Outplacement services are a valuable benefit that companies offer to employees who are leaving the organization. But what are the costs of such services, and what factors influence these prices? In this blog post, we take a detailed look at the cost factors and show how outplacement services can save costs in a holistic process.
In this blog post, we will cover the following aspects:
- What is outplacement consulting?
- Factors that influence the cost of outplacement
- Average costs of outplacement
- Cost-benefit analysis (including examples)
- Hidden cost traps: Declining productivity
- Tax aspects
1. What is outplacement consulting?
Outplacement consulting supports employees in their career transition after losing their jobs. This consulting can include the following services:
✔️ Consulting sessions: Individual career counseling to support career transitions.
✔️ Application document preparation: Professional resumes, cover letters, and online profiles.
✔️ Job search and networking: Assistance in finding new positions and building a network.
✔️ Interview coaching: Preparation for job interviews and other application processes.
2. Factors that influence the cost of outplacement
The cost of outplacement consulting varies greatly depending on:
✔️ Scope of services: A comprehensive package with many services is generally more expensive than basic consulting.
✔️ Experience of the provider: Providers with extensive experience and a good reputation often charge higher fees.
✔️ Duration of the program: Long-term programs that last several months cost more.
✔️ Number of consulting hours: More hours for individual consulting lead to higher costs.
✔️ Digital service vs. on-site service: Digital services offer cost advantages as no travel expenses are incurred.
3. Average costs of outplacement
The cost of outplacement consulting can be broken down as follows:
€800–€1,200 per employee (Basic Service)
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- Resume and cover letter creation.
- Access to online tools and resources for job searching.
- Short-term targeted support and assistance with job search.
€2,000–€4,000 per employee (Standard Service)
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- Individual and group coaching.
- Mid-term support and assistance up to 3 months.
- Preparation for interviews and optimization of LinkedIn profiles.
€5,000–€10,000 per employee (Premium Service)
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- Personal branding and executive coaching.
- Personalized tests and analyses.
- Long-term support for up to six months.
- Intensive 1:1 counseling and tailored job placement services.
It is important to note that many outplacement providers offer customized packages that vary depending on the number of participants and services used.
4. Cost-benefit analysis
Although the initial costs may seem high, outplacement consulting can bring long-term benefits:
✅ Financial savings: An example shows how outplacement can reduce costs:
Anna S., a long-time employee of a medium-sized company, is dissatisfied after a restructuring and is considering legal action against the company. Her lawsuit could be lengthy and costly, leading to significant expenses for legal fees, court costs, and additional salary payments during the proceedings.
Instead, the company offers Anna outplacement consulting. This decision has several advantages:
- Quick resolution: Outplacement consulting helps Anna with her career transition, reducing the likelihood of legal action.
- Cost savings: The company avoids high legal and court costs that could arise from a lawsuit.
- Avoidance of additional salary payments: Legal proceedings can lead to long delays, requiring additional salary payments to the employee. Outplacement consulting avoids this.
Overall, the company saves between €25,000 and €50,000 by opting for outplacement consulting, saving on legal fees, court costs, and months of salary payments. This proactive measure leads to a faster and more cost-efficient resolution compared to a potential lawsuit.
✅ Legal security and employer image: Outplacement consulting strengthens the employer’s image and ensures legal security. A fair handling of separations is positively perceived both internally and externally.
5. Hidden cost traps: Declining productivity
A often overlooked cost trap during layoffs is the loss of productivity. Rumors and uncertainties caused by layoffs can affect the productivity of remaining employees and exceed the costs of an amicable separation.
Example: The termination of Richard M. leads to unrest and speculation among colleagues. If ten employees spend a week intensively discussing the termination and possible further layoffs, 50 hours of working time can be lost. At an hourly rate of €100, this results in costs of €5,000 for just one week.
Similarly, the costs for damage control meetings or legal negotiations can be significant. Works council discussions before the termination also tie up capacities and resources.
6. Tax aspects
Until the Annual Tax Act 2019, the fee for outplacement consulting was taxable. The employee could claim the amount as business expenses, leading to tax neutrality. Since the 2020 law change, outplacement consulting costs for departing employees are tax-free (§ 3 Nr. 19 EStG-E). This change simplifies the tax handling and reduces dissatisfaction about tax liability.
7. Conclusion: What does outplacement consulting cost?
At first glance, the costs of outplacement consulting may seem high. However, considering the entire separation process, it becomes clear that outplacement can avoid many costs – such as legal and court costs as well as productivity losses. Companies can achieve significant savings through outplacement while demonstrating their commitment to fair and supportive separations.
With professional separation management, a company shows responsibility and offers its employees valuable perspectives for career development. Well-executed outplacement can not only save costs but also help employees find a satisfactory new position.
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