Should You Take Your Company’s Buyout Offer?
Covid-19 has been tough for the economy, businesses of all sizes, and individuals alike. In April, the unemployment rate sky-rocketed to 14.7%, which is the largest monthly increase ever on record. Companies are adjusting their staffing levels in trying to navigate the shutdowns. This is happening through hiring freezes, layoffs, temporary furloughs, and even buyouts.
Buyouts are a way for companies to reduce their headcounts by offering workers incentive packages to leave their jobs voluntarily. For some, receiving a buyout offer will be the start of a celebration. For others, it will be the start of an emotionally stressful time. Whether the offer is right for you depends on your unique situation. If you receive a buyout offer, there are some important questions to consider before deciding.
What is the offer?
Taking a line from the movie Jerry Maguire, “Show me the money!”, the most obvious headline item to consider when evaluating a buyout offer is the money. The more money offered, the more tempting the deal. An offer of a few weeks of salary is probably not that attractive whereas a year or two of your salary will be much more lucrative. Each company will structure its offer differently. Compensation can be derived from any number of considerations. The sky is the limit, so check with your employer to understand how your buy-out package will be calculated.
Money is not the only term you need to think about in a buyout. You need to evaluate what other benefits you may lose before making your decision. Most large companies offer health care benefits where the company pays a portion of the premiums. Health care insurance is very, very expensive to buy on your own and needs to be a significant consideration. Check to see if the company is offering a continuation of group benefits and continuing to subsidize the cost for you. If not, your insurance costs will likely go up. Consider your options: COBRA, the healthcare exchange, or the possibility of joining your spouse's plan. Consider the costs and benefits of all your options, and be sure that you have a viable insurance option that works for your situation.
What are the requirements?
In addition to you leaving, the company will likely have other requirements that you need to think about. There may be a non-compete type clause limiting your job opportunities at other companies. This could be a deal-breaker for someone who is not ready to retire. Companies also could add re-hire clauses, that if you take a position back with the company, you forfeit some or all of the buyout package. You likely will need to sign something indemnifying, or holding harmless, the company from a future lawsuit. I do not think indemnification should be a big deal to most, but it could be to some. Every offer is different and will have its own requirements, make sure you read through and understand them thoroughly.
Where are you with your career?
Different stages of careers will create additional considerations for a buyout offer. A buyout offer can be a blessing when you are close to retirement, enabling you to bridge the financial gap and retire early. Likewise, if you are frustrated with your position and ready to move to another opportunity, a buyout offer can be a springboard to the next step. For older workers not ready to retire, though, the offer likely will not be as attractive. With the unemployment rate at 14.7%, I would expect this to be a tough job market for those looking for positions, even when the economy starts to open back up. If you are not financially ready to retire, the buyout package plus any personal assets will be what you must rely on until you find another job. Evaluate where you are in your career, if you are ready to retire, your hire-ability for other positions, and how long can you go without a job when making this decision.
What if you don’t take the offer?
Just as taking a buyout offer can offer you new opportunities and risks, deciding not to take a buyout offer has its own set of opportunities and risks as well. Surely you don’t want to stay with a company that is a sinking ship. There is also risk that if you do not accept the offer, you could still be laid-off in the future with terms that are likely not as favorable. Conversely, there may be new opportunities and positions that open with-in the company that enable you to advance. Try to talk to your managers, do your best to get a realistic evaluation of both you and your company’s prospects going forward, and use the information to help with your decision.
Deciding whether a buyout option is right for you is a deeply personal decision based on your own unique financial circumstances, the offer itself, your company’s prospects, and your current and future career opportunities. It is a tough decision that if you can, you should take your time with. If you are going through this decision process our advisors, Brian and Michelle, would be happy to help talk you through it. Contact us in the contact field below.
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