How outplacement can lower the cost of a layoff.

Throughout this series we’ve explored some of the priorities, attitudes, and costs associated with a layoff. From the different circumstances which lead organizations let go of good employees, to how such a transitional period impacts the priorities of those serving various roles within the company, we’ve shown that layoffs result from underlying circumstances that aren’t always considered.

We’ve also briefly touched on the different ways outplacement not only eases the transition of affected employees but also protects and even boosts the employer brand. This last entry in our three part series on the hidden costs of layoffs will touch specifically on what costs beyond employer brand for which you have the power to plan and to mitigate and how outplacement can help you achieve your goal.

Morale, Productivity and Retention

One of the biggest costs to a business undergoing a period of layoffs is also one of the less obvious ones—the short-term financial impact of low employee morale. When most people think about layoffs, they typically only consider those who have been impacted. However, even those who remain at the company are prone to decreased morale and overall happiness. Employee morale directly affects productivity and can also contribute to a high turnover rate and absenteeism. Gallup estimates that there are 22 million actively disengaged employees at a given time, costing the U.S. economy as much as $350 billion per year in lost productivity. Such striking numbers demand attention and suggest that how companies handle a period of layoffs can have a significant impact on the remaining employees.

Regardless of whether the layoff could have been avoided, staying employees are known to feel empathy for their fellow coworkers and may even worry about their own job security. When a layoff isn’t communicated effectively and measures aren’t put in place to take care of impacted employees, it can result in growing resentment among remaining staff. This can manifest in employee resignations, difficulty recruiting good prospective employees and even a dip in sales. In the end, the way a company handles layoffs has both short- and long-term consequences.

Unemployment Tax Charges: Now and in the Future

Even if your department doesn’t personally keep its hands on the company purse-strings, human resources can directly affect the long-term financial impacts of a layoff on the organization. Most people are aware of the short-term effects of a layoff on unemployment taxes, including a higher experience rating and increased unemployment tax charges in the following year, but few know the long-term impacts of a layoff on unemployment taxes. Did you know, for example, that your organization might still be responsible for your former employees’ unemployment charges if they are laid off from their next company within a few years of leaving yours? Your organization is actually responsible for a percentage of a laid off employee’s unemployment claims for a number of years after a layoff, so it is not only in their best interest but also in your organization’s best interest to help them land a stable and fitting new job fast.

How Outplacement Limits These Costs

Protects Company Values

A company’s value and its employer brand is an exceedingly crucial part of its overall position, regardless of its size. Unfortunately, if a company undergoes a cycle when it’s forced to reduce personnel–no matter the cause–it becomes liable to receive some negative kickback that could impact its overall success, including from its remaining employees. However, offering benefits that protect their former coworkers, such as outplacement, can mitigate negative sentiment among staying employees. In fact, providing services that take care of the employee can reinforce a company’s image and can even help boost the company’s reputation, retention, and productivity in the long run. Most companies these days promote rhetoric about values and genuine care, and outplacement benefits is the perfect opportunity for an organization to prop itself above its competitors by doing one thing different—practicing what they preach.

Displaced Employees Land Fitting New Jobs Fast

Outplacement services can help a displaced employee find another job that best suits their expertise and past experience quickly. These services specialize in making sure that the impacted employee finds new work that aligns with their career goals, ensuring that they’re more likely to find a job that they can stay with and excel in—reducing the possibility that they may need to go back on unemployment. Without the presence of outplacement, affected employees are left on their own to take the steps required to finding employment. The support, coaching and library of resources outplacement services offers displaced employees plays a critical part in helping them find their way back to satisfying—and hopefully long-term–work.

The Bottom Line

From preventing lost productivity to reducing your experience rating and even potential future unemployment claims, outplacement positively affects the bottom line in the long term.

Throughout this series we’ve explored the far-reaching impact outplacement has on not only protecting but also bolstering every aspect of a company’s business practices. It’s clear that those who offer outplacement have an advantage over the competition, demonstrating how they value their employees during a time when company culture plays such a huge part in success.

Want to know more about the hidden costs of a layoff? Learn about the medium- and long-term impacts that unemployment may have on your organization’s taxes and how to mitigate these charges with outplacement services, by downloading our white paper, The Unspoken Costs of a Layoff.
  • Rick Cobb

    Happy to share the original research we did on this, over 10 years ago. When we released it, we created formulas showing how much money a company would save using our programs. FYI – I just invented a new word. I call it “plagiarism”.
    https://www.chicagofed.org/publications/economic-perspectives/2005/2qtr2005-part8-challenger

    • Kaila

      Hi Rick! So sorry to have missed this comment earlier. I appreciate you taking the time to read the blog.

      I think this may just be the case of two industry writers recognizing a similar trend, as we hadn’t read your paper (nor did we know it existed until you linked to it here). There are no passages copied from your paper so pointing out a concept isn’t plagiarism–and I don’t believe that you have this concept copyrighted. If so, we apologize, as this is something that one of our own employees pointed out as an interesting topic and we pursued it independently of your report. There are a number of articles that have been written on this topic by other sources as well, so I’m assuming that you do not have a copyright to the concept. If you would like to discuss further, you’re welcome to reach out. My email is kprins [at] risesmart [dot] com. Thanks! – Kaila

Blog Topics