What to Know Before Buying a Worker

Are you getting paid to voluntarily quit your job? That may seem like a good deal at a time when the prospect of layoffs looms large across industries.

Buyouts are severance packages designed to encourage employees to leave a company. Sometimes they are a warning of future layoffs, and other times, a cost-cutting strategy for companies to reduce their payroll costs.

For example, after cutting 500 salaried positions in February, General Motors offered the majority of its 58,000 U.S. white-collar workers a voluntary employee buyout. So far, about 5,000 people have chosen the “Voluntary Severance Plan,” or VSP, the company’s CFO Paul Jacobson announced Tuesday.

The VSP is a buyout category — that doesn’t mean the tens of thousands of GM employees who pass out will automatically be let go. But against the bleak backdrop of the current job landscape, exiting a company by choice (rather than force) may be an option for some.

Buyouts can be less voluntary and more “prelude to layoffs,” says Lindsey Witzer, senior executive at Randstad RiseSmart. In these cases, the buyout is a severance agreement where the company offers certain benefits, such as compensation, in exchange for the employee’s acceptance of certain terms, such as non-disclosure or non-compete agreements. Regardless, these types of buyouts are less voluntary and usually mean the employee’s position is eliminated.

Both types of purchases come with complications.

Buyouts “can be a very painful, emotional thing,” says Andres Lares, managing partner of consulting firm Shapiro Negotiations. “There’s a significant amount of complexity in terms of what the market perceives you to be and how you perceive it.”

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Here’s what you need to know before you buy:

You can (and should) take your time.

Accepting or rejecting a purchase on the spot is almost never a good idea.

Once a buyout is awarded, companies typically give employees 14 to 21 days to review the contract, said Lindsey Green, a partner at DSK Law, who helps with buyout negotiations and structuring. She urges people to take that time.

“I think there’s always going to be a discussion or at least something to clarify,” Green told CNBC Make It. “Employees should have an in-depth review of the terms of the contract with legal counsel, a financial advisor or on their own. Whether the buyout is a warning sign of layoffs or a purely voluntary option, a second opinion can provide the necessary clarity.”

Taking time to think about the offer is a matter of avoiding impulsive, emotional decisions, especially if the buyout is offered in the context of your stock being eliminated. On-the-spot contracts render a contract illegal if it’s deemed to have been signed under duress, Green says.

“Okay, can I stay out of the room for a minute and 10 minutes or call my wife?” There’s something to be said for leaving the room you’re in,” Lares says.

Be prepared earlier than you think

At the first warning sign of potential layoffs, Laures says, workers should start planning their best buyout option. To guide that preparation, he recommends the mnemonic device PAID

  • priority: Employees should research what their company and other companies in their area have done for past rounds of acquisitions or layoffs. Many buyout packages start with four weeks of compensation and one additional week for each year worked, but that varies, Green says.
  • Alternatives: Employees should consider both their preferences and the company’s. For example, if you are the only project manager on a particular team, it may be in the best interest of the business that you negotiate a later departure date.
  • Interests: What do you and your company care about? To navigate the most effective negotiation strategy, employees must consider how their priorities overlap.
  • Deadline: Employees should have a clear sense of the timeline when they need to respond and start their research now.
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Negotiate outside the box

Negotiating a better purchase isn’t just about getting more money.

“There are easily 30 different things you can think of,” says Lares. “What is my priority here?’ I think the first step is to find out.”

For example, one may prefer to have a weekly payment system instead of buying in bulk. Or they may want to be compensated for accrued vacation days. Some may negotiate to change the terms of their non-compete agreement. Others may try to push back their departure date and secure a gradual exit process.

Employees should also clarify the terms on which the company provides job hunting support, such as letters of reference or links to their health insurance, retirement funds, and the recruiting firm.

Keep it in perspective

Large-scale buyouts and layoffs are a reflection of an employee’s work.

“It’s mostly market-driven decisions,” says Lares. “It’s not personal. It doesn’t mean you’re valuable or not valuable.”

Currently, staff reductions are widespread in response to the difficult economic environment. According to Randstad Risesmart’s Witcher, nowadays, the acceptance of buying has become more “open and accepted”.

He says, “What people used to try to hide and avoid talking about has become almost normal, a badge of honor for some. See how Twitter employees were inspired to start their own businesses after leaving. Step into their stories.”


What to know about severance pay, insurance and benefits if you’re laid off

Half of employers plan layoffs—here’s how to negotiate your exit if you do

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