Buyouts: If You Don't Jump, Will You Get Pushed?
If your employer is downsizing and offers you a buyout, it pays to look beyond the financial numbers and examine the context in which it is made.Skip to next paragraph
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"It's critical to understand why the buyout is being offered," says Gary Dietz, managing principal of Towers Perrin, a human resources consulting firm.
"If you've wanted to do something else, a buyout offer provides a fabulous opportunity for a financial windfall to allow you to move into a different career," Mr. Dietz says.
But before you decide whether to accept or reject the package, Dietz recommends that you assess (1) whether buyouts are an industrywide trend, (2) what is going on in your particular company, and (3) your own circumstances.
As many as half a million American workers each year are offered buyouts, estimates John Challenger, of the Chicago outplacement firm Challenger, Gray & Christmas.
Since the early 1980s, as companies have undergone successive waves of downsizing, they have attempted to offer buyouts in what Dietz calls a "prudent and generally fair process."
But it's generally a take-it or leave-it affair.
And often, "a voluntary buyout is followed close on its heels by an involuntary program," Dietz says. "The tough question for the employee is, 'If I don't [take this offer], am I one of the individuals who will be targeted for the involuntary buyout?' "
If you are employed in an industry such as banking or pharmaceuticals, buffeted by merger waves, "you may want to look at the [voluntary] offer more closely," he says. "You may be facing a situation where there are a lot fewer positions."
The same is true if your employer faces financial difficulty. The company may offer a succession of deals as its troubles deepen.
"Usually the pattern has been the buyout [offer] gets smaller over time," says Alan Johnson, managing director of Johnson Associates, a compensation consulting firm in New York. So employees should scrutinize the first offer carefully.
If you've got highly marketable skills, that too might prod you toward accepting a voluntary offer.
But if you think you have valuable skills and a file bulging with excellent performance evaluations, "you're probably in good shape in terms of your potential to remain and prosper with the company," Dietz says.
Once you've evaluated where you stand, it's an "absolute prerequisite," he says, to have a financial counselor help you analyze the offer. "We're talking about your financial retirement plan."
Many companies offer employees financial consulting.
"They should talk with their accountant or their financial adviser about what the buyout means long-term in terms of their pension," says Mr. Challenger, the outplacement specialist.
"With the voluntary [buyout], you really have control," Dietz says. But under an involuntary scheme, "You just may be paid for a certain number of weeks for years of service. There may not be an enhanced pension benefit offer."