The recession has been a double-edged sword to employers, forcing them to contend with the productivity and morale issues brought on by staff layoffs but also the financial squeeze of rising unemployment insurance taxes, COBRA costs and severance packages.

On average, employers paid 34% more in unemployment insurance taxes in 2010 than in 2009, according to the Department of Labor.

One outplacement firm, RiseSmart, believes they have the return-on-investment-focused solution to these financial considerations.

According to the firm's analysis, an employer that reduces its headcount by 75 employees today may be expected to pay more than $1 million in unemployment taxes over the next 12-to-24 months. This cost estimate assumes the employer's laid-off workers require an average of 37 weeks to find new jobs, the average duration of unemployment in February 2011, as measured by the Bureau of Labor Statistics.

However, RiseSmart concludes, the same employer can reduce its UI tax burden by more than $500,000 by decreasing the average duration of unemployment of its laid-off workers to 18 weeks.

"If at the end of the day you can get employees into jobs faster, you can potentially reduce costs, depending on how severance is delivered, and you can reduce your corporate tax rates based on unemployment taxes going down," says Sanjay Sathe, founder and CEO of RiseSmart.

RiseSmart's Transition Concierge outplacement program helps employers guide laid-off workers toward new jobs by presenting appropriate job opportunities and culling articles and events relevant to the job search.

Among the program's benefits, Sathe says, are improved employee morale and engagement, "because people who remain at the company are watching what happens to those going out the door."

Further, he adds, "if you get them into jobs, you're not burning bridges, and if the economy [restores itself], you can bring them back."

 

Outplacement critics

However, not all employment experts are convinced that outplacement programs are the best option for employers to pursue.

Ouida Peterson, vice president of education at Conexis, an employee benefits administrator, explains that "employers understand the concept of 'Get them out of my unemployment purse quicker,' but the conflict oftentimes is paying for the outplacement services. Aren't they laying off employees because they are having a money flow problem?"

She continues: "The employees' opinions spread like a virus through the company. Employees losing their job think, 'Why didn't you just put more money into keeping the employees?' The employees remaining at the company think, 'Why are you helping them find another job? How about rewarding us for staying?' The morale issues of a layoff are delicate maneuvers."

Peterson concedes that "of course employees don't consider the cost of unemployment benefits, and there are additional costs," chiefly, COBRA.

"As a COBRA administrator, we have seen more people electing COBRA and an increase in claim utilization of COBRA participants since the subsidy," she notes. "That costs everyone - the employer and the employees. What is it worth to help these people find another job quickly? Only the employer in the situation can answer that."

 

Services are worth the cost

For Leslie Beemer, associate director of employee relations at Gilead Sciences, Inc. and a RiseSmart customer for one-and-a-half years, outplacement services are worth the cost. She used RiseSmart's services when Gilead needed to close a site in North Carolina last December.

She believes that "it gives employees peace of mind that they have a resource available to them for quite some time."

The outplacement firm talks to employees onsite so there is a "seamless experience. The ability to talk to somebody about their next step on the day that they are notified, or soon after, is a wonderful thing," she says, adding that RiseSmart also provided training and education for management about the services and resources available.

"It's a resource that we can give to an employee who is caught in that unfortunate situation," Beemer says. "Certainly, there are certain situations where you don't have the ability to keep the employee on for whatever reason. I would argue that having the ability to give that employee a resource in that situation is certainly a good thing and far better than offering them nothing."

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