What is Outplacement?

Outplacement is any service that assists a departing employee with obtaining a new job or transitioning to a new career. Access to outplacement services is offered by some employers as an employee benefit for their staff. Outplacement services can be beneficial for all parties monetarily, professionally, and emotionally and, more often than not, ensure a peaceful end to a working relationship.

Key Takeaways

  • Outplacement is a service that helps a terminated employee with the transition to a new job, which can include resume writing, job search, and job coaching.
  • Outplacement can can have benefits and costs for both employers and employees, as a part of the total compensation cost of a company's labor force.
  • Outplacement can reduce stress and turmoil for transitioning employees and mitigate risk for the employer.

Understanding Outplacement

No one likes to be fired or laid off from a job or to deliver the news to someone else, but going above and beyond a severance package by providing outplacement services can help both parties through an often-rough transition.

Sometimes services are offered in-house by the company that’s letting an employee go; others hire a third party when it's necessary to keep expenses lower or if tensions or awkwardness are particularly high. Outplacement services were traditionally provided at an outplacement firm so that the former employee could have access to office tools (such as a phone and computer) that he or she needed in order to write resumes and cover letters and find new employment. Today, many employees have home offices and may only need to visit an outplacement firm for career counseling, if at all, since counseling may also be done over the phone.

Either way, the services remain the same: resume and cover letter writing, coaching, market analysis, fine-tuning interviewing skills, salary negotiation, and other services designed to give an ex-employee the best opportunity for finding another job as quickly as possible.

Benefits of Outplacement Services

From an employee’s perspective, the outplacement certainly lightens the emotional load that comes with a job loss. It’s often overwhelming enough to find a pink slip on your desk. Outplacement services can often help with feelings of insecurity, embarrassment, anger, or fear of the unknown, which make a job search that much more difficult.

On the other hand, employees should recognize that employer-paid outplacement services will, in the end, be incorporated into the employer’s total labor cost. That means that any money the employer pays for outplacement could be made up by lowering total compensation in other ways.

From an employer’s perspective, providing outplacement services can show that the company truly cares about the person as a human being and could go a long way toward thwarting any revenge. Insurers who provide insurance against the risk of wrongful termination lawsuits look favorably at firms that a have a solid outplacement plan, as it can reduce the risk of costly legal problems. Compassionate outplacement may also reduce the risk of workplace violence and active shooter situations.

It’s also a way to keep an ongoing relationship with an employee. That’s particularly important if it involves a layoff due to downsizing, not poor performance or behavior, or the person leaves on his or her own accord. It’s in a company’s best interest to be encouraging and supportive if it has an eye on possibly rehiring the person at a future time.

The other aspect of providing outplacement services that bodes well for companies is saving money on unemployment claims. While companies do not pay extra when a former employee files a claim that’s approved, the annual tax rate they pay to the state toward unemployment can be affected.

That’s because that rate is determined by the number of claims past employees make in a year. For example, according to Chron.com, “a business with a $1 million payroll business can save more than $70,000 a year by avoiding unemployment claims.”

On the cost side, employers should consider the normal and expected rate of turnover in their labor force. Frequent or large layoffs can considerably increase the cost of providing outplacement service. Employers should plan ahead and budget the expected cost of outplacement into their total labor cost.