Employment Background Check Blog
reduction-in-force-event

If your organization has ever dealt with the reality of a reduction-in-force (RIF) event, you know just how much stress and uncertainty they can create.

Adding to this pressure are the longer-term implications of a layoff: the exposure to litigation risk and creation of additional costs of unemployment.

In terms of litigation risk, fighting a claim against wrongful termination can be a long and expensive battle, diverting often scarce resources and capital from other strategic projects.

Following a RIF, unemployment costs can also hit your bottom line, since, in most states, employers fund (or significantly share) their employees’ unemployment benefits–costs of that can fluctuate depending on how quickly former employees find a new job.

But one way you can address litigation risks and longer-term unemployment costs head-on is by offering outplacement services to all transitioning employees.

Reducing Risk the Right Way

Getting a transitioning employee to sign a severance agreement is often a critical step in better insulating your organization from the threat of litigation. While offering outplacement may only be one part of a more complex severance agreement, it’s nevertheless a critical one, since it helps relieve the long-term pain of a layoff: finding a new job.

When outplacement is incorporated into a robust severance agreement that also includes measures, like interim compensation and benefits, that alleviate shorter-term challenges, a terminated employee may be more inclined to sign the document.

When individuals believe that a former employer actually cares about their long-term career prospects, it could work to counteract immediate negative feelings and soften the often painful experience of a termination. Taken together, a signed severance agreement and an employee whose perceptions of being wronged have been mitigated can be a powerful preventive measure against litigation.

By offering outplacement to all your transitioning employees, you go a step further in better ensuring that in the weeks and months following a RIF, there are fewer disgruntled former employees who may be tempted to take legal action against your organization.

Lowering Your Costs

One key preventive method to manage the costs of a layoff is to better ensure that your transitioning employees don’t stay on the unemployment rolls for very long. That’s where offering outplacement can work in your favor, since doing so can reduce the time it takes for an individual to find a new job. Providing this type of assistance to terminated employees can be a powerful tool in combating the often unforeseen long-term costs of a RIF.

So why does it matter that you’re able to offer outplacement to all your employees, and not just to upper-level managers (as has been the traditional model)?

Keep in mind that upper-level employees typically have more experience and more extensive professional networks that they can leverage to identify the next step in their careers. As a result, they may only be on unemployment for a few weeks–and that’s if they even file for it.

An entry- or mid-level employee may encounter more difficulty in finding a new position, therefore keeping them on unemployment for a longer period of time. Therefore, it would be a savvy financial move to offer outplacement to all your transitioning employees and better contain your long-term unemployment costs.

Universal Outplacement Isn’t a Fantasy

With the high cost of traditional outplacement, you may feel like you’re unable to offer transition assistance to all of your employees. But there are now new outplacement solutions on the market that not only have improved on the traditional model, but are actually available at a lower price point.

This means you can offer outplacement to every employee, regardless of job title. Doing so can help mitigate organizational risk and potentially reduce transitioning employees’ time on unemployment.

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The HireRight Blog is provided for informational purposes only. It is not intended to be comprehensive, and is not a substitute for and should not be construed as legal advice. HireRight does not warrant any statements in the HireRight Blog. Any statutes or laws cited herein should be read in their entirety. You should direct to your own experienced legal counsel questions involving your organization's compliance with or interpretation or application of laws or regulations and any additional legal requirements that may apply.

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