Understanding the Hard and Soft Costs of Layoffs: Why Outplacement Matters

Layoffs are never easy, but the real challenge lies in what comes next. While severance packages and compliance matters grab immediate attention, it is a properly executed outplacement strategy that quietly reshapes your company's future. By carefully managing employee transitions, the return on investment outplacement provides becomes evident through reduced unemployment costs, reduced legal risks and a predictable severance process.

Plus, outplacement done well safeguards your all-important brand and team morale, making it a strategic move rather than just an expense. Why does brand matter in all of this? Because that is the perception your customers see you through. Missteps with the brand, such Cracker Barrel’s attempted rebrand gone awry, can quickly become exponentially impactful on the bottom line. Reputation management MATTERS. And the people who remain with your company after the layoffs are over have to remain focused and motivated to support the business, right? 

Here is where outplacement investment can shield your reputation, your brand and your bottom line. When considering outplacement services, it's important to understand the concrete financial benefits it can bring to your organization.

Let's explore three key areas in hard costs and soft costs where outplacement can lead to significant cost savings.

3 Primary “Hard Costs” Outplacement Mitigates

Reducing Unemployment Costs

Outplacement services play a crucial role in minimizing unemployment costs for companies going through layoffs. Each week a former employee is unemployed can increase your UI tax rate. The faster a laid-off employee finds a new job, the less time they spend collecting unemployment benefits. By helping former employees find new jobs quickly, outplacement services significantly cut down on the number and duration of unemployment insurance claims.   

By shortening the time employees spend in transition, this saves your company considerable money over time.

Lowering Legal Risks

Layoffs can sometimes lead to wrongful termination claims or disputes. Offering outplacement services can be a powerful tool in reducing the risk of legal action following reductions in force. When employees feel supported during their offboarding, they're less likely to pursue legal claims against their former employer. Goodwill can go a long way in preventing costly lawsuits and settlements.

By providing a structured path forward to a transitioning former employee, outplacement services can help channel an employee's energy into positive job-seeking activities rather than dwelling on negative feelings about you as their former employer.

Predictable Severance Planning

Outplacement services can make severance planning more predictable and cost-effective. When employees have access to professional job search support, they're more likely to engage in active job hunting right away. This proactive approach can lead to shorter severance periods. And employees who find new jobs quickly may not need to use the full extent of their severance package, potentially saving your company money.

Outplacement can help standardize your severance process. By offering a multi-functional package that includes both financial support and career transition services, you can create a more equitable and transparent approach to layoffs.

3 Primary “Soft Costs” Outplacement Mitigates

Protect Your Brand

In today’s highly connected world, word travels fast.  Reddit, dissemination of news from decentralized news sources, Glassdoor reviews, LinkedIn posts, and other employee network communication forums can quickly shape public perception of your company. Dents in your brand reputation are never an ideal shape and they cost money to fix them. Offering outplacement proves that you value people, even during tough times. 

It is critical that preserve your reputation as a good place to work during the tough times, so that pays its return in the good times, when it is time to hire again.

Empower Employee Morale

Remaining employees often experience “survivor’s guilt” after layoffs. And uncertainty is an even bigger driver of anxiety that quickly takes your team off task, compounding problems that layoffs were designed to resolve.

Knowing departing colleagues are being supported with resources and a plan, can stabilize morale, reduce key voluntary turnover, and help your team stay focused on core business objectives. 

Future Talent Acquisition

Layoffs that are being made now are done, in part, to preserve the future growth of the business. So, the day when it becomes “time to hire” is always just around the corner.  What do you want that to look like?  Prospective employees pay attention to how companies handle workforce transitions. A reputation for treating people well can make it easier to attract top talent when you start hiring again.

Outplacement programs offer job search support, resume writing assistance, and interview coaching. But what outplacement is really about is lowering overall costs for your company.

Think of outplacement as an insurance policy that pays dividends. The hard-dollar savings are in the form of reduced UI costs, lower legal risk, and more predictable severance that is easy to measure. The soft-dollar benefits such as brand protection, employee morale and future talent attraction are harder to quantify.  But they absolutely can be quantified, and they have long-term impact on your business success.