Newplacement: How employers can sweeten the farewell for employees   

Every now and then, employers want to or have to let employees go, but the law on protection against dismissal does not quite play along. Severance payments in termination agreements are then a common way of sweetening the pill for employees. But are outplacement or new placement a good alternative to make it easier for employees to say goodbye and make a fresh start?

What is outplacement?

The term outplacement – or, to put it in a more positive light, newplacement – refers to a service that is usually offered by freelance consultants or companies in connection with professional reorientation. It involves professional support and guidance for a career change, such as leaving a company and then looking for a job, starting a business, etc.

The typical scope of a new placement consultation includes the following advisory services, among others:

• Analyzing the current situation and determining the employee’s future plans,
• guidance on career prospects,
• developing an application strategy, including optimizing application documents and online profiles,
• job research & marketing by the employee,
• interview training and, if necessary, coaching for personal development,
• advice on tax and social security issues as well as
• support in contract negotiations and during the familiarization phase.

This form of support is either booked and paid for by employees themselves when a career change is pending. Or it can be financed by employers who want to make it easier for an employee or an entire group of employees to leave the company by assuming the costs of new placement counseling.

When should employers consider new placement?

There are many different situations in which it can make sense for employers to cover the costs of employee re-placement, e. g.

• the company is to be or must be restructured in terms of personnel,
• if company mergers or sales occur, or
• jobs have to be cut.

This shows that financing new placement for employees is a good idea in situations in which personal or operational redundancies are difficult to implement and a termination agreement is necessary to bring about the desired personnel change.

In the termination agreement, it is then possible to agree that the company will support the employee in their professional reorientation and pay for new placement counseling – instead of or in addition to a severance payment, for example.

Advantages for employers?

This way of sweetening the separation from the company for employees has a number of advantages for employers: Supporting employees in their professional reorientation gives the employer a significantly better image than a measly severance payment – both externally and internally (work climate!). Because with such support for employees – even at the end of an employment relationship – you are clearly communicating: We care!

In addition, the financing of new placement consulting – like a severance payment – is easy to calculate in terms of time and money, can contribute to an efficient change in the company in the best case, and can be claimed against tax.

Advantages for employees?

But new placement also has advantages for employees: they are not simply given their money and “kicked out the door”. The employer’s support helps to create prospects and allay fears.

At the same time, this support in career planning usually creates better opportunities for employees to gain a new professional foothold or to really develop further.

In addition, financing new placement counseling for employees can be financially more attractive than a severance package. Severance pay is subject to income tax for employees. Since 2020, this has been different in the case of new placements: since then, it has been clearly regulated that employer-financed new placement advice as a service for professional reorientation for employees is tax-free. This applies regardless of whether new placement advice is provided internally or externally.