Cutting ties with an employee can be a touchy experience for both parties. Not only does a newfound lack of job security cause stress for the employee, but termination also can pose a financial risk for the corporation.
The need to terminate may be caused by budget cuts or a mismatch between the position and employee. Regardless of the reason for the termination, savvy corporations employ proactive ways to mitigate financial risk and maintain rapport with former employees. One of these ways is through investing in specialized outplacement services.
Outplacement services function as a means to ensure your company and former employees are taken care of. Below, we've detailed some of the most compelling financial rewards you can expect as a result of providing outplacement services.
Risk and Costs Of Lawsuits
According to the U.S. Department of Labor and Bureau of Labor Statistics, an average of over 19 million firings or layoffs take place each year in the United States. This is a normal occurrence, as layoffs and firings are regrettably common when operating a business. Yet those terminations can cause the occasional lawsuit.
No company likes lawsuits, as they can cost a pretty penny. However, you and your company can completely avoid a potential lawsuit altogether. Investing in proper outplacement services alone can save you an average of $40K per termination—and that doesn’t even calculate the mental benefit of avoiding a lawsuit.
Let's put things into perspective: On the one hand, the average settlement per employee is $55K if they have a lawyer and $15–30K if they don't. On the other hand, $15K can cover outplacement service fees for at least 10 employees, depending on the chosen outplacement service and plan.
Cost of Increased Company Taxes
Moreover, when you've had to terminate someone’s employment, you have to pay for their unemployment insurance even after they are no longer employed. This in turn increases the company's taxes.
The U.S. Department of Labor and Bureau of Labor Statistics (BLS) details the cost of layoffs and their effect on unemployment taxes. While calculating the exact effect layoffs will have on a company's taxes is difficult, a variety of different factors can increase those taxes. According to the BLS, these factors include the following:
- The number of terminations already completed by the company
- The period that each laid-off employee will collect unemployment benefits
- The amount of money in the unemployment insurance trust fund of the employer’s state of operation
- The total number of layoffs made by other employers
If you're wanting to bypass an increase in taxes, partnering with an outplacement service provider can be a great option. Why? They help former employees find new positions as quickly as possible. This then eliminates your need to pay for the former employee's unemployment, decreasing your company's taxes in the process.
Cost of Reduced Morale Among Employees Left Behind
Layoffs and firings are inevitable, but they can have a negative effect on company morale. This is bad for a company, because they can cause of loss of trust and diminish long-built rapport between the parties.
A loss of trust leads to a decrease in productivity, motivation, and employee performance—ultimately having a negative effect on sales. It causes a trickle effect.
Outplacement services function as a metaphorical cushion between the company and its employees. When included in employment contracts, they serve as a way for employees to know that they can trust in their employers, which they can see truly care for them. Knowing that they will have outplacement if needed provides a safeguard of sorts, assuring them that they are valued and will be taken care of in the worst-case scenario.
Cost of Damage to a Company's Reputation and Brand
Social media can help or hurt your brand. One bad social media review can reverse years of the reputation you've earnestly built for your brand. Just one review by a disgruntled ex-employee can throw you overnight into a social media takedown.
A negative employee Glassdoor review can cost your company thousands. Hiring and retention costs may rise as a result, and sales can even be affected. Reputation Manager Jonas Sickler states that while one cannot determine the exact cost of a bad reputation for a business, negative reviews are estimated to cost the U.S. economy more than $537 billion in annual revenue.
Moreover, Sickler states that a poor online reputation can impact a company's hiring costs, as well as employee retention. 71% of U.S. workers will not apply to a company with bad reviews. This causes a ripple effect: negative reviews mean a bad reputation, limiting your hiring pool.
On the other hand, one positive review can cause a flood of brand appreciation. Good social media can lower your costs and increase your revenues. This doesn't happen through posting about how wonderful your company is. Your employees will do that naturally if and when they feel appreciated, secure, and valued. Employees who receive great outplacement benefits often express their gratitude online.
Find Your Next Outplacement Service Provider
Terminations will happen. This is why we at YES Outplacement want to help you navigate this process.
We work hard to ensure that your company is protected and your former employees can transition fast into great new jobs. Our outplacement services are here to …
- Protect your brand as socially responsible
- Mitigate the risk of litigation
- Increase morale for employees that remain
- Give terminated staff dignity, hope, and the support they need to move forward
- Make you more competitive in your talent acquisition efforts
- Safeguard your reputation
- Inspire your employees to trust you
- Raise your Glassdoor ratings or keep them high
We're eager to answer any questions you may have. Schedule your free half-hour consultation, and we can get started by aligning you with the best services we have to offer for your needs. Ensure your company and former employees are taken care of today.