Your Company May Offer You A Voluntary Buyout As Layoffs Loom

In a time when layoffs loom over industries and the prospect of them coming into existence looms large as a consequence, getting paid to voluntarily quit a job might seem like an especially appealing deal.

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The buyout program is a process that companies use to reduce their wages through the use of severance packages. They are sometimes used to warn people about future layoffs and at other times they are simply a way for employers to cut wages as a cost cutting measure.

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The majority of General Motors' 58,000 U.S. white-collar workers were offered voluntary buyouts after the company cut 500 salaried positions in February. According to Paul Jacobson, the company's CFO, about 5,000 of its employees have already chosen to participate in the VSP, which is known as the "Voluntary Separation Program".

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There are tens of thousands of GM employees who are opting in to the VSP buyout plan. It does not necessarily mean that they will automatically be terminated because they passed it. Nevertheless, given the current gloomy landscape of the employment field, some people may prefer to leave a company by choice (rather than force) because of the current economy.

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The buy-out process can also be less voluntary, according to Lindsay Witcher, a senior executive at Randstad RiseSmart, and more like a prelude to layoffs. Typically, in these cases, a buyout is a severance contract where the company offers the employee certain benefits such as compensation in exchange for signing certain conditions such as nondisclosure or non-compete agreements with the employer. It does not matter how you look at it, buyouts such as these are less voluntary, and usually indicate that the employee’s position is going to be eliminated very soon.

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There are complications associated with both types of buyouts.

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In addition to the emotional aspects of a buyout, some factors such as how you handle the situation play a big role, says Andres Lares, managing partner at consulting firm Shapiro Negotiations Institute.

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If you're contemplating taking a buyout, here's what you need to know:

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It is okay to take your time when it comes to this process (and you should).

When it comes to either accepting or rejecting a buyout right on the spot, it is almost never a good idea.

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There is usually a 14 to 21 day period following the date a buyout is offered before employees must respond to it. According to Lindsay Greene, a partner of DSK Law who assists clients with buyout negotiations and structuring, that time should be used to consider the buyout completely and to ask any questions.

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Greene tells Trade Algo Make It that there will always be something to discuss or to clarify. Employees should review the terms of the employment agreement in depth with a lawyer, financial advisor or themselves if they have not done so already. There is a possibility that a second opinion can provide the necessary clarity regardless of whether the buyout is a warning sign of layoffs or a purely voluntary decision.

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If the buyout is offered with the context that your role is about to be eliminated, it is very important to take the time to think about it in order to avoid making impulse, emotional decisions, especially when the buyout is offered with that context. If an on-the-spot contract is viewed as being a result of duress, Greene believes a contract might be considered illegitimate if it is perceived as being signed under duress.  

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Lares explains that there is something to be said for just stepping out of the room for a minute, or simply asking your spouse if you could call them? "There's something to be said for literally stepping out of the room that you're in!" she says.

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The earlier you prepare, the better your chances of success will be

To help workers prepare for a potential buyout offer, Lares says that workers should start thinking about what kind of offer they would prefer as soon as warning signs of layoffs start appearing on the horizon. To assist in this preparation, he suggests the use of the acronym P.A.I.D.

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• There are a number of buyout packages that start with four weeks of compensation plus an additional week for every additional year worked, but the compensation package for every year worked varies depending on whether or not the company has been involved in prior buyouts or layoffs.

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• As an employee, you need to consider what are the other options available to you, as well as what is in the best interest of your company. As an example, you might be in the best interest of your business if you negotiate a later departure date if you are the only project manager on the team.

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• Employees need to consider what their company values and how they overlap with those values to determine which negotiation strategy will provide them with the most effective results.

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• As far as deadlines are concerned, employees must have a clear understanding of when they will be required to respond and should begin researching as soon as possible.

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• Take a different approach to negotiation

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• There may be more to selling a company than simply getting more money when negotiating a buyout deal.

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“There’s probably 30 different things that you could think about,” says Lares. “The first step is to identify what is your number one priority, then determine what you ought to be focusing on.”

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If, for example, someone wants a buyout that is structured to be paid in weekly installments, rather than lump sums, they may be able to do that. They may also be able to receive compensation for their accrued vacation days. They may even negotiate with their noncompete agreements to change their terms. Alternatively, others may try to push back their departure date and secure a more gradual transition from their company.

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Aside from clarifying the terms of their health insurance plan, retirement account, and what job-seeking support that the company would be able to provide such as reference letters or referrals to a recruitment firm, employees should inquire about the terms of their medical plans.

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Don't lose sight of the bigger picture

Employees who are affected by big-ticket buyouts or layoffs rarely have their work reflected in such large-scale arrangements.  

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The fact is that most decisions are influenced by the market, not by our personal values or opinions, Lares says. "There is no reason for us to feel unvalued or unimportant."

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Due to the challenging economic environment of the past few years, staff shrinkage is ongoing as a result of the tough economic climate. As a result, acceptance of a buyout has become more acceptable and open today, according to Witcher from Randstad RiseSmart.

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In her words, what was once a topic to be avoided and hidden has almost become a badge of honor and almost a commonplace thing for people to discuss. Taking Twitter staff as an example, we see their stories about how they incorporated the exit into the creation of their own businesses after they left.