All about outplacement pricing
November 29, 2021
Benefits of Outplacement Services
All outplacement services are not the same. When outplacement is most valuable and when it’s least valuable is essential to know, and it can mean saving a company hundreds of thousands of dollars in outplacement costs per year.
Outplacement pricing typically consists of three components – outplacement consulting time, outplacement training time, and outplacements with clients – each with different prices attached to them.
The first step in understanding outplacement pricing is to know what business you’re actually in as an outplacement firm. For extreme simplification, we’ll break out companies into two general categories: those that handle layoffs themselves or those that outsource them altogether. You may fit somewhere between these two, but we’ll make it black and white for this discussion.
Most outplacement companies charge a fee per outplaced employee. In the “handling it themselves” category, outplacement usually is included in the outplacement consulting package or outplacement training package because outplacement can save a company time and money in T&E and severance/benefits packages in addition to helping with resume preparation and LinkedIn profiles which can all be done by outplacement companies, so they don’t have to do them themselves when someone leaves.
Because outplacements require expertise in navigating challenging emotional waters, outplacement consultants are only paid when they walk people through their first meeting with a client (initial interview) and after outplacing them with a client. There’s no outplacement revenue generated until outplacements are done, which is why outplacement companies have outbound outplacement quotas built into their contract agreements with clients.
In the “outsourcing it” category, outplacement fees (per outplaced employee) frequently range from $1,000 to $3,000 and sometimes more. This price point can be very high because outplacement firms expect follow-up work with terminated employees after they’re outplaced to help them transition and maintain momentum through reentry (the period immediately following termination when workers start applying for new jobs).
The trick here is that you don’t get reimbursed for outplacement fees by a client unless you outplace the outplaced employee with them. If they terminate before outplacing, outplacement revenue is lost, and outplacement company profits suffer significantly.
The other issue is that many outplacement companies offer discounts if a client signs an annual contract for outplacements instead of paying on a per-outplaced-employee basis. For example, one outplacement company may charge $1,000 for outplacements but give a 50% discount to sign an annual contract for eight outplacements (64% off) instead of getting set individually for each outplaced employee.
One benefit of this model is that clients lock in rates for future years, which is something outplacement companies fight for. Since outplacements are not an expense to your business, they need to generate revenue or at least help you generate more revenue through new hires, resumes, and LinkedIn profiles, so it makes sense why outplacement companies are so adamant about locking-in outplacement caps.
On the other hand, outplacement fees are often criticized as being too high because outplaced employees see their friends leaving the company when they do who don’t experience layoffs (for reasons like poor performance) pay zero outplacement fees ($0). Employees might conclude that since some of their co-workers aren’t forced out that maybe there isn’t anything wrong with them after all, and they no longer want to work with outplacement companies. It’s a common outplacement client complaint that outplacement fees are too high; however, outplacements are not mandatory for outplaced employees leaving your company, so it makes sense that clients might use this as an excuse to stop outplacing as well as wanting to switch out (stop using outplacement firms and bring employees onboard themselves).