What makes an employer’s buyout offer a good deal? The answer depends on where you are in your career, where you hope to go next and exactly what’s in your buyout package.
In today’s economy, the lure of a big-bucks buyout can be tempting, but before you say yes, take the time to fully unwrap the package your employer is offering to see what’s inside.
The best buyout is one that bridges a small gap between now and retirement. If you’re not ready to retire, you may want to keep your job. “Once you’re over 40, it starts getting harder to get jobs,” warns Lita Epstein, author of Surviving a Layoff: A Week-by-Week Guide to Getting Your Life Back Together.
The job market is “horrendously tight” for those over 50, adds Robin Pinkley, PhD, 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. “Everybody is trying to get rid of the large-salaried folks, so the number of positions for them are going to be far and few between.” Given this reality, consider whether you could afford to take a lower-paying position.
Even if you’re confident of quickly landing a new job, start your job hunt right away, advises Jill Evans Silman, SPHR, vice president of Meador Staffing Services in Shenandoah, Texas. “If you take a buyout, there’s a temptation to not reapply yourself quickly into something else,” she says. “Time can get away from you, and employers have issues with too much time out of the workplace.”
Before you accept the buyout, take home contact information for clients, coworkers, industry associates and especially vendors. “They hear first when there’s a job open somewhere else,” Epstein says. Make copies of projects and email to your personal address anything stored in your computer that demonstrates your accomplishments.
Stepping-Stone or Quicksand?
Those who want to switch careers or launch a new business can use buyout funds as a financial stepping-stone.
If your new business will compete with your old employer, check the buyout agreement for a noncompete clause. “Check [the clause] with an attorney, because it might not be legal [in your state],” Epstein advises. “If the noncompete isn’t going to stop you from doing what you want to do, ask for as much money as you can get for that agreement.”
Thinking of using your buyout to fund additional education? Know when you can start -- the application deadline for many competitive programs is six months or more before classes begin -- and how long it will take to finish. Ask your employer to include tuition assistance in your buyout package.
Along with the amount of cash offered, health insurance is a top financial consideration for buyout recipients. “If you’re not eligible for Medicare, getting health insurance on the open market can be next to impossible, because almost everyone has some pre-existing condition that’s going to knock them out,” Epstein says.
Can your employer contribute to health insurance going forward? If you’re eligible to continue on your employer’s health insurance through COBRA, what will that cost?
Spending a few dollars to have a financial planner or retirement benefit expert review your buyout offer could save you thousands. Have him evaluate what the buyout does to company match money in your 401k or pension payments and how any money you receive will influence your taxes and financial aid you (or your college-age children) receive.
If your buyout offer gives you the choice of taking a lump-sum payment or payments over time, consider the likelihood your employee will stay afloat. “Make sure they can honor what they promise,” Silman says. “We’ve all heard stories of retirees who have had their benefits unplugged. In today’s economy, having cash may not be a bad situation.”
Negotiate Your Exit
Just as you negotiated when you landed your current job, you can negotiate on your way out the door, Pinkley says. Figure out what the company is getting in return for buying you out and enhance that. “Have an open discussion about what you can do to facilitate what they’re trying to get,” she says. “If it’s goodwill, you can talk about how well you’re being treated. If it’s training someone in your stead, can you have an extra percentage of the profits from next year?”
Then, approach your exit just as gracefully as you approached your entrance. “Organizations are not coming to the table with the highest amount they’re willing to offer,” Pinkley says. “They’re coming in knowing you’re going to negotiate. Do it in ways that are constructive. Go in trying to problem-solve. Think about what you need to accomplish to make yourself better off and go in with a plan.”