Senior Client Partner, Leadership & Professional Development
5 Things to Consider Before Accepting a Buyout Offer
The first half of the year proved more challenging than the company expected. The cost cuts it implemented—including cuts in bonuses and raises and freezes on investments and hiring—weren’t enough to meet its earnings guidance for the year. More drastic measures were needed, chief among them a 10% reduction in staff across the board. The hope was that layoffs wouldn’t be necessary and that the company could instead achieve the reduction through voluntary buyouts.
It’s a refrain becoming more and more common in organizations across industries. Before resorting to layoffs—or, in many cases, in addition to them—companies typically offer voluntary buyouts to incentivize people to leave. These packages, consisting of compensation, benefits, and other incentives, are often similar to severance packages offered to laid-off employees. “Buyouts are fairly common whether the economy is good or bad,” says Kevin Gagan, global leader for enterprise coaching at Korn Ferry. Gagan, whose work also includes career-transition services, notes that buyout offers often follow a merger or acquisition, for instance.
Though buyouts are a common corporate cost-cutting tactic, they are still misunderstood by a large swath of workers. And with the economy expected to get worse before it gets better, more workers are likely to be confronted with a buyout offer. Here are some tips from our experts on what to consider before accepting or rejecting one.
Age is just a number.
Many people assume buyouts are for older workers or those near retirement. But taking a voluntary buyout can also be a good option for younger or more junior employees to consider, says Gagan, especially if they have in-demand skills and are considering a career change. A buyout can also be an avenue for returning to school. Whatever your age, Gagan says, the two key questions to think about when offered a buyout (aside from the actual terms) are “how long you can be unemployed, and what you want to do next.”
Is staying worth it?
What is the state of the company? What are your prospects for advancement? For some companies, voluntary buyouts are simply a financial calculation. For others, however, buyouts can reflect deeper structural or systemic problems that could culminate in layoffs or—in the worst-case scenario—an eventual sale or bankruptcy. From a career-advancement perspective, experts say, the company’s long-term prospects could actually make staying riskier than taking a buyout.
Test the market.
David Meintrup, a career coach with Korn Ferry Advance, suggests talking to an—ahem—recruiter who specializes in your industry or job function to get a sense of the market before you accept or reject a buyout offer. As a way to get a “pulse check” on job prospects, he recommends asking for information on (among other questions) the number of open searches, hiring trends in the industry or function, and average time to hire. An added benefit is that you can start building a relationship for when the time does come to look for another job.
An exit package is similar to an entry package in that there may be certain components you want to push for, says Frances Weir, a career coach with Korn Ferry Advance. Would a lump-sum payout trigger a higher tax payment than a bimonthly or weekly pay structure? Can the company tack on a few months of paid medical benefits if you agree to stay on to finish a project? “Advocating for yourself is just as important when leaving a job as it is when accepting one,” says Weir. She also advises carefully reviewing any covenants that may affect you—such as financial clawbacks and non-disparagement and non-compete clauses—if you get a job before the buyout terms are fully paid out.
Craft an elevator pitch.
One of the biggest concerns workers have about accepting a buyout is that it could hurt their job prospects. But whereas layoffs are usually a direct reflection of performance, buyouts typically aren’t. In fact, Gagan says, workers can use a buyout to their advantage as part of their elevator pitch for future employers. “Buyouts are not that unusual,” he says, “so laying out why accepting one made sense for both the candidate and the company helps send a positive message to employers.” If possible, Weir advises trying to secure references who can back up your story. To blunt any potential stigma, she also suggests exploring whether you can keep your current employer listed on your resume or LinkedIn profile until the buyout terms expire or you get another job offer.
Learn more about Korn Ferry’s Career Transition and Outplacement Services capabilities.