Evaluating Buy-Out Packages

Your employer has revealed it wants to eliminate several hundred jobs by offering buyouts, also known as early retirement packages, to a group of employees. That group includes you.

Evaluating the financial implications of a buyout package could be hard enough if you’re more than happy to go. It gets complicated on the emotional side when you intended to be loyal but now see that loyalty as betrayed. So consider first the security of your job if you decide to stay. Will it be eliminated later with a less attractive severance package or none at all? And if you stay and the job stays, how will you feel about working for an employer that gave you the highway option?

Your age and life stage will greatly impact your decision. You may be young enough that retirement now isn’t an option, so the severance will be your paycheck while you find another job. Or you may have young children and decide severance will provide income while you stay at home for a few years. If you were looking at retirement within a few years anyway, this could give you the opportunity to begin early.

Of course, you’ll need to evaluate the financial pros and cons of accepting or rejecting the offer. That means more than just the bottom line cash, which companies usually calculate based on seniority and years of service. Think about bonuses, stock options, paid time off and insurance premium subsidies that you will no longer get. Talk with a tax specialist about the impact of receiving a lump sum or stretching it out over time – severance or early retirement pay is considered taxable income.

You legally have 45 days to consider a buyout package, and most people wait until the 11th hour. By signing a buy-out agreement, you forfeit your right to sue your employer later on any employment and compensation-related issues, so resolve those before time runs out.

Buyouts usually occur after a merger when duplicate positions need to be eliminated. Companies may offer a staying bonus to those who don’t leave to ensure they have adequate staff to complete the transition. If you accept a staying bonus, you should still update your resume and check your finances to make sure you can survive being terminated when the transition is finished .

Take advantage of any extra services your employer may be offering to those who accept the buyout, such as career counseling or placement services, even if you plan to retire, so you can walk away knowing you took advantage of each opportunity.

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