The Hidden Costs of Poor Employee Offboarding

Unlike great works of literature, it seems the final chapter of the employee lifecycle rarely gets the attention and thought it deserves. As a CEO and entrepreneur, I’ve witnessed many employee transitions, including a layoff experience of my own. Time and time again, I hear stories of unsupportive exit experiences, to the point that it has become clear that offboarding is simply not a priority for many employers, even those who pour resources into onboarding procedures. This is a mistake that can have significant repercussions for organizations and I can tell you exactly why. 

1. Health Insurance Costs

One of the most immediate effects of inadequate and outdated offboarding is the financial impact on a company’s health insurance plan. Outdated offboarding processes highlight COBRA as the primary health insurance option, or subsidize it within severance and retirement packages. Increasing COBRA participation puts considerable strain on employer health insurance plans, increasing rates and exposing the company to high-cost claims.

2. Decreased Morale Among Remaining Employees

The way departing employees are treated, including the perceived lack of support, can have a ripple effect on the morale of those who remain. If employees witness a chaotic or unsupportive offboarding process, it can foster feelings of insecurity and dissatisfaction. They may begin to question their own job security or feel undervalued, leading to decreased productivity and higher turnover rates in the long run. A respectful offboarding process reassures remaining employees that they are valued and supported.

3. Damage to Company Reputation

In today’s digital age, employee experiences can quickly become public. Negative offboarding experiences can lead to bad reviews on platforms like TikTok, Glassdoor and LinkedIn, harming the company’s reputation. A poor reputation can deter top talent from applying, making it harder to fill critical roles in the future. Conversely, a well-managed offboarding process can turn former employees into advocates, brand ambassadors, for the organization.

4. Legal and Compliance Risks

Inadequate offboarding can also expose organizations to legal risks. Failing to comply with regulations regarding final paychecks, benefits, and documentation can result in lawsuits or fines. A clear offboarding process that adheres to legal requirements can help protect the organization from these potential pitfalls.

5. Lost Alumni Network

A poorly managed or unsupportive offboarding experience can sever ties with former employees who might otherwise become valuable alumni. Alumni can be a great source of referrals, business opportunities, and even future hires. Maintaining positive relationships with former employees through thoughtful offboarding and post-employment transition can foster a strong alumni network that benefits the organization.

6. Increased Turnover Costs

The costs associated with employee turnover extend beyond the immediate expense of hiring and training new employees. When offboarding is disregarded or left on cruise control, it can lead to higher turnover rates, which incurs additional recruitment and training costs. Investing in a strong offboarding and post-employment transition process can help minimize these expenses by fostering a more positive workplace culture and reducing the likelihood of future exits.

Conclusion

The impact of poor employee offboarding and lack of post-employment transition support is far-reaching and can affect everything from team morale to legal compliance. Organizations that prioritize effective offboarding processes not only safeguard their reputation but also enhance their operational efficiency and employee satisfaction. 

As leaders, we have a profound responsibility. Every hello eventually leads to a goodbye, and how we manage that farewell speaks volumes about our values. It’s not just about processes or protocols – it’s about people. Real people with hopes, fears, and futures that extend beyond our company walls. In the end, a well-executed offboarding process can leave a lasting positive impression, not just on departing employees, but on the organization as a whole. 

Investing in offboarding and post-employment transition isn’t just good practice; it’s a smart business strategy. I challenge all of us to view offboarding not as an administrative task, but as a deeply human moment. It’s an opportunity to show gratitude, to provide support, and to ensure that every person who’s been part of our journey leaves with dignity and respect.