The hidden costs of layoffs (and how to avoid them)

When a company conducts mass layoffs, or even smaller-scale cutbacks, the objective is usually to reduce costs.

Reductions in force carry a price tag of their own, however. And if not managed properly, these costs can be far greater than the employer bargained for.

The financial gains of layoffs can be offset by rising unemployment insurance (UI) taxes, severance costs, COBRA plans, discrimination claims and even lawsuits.

For every week a laid-off employee has not found a job, companies can expect their future UI tax obligations to grow. With the national unemployment time frame currently at 40 weeks, that can add up to a major hit to the bottom line. The more employees involved, the greater the impact.

Generating ROI with Effective Outplacement

While many companies simply absorb these UI costs, an increasing number are looking more holistically at their workforce reduction strategies – to ensure that the savings produced by layoffs don’t immediately go out the back door.

Smart employers can slash their UI costs in half, for example, by working with a results-oriented outplacement provider to help their transitioning workers get into new jobs faster.

In addition to reducing UI costs, companies that invest in results-oriented outplacement solutions present themselves as caring employers. The benefits of this portrayal cannot be discounted.

Outplacement can soften the feelings that can develop in a workforce reduction. Left without assistance, employees who feel abandoned are more likely to lash out. This can occur in social media and online forums, damaging the employer brand, and more formally, in meritless lawsuits.

According to the Equal Opportunity Commission (EEOC), workplace discrimination lawsuits soared to record heights in 2010, up 7.1 percent from 2009. It was the largest number of claims filed in the EEOC’s 45-year history.

A Win-Win for Employers and Employees

Now more than ever, outplacement is a win-win for employers and employees. And the case can be made with hard numbers to even the most tough-minded CFO.

But not all outplacement solutions are alike. So it’s important to choose wisely.

Old-school outplacement providers are in most cases not focused on ROI, and in fact often don’t even track their results for their clients. They offer high-cost, low-return services such as group “grief” counseling, classes on resume preparation, and the leasing of expensive office space for use by transitioning workers.

Today’s leading-edge outplacement solutions take a more modern, results-oriented approach. They provide each transitioning worker with a personalized online portal from which they can access jobs mined from millions of sites across the Internet, research companies, manage their job search in real time, and even share jobs using social networking. These new outplacement solutions are a reflection of changes in the recruiting industry, which has embraced online job searches and the use of social media.

But the new outplacement solutions aren’t just about technology. Each worker can meet one-on-one with a transition specialist with experience in the employee’s industry, participate in webinars with industry experts, and practice interviewing with an HR specialist.

Participants in tech-savvy, results-focused outplacement programs such as these tend to find jobs in about half the time as the national average.

For today’s employers, this can make all the difference in whether your planned layoff achieves the cost benefits you envision – or carries a price tag that’s far bigger than expected.

Learn more about how "win-win" outplacement services can help you!