Retrenchment gains: Outplacement firms rake it in as companies look to soften layoff blows

Startups as well as companies in IT, IT services and retail sectors are reaching out to help retrenched staff, human resources and manpower agencies said. Typically, outplacement takes about three months and only one in five candidates are forced to take a pay cut, they said. Apart from helping find new jobs, outplacement services help candidates polish resumes, coach them for interviews, and encourage them to join relevant social media groups.

Adecco has seen a three-fold rise in the number of employees seeking career transition this year as compared to last year, an executive of the HR services company said. Adecco has an outplacement unit called LHH. “Notably, 75-80% of our diverse client base originates from the IT and ITeS sectors, encompassing both international organizations and a multitude of Indian firms," the executive said on condition of anonymity.

While outplacement services entered India right after the global financial crisis, the business is largely cyclical, depending on the job market. In 2001 and large parts of 2002, when a hiring frenzy was on, companies did not reach out for these services. But when hit by a funding crisis and macro-economic slowdown, startups, IT, ITeS and FMCG companies laid off in thousands, spurring demand for outplacement services.

“Over the last one year, our revenues from outplacement services have doubled and now, we have a 170-member team of employees and associates," said Hardeep Singh, president of Right Management India Pvt. Ltd, the consulting arm of recruitment firm ManpowerGroup. He emphasized that the candidates are getting new jobs within 90 days of being laid off, and barely 20% of them have to take a salary cut. His clients - mostly IT, ITeS and startups - are also seeking help in retrenching employees and training their managers on how to soften the blow.

Often, the candidate’s age, rather than the compensation, can hurt his chances of getting recruited, as firms prefer younger employees, Singh observed.

Companies that specialize in outplacement services charge a fee to the client, which can range from ₹40,000 to a couple of lakhs per candidate. The outplacement firm charges only the company laying off, and not the firm hiring the candidate. Thus, it’s a win-win for a recruiter, as picking up an industry-ready candidate who has been trained in specific roles by the outplacement service is also cost-effective.

“Outplacement is inversely proportionate to the job market. In 2022, we saw an uptick in hiring, so demand for outplacement services was lower. In 2023, particularly in H2, we are seeing a higher demand for outplacement services, as hiring in certain sectors is impacted by recession fears, etc," said Sue Ann Vaz, executive director of ABC Consultants who also heads its outplacement services.

In the volatile age of social media, nobody wants to go viral for the wrong reasons. And for companies, the stakes are too high to invite a social media backlash, which can severely dent their brand image. Thus, outplacement services are useful for perception management, too.

The “motivation behind seeking outplacement services may have changed from support in covid times to risk-mitigation in today’s times," Vaz said.