When should you take a buyout from your employer?By Susan Adams
On Monday, package shipping giant FedEx announced it would offer buyouts to an unspecified number of staffers as it looks to reorganize its U.S. operations. How should those FedEx workers decide whether to take buyouts? If you're offered a buyout to give up your job, what should you do?
Career professionals say there are several good reasons to take a buyout. It can be a boon if you're at a point in your career where you are thinking seriously about retirement. Also, if you feel like you've been passed over for a promotion or you've lost clout within your organization, it can make sense to consider a buyout offer. Another reason: If you are unhappy in your current post and you know that you are a marketable commodity should you start job-hunting. A buyout can also provide a bridge to starting your own consulting venture or serve as a financial cushion if you're thinking of making a career switch that requires going back to school.
But Robin Pinkley, a professor of management and organization at SMU Cox School of Business in Dallas and author of Get Paid What You're Worth: The Expert Negotiators' Guide to Salary and Compensation, says that too many employees are wooed by the positives of a buyout offer, and they don't think hard enough about the costs. For instance, if you are over 50, she says, "we know that the probability of being rehired exponentially declines." No matter what age you are, if you're intending to look for another job after you take your buyout, your bargaining power instantly plummets, she points out, because hiring managers view you as less desirable if you don't have a job. "You're competing with others who still have a job," she notes.
On the other hand, says Pinkley, you should be clear-eyed about what will happen if you stay at a company that is offering buyouts. Chances are good that your workload will increase as others take buyouts and the staff shrinks. You may not be working with the colleagues you have come to enjoy. It's also possible that the company is heading into a period where the next round of cuts will be layoffs, instead of voluntary departures, and your position could be on the block.
Ellis Chase, a longtime New York career coach who used to work in hiring at Chase bank and at staffing firm Right Management, says he's had clients make the most of their buyout stories and that companies understand when applicants explain they decided to take advantage of the opportunity to focus on a search full-time. One of Chase's clients was a managing director at a company that made an acquisition of another company, creating redundancy within the organization. The client had been thinking of going out on his own as an independent contractor, so he offered to take a buyout. "It was a wonderful buffer," says Chase.
Another client who was in his 30s and worked in financial services had been thinking seriously about taking a trip around the world with his wife and young child. When his company offered a buyout, he accepted, and his wife quit her job and joined him. They traveled for a year and were able to line up jobs before they returned to the U.S.
Though it worked out for that couple, Chase says that too many people use a buyout as an excuse to take time off. It's wiser to dive straight into your job hunt, he advises. "Running away is not what this should be about," he notes. Taking a buyout should be part of a careful plan, including a job search timetable.
Chase, Pinkley and Dale Winston, the CEO of executive search firm Battalia Winston, all say it makes sense to try to negotiate for the best possible buyout offer. Do ask colleagues about what sort of packages they are getting, confer with former colleagues who have taken buyouts, and talk to your employer about whether or not any company stock you have as part of your compensation package is fully vested. Junior employees can also negotiate whether they can keep their company laptop and smartphone. For more senior employees, companies are often willing to bridge whatever gap you may face between your severance date and the timetable for collecting retirement benefits. For tax reasons, it is almost always preferable to take a payout over time, as opposed to in one lump sum. "Everything is negotiable," says Chase.
It's also wise to come to an agreement about references. Especially if you were passed over for a promotion, ask your employer to agree to say glowing things about you. Another consideration: non-compete agreements. If you are considering working for a rival or starting a consulting enterprise that could take business from your employer, you want to make sure you are not restricting your options by signing a document that would prevent you from competing with your employer.
Though it's not wise to broadcast your decision to colleagues, you also don't want to make it in a vacuum. Do consult a financial adviser to get a sense of your health insurance costs going forward, and how much of a financial cushion the buyout will offer.Finally, it's important to do some emotional soul searching before you accept a buyout offer. If you've worked in one place for a decade or more, the office can become a part of your sense of yourself, and it may be difficult to sever those ties. On the other hand, you may be ready to cut loose and forge out on your own. The final answer will come, likely as not, from your gut.
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