducing unemployment costs and legal fees while improving its reputation.

What Is an Outplacement Firm?

An outplacement firm is a company that specializes in services to help recently terminated employees find new jobs, including writing resumes, networking skills, and counseling. Experienced career specialists help these individuals navigate the difficulties and pain points of seeking new employment and offer expert advice.

How Does an Outplacement Firm Work?

Outplacement firms typically contract with companies as a paid benefit to participating employees. The firm provides personalized support to each individual based on their needs. The outplacement firm’s specialists work with the former employees to offer advice and tools on applying for jobs, preparing for interviews, conducting salary market research, leveraging their connections, using social media, and much more. The goal of outplacement firms is to help displaced employees find new employment opportunities faster with the help of expert coaches.

Why Are Outplacement Firms Important?

Offering outplacement services to your ex-employees can be crucial for your company’s reputation and finances. Here are five reasons you should consider implementing this benefit as part of your severance package.
  • Prevent lawsuits. Offering outplacement services can prevent lawsuits for wrongful termination or retaliation. When discharged employees are upset, they may use lawsuits to seek settlements or other gains from the company. They may get filed out of anger and have no real basis, but can cost a lot of time and money to manage.
  • Improve your employer brand. Seeing that an employer cares enough to take extra steps to assist terminated employees find a new job reflects well on your company’s reputation. It can reduce social media or news slander. These individuals may be surprised to hear that you have anticipated their needs. Further, after they’ve moved on, having a positive outplacement experience will likely encourage them to score the company higher on surveys and ratings. Even current employees who fear termination in a future round of layoffs (also referred to as “survivor morale”) may be more at ease knowing that resources will be provided if they do get laid off.
  • Lower unemployment costs. A small investment in outplacement services can help avoid hefty unemployment premiums. Ensuring that your employees have the resources they need to find new work is a better option than searching on their own unsuccessfully for weeks or months. Likewise, outplacement services cut down on your bills by pairing employees with jobs sooner. This allows them to get paid sooner by their new employers.
  • Alleviate tension. When layoffs are happening or other circumstances cause terminations, emotions tend to run high. These employees may not be receptive to the advice or benefits you offer when they’ve just discovered they've lost their job and source of income. Handing the task to professionals at an outplacement firm will offer these individuals a chance to process the change and leave amicably.
  • Display compassion. Often, you’ve built strong relationships with these individuals and you sincerely wish the best for them. You may not have terminated them unless layoffs necessitated it. Many may be “out of practice” when it comes to marketing their skills and understanding the ins and outs of recruiting. Offering outplacement services is a very kind way to send employees off and show that you wish them well throughout the transition.

What Should an Organization Look for In an Outplacement Firm?

There are a number of factors you’ll want to consider when determining which firm to select. Not all outplacement firms are created equal, and neither are your employees.

Glowing Metrics

You want to make sure the outplacement firm you select has a proven record of success. Every provider should be able to offer you data on the success of employees who utilize their assistance. You can ask their averages for the elapsed time of their clients to finalize a resume, get an interview, and receive a job offer. Typically, long-standing and larger companies have the best reputations. However, smaller, newer companies may be better suited for your employees’ needs or have the best metrics for a specific field or industry.

Customizable Options

One size certainly does not fit all employees at various stages in their careers and different specialties and industry experiences. An organization should not need to pay for services that are irrelevant to their demographic of employees, nor for outplacement services that are too short to fit the recruiting cycles of particular fields, thus yielding less success.( Most firms have a deadline on their offerings and do not stay with the clients until they acquire a job.) You may want career coaches that have specific backgrounds and experiences to support your employees.

Location of Services

Where are your employees located? If your small business only has one location, utilizing outplacement services in your city may be a great option. If you’re a larger, multi-state employer, you may need to find an outplacement firm with multiple locations or virtual remote options. Some larger employers consider using multiple outplacement services in various locations to meet their needs. Maybe you prefer 100% virtual offerings. Be sure to consider your desired location or delivery of services.

Quality, Quality, Quality

Last but not least, of course you want the best quality possible. Since outplacement can be expensive, ensuring that the quality is top-notch is key. Researching outplacement services that specialize in your industry or the field of your laid-off employees may help you obtain career coaches who have more specific and relevant knowledge.

How Much Do Outplacement Firms Cost?

The cost of outplacement firms varies quite a bit depending on the range of services being offered. According to ADP, (a leading provider of human resources management software and services), outplacement firms can cost from a few hundred dollars per employee for basic services to about $20,000 for executive services (per employee). Because outplacement firms typically charge per employee, employers only pay for those who actually use it. Employers can communicate with the firms to collect data and metrics on participation rates and placement percentages to stay up to date on their effectiveness and determine whether the costs are worth it. The largest and most well-known outplacement firms can charge the most per employee—typically starting at a few thousand dollars—because of their robust processes and trusted reputation.
Chelsea Fredericks, SHRM-CP

Chelsea Fredericks, SHRM-CP

Chelsea is an HR consultant, specializing in internal investigations and employee relations. She recently graduated from the BYU Marriott School of Business with a degree in Human Resource Management. There, she was a four-year member of SHRM and served as the chapter president. Chelsea is passionate about human resources because of the ability to strengthen and encourage others through meaningful experiences and coaching that can improve their work life, satisfaction, and job performance.
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