Who pays for outplacement and how does an outplacement allowance work?
Blog by
Mariël Ganzeboom
Outplacement is an investment in new work and a new future. But who actually pays for this guidance? And how does an outplacement allowance really work?
In many cases, this guidance is part of a broader outplacement program that is documented in a termination agreement or social plan.
In this blog, you’ll find all the financial aspects of outplacement in one overview: from costs and allowances to transition compensation, collective agreement arrangements, and practical budgets.
Who pays for outplacement in the event of dismissal?
In most situations, the employer pays for the outplacement program. This is often done through a social plan, restructuring budget, or arrangements in the settlement agreement (VSO). The costs are then paid directly to the outplacement agency, so you don’t receive an invoice yourself.
Good to know:
- Outplacement can be included in the settlement agreement (VSO).
- The employer and employee decide together what budget is appropriate.
- The program usually starts directly after dismissal or just before.
Many employers choose outplacement to help employees transition smoothly to new work and to avoid someone being without prospects for too long. Moreover, many organizations see it as part of good employment practice: it provides support in an uncertain phase and ensures a respectful end to employment. In larger reorganizations, outplacement is therefore often laid down in company policy or a social plan.
You can find more about different forms of guidance on the page about individual outplacement and in our explanation about collective outplacement.
When does the employee pay themselves?
Sometimes someone opts for outplacement independently, for example in case of voluntary departure, career reorientation, or if there is no arrangement via the employer. In that case, you can pay for the program through:
- (Part of) the transition allowance.
- Sector-specific subsidies or training budgets.
- Your own contribution depending on your situation.
Many people prefer to pay for outplacement using the transition allowance, as it is an investment in job security. How this works exactly, you can read below.
Outplacement and the transition allowance
The transition allowance is intended to support the step towards new work. That’s why all or part of the payment can be used for outplacement.
It’s important to specify in the VSO what amount is available, whether it falls within or on top of the transition allowance, and how the program will be paid. This avoids misunderstandings and keeps financial agreements clear.
What is an outplacement allowance
An outplacement allowance is the budget made available to pay for the outplacement program. This budget can come from:
- The transition allowance.
- A separate employer’s budget.
- Agreements from a social plan.
- Additional arrangements in the VSO.
The goal is always the same: making sure you get back to sustainable work as quickly as possible.
What can you use the budget for?
The allowance can be used for program components such as career coaching, application training, labor market orientation, coaching, and sometimes retraining. In practice, this is usually decided in consultation so that the program fits your situation.
How is the amount of the budget determined?
The amount of the outplacement allowance varies per organization and situation. Common factors are:
- The reason for dismissal.
- Function and work level.
- Provisions from the collective agreement or a social plan.
- Room for negotiation in the VSO.
In practice, budgets between €2,000 and €6,000 are often seen, depending on the duration and intensity of the program.
What does an outplacement program cost on average?
The costs depend on the duration and intensity of the program.
- Short program (3–4 months): average €2,000 – €3,000.
- Average program (6–9 months): €3,000 – €5,000.
- Comprehensive program (up to placement with aftercare): €5,000 – €7,500.
Employers often opt for customization: tailored to the role, sector, and personal situation.
Tax rules surrounding outplacement
For employers, outplacement costs are usually considered business expenses. This means they may deduct these costs for tax purposes, just like other investments directly related to good employment practices or staff development. This lowers the net cost and makes it a logical choice for many organizations to facilitate guidance towards new work.
For employees, outplacement is usually tax-free, as long as the support is aimed at training or work-to-work transition. The Dutch tax authority considers this an investment in sustainable employability and not wages in kind. As a result, the amount is not taxed and the employee does not face adverse tax consequences.
Because of this combination—tax deductibility for employers and tax-free use for employees—outplacement is both financially appealing and practical in nearly every dismissal situation.
The role of MEPD in your outplacement program
Outplacement can be arranged in various ways, but clear agreements and appropriate support make the program accessible and effective. MEPD helps employers and employees select a program within the available budget that truly suits someone’s situation and future ambitions.
Would you like to know what is possible in your situation or do you have questions about allowances or costs?
Feel free to contact us. We’re happy to think along with you.
Mariël Ganzeboom
Marketing and Communication
My passion is to creatively contribute to the further growth and brand awareness of MEPD—and thereby, indirectly, to the development of people, teams, and organizations.
