It starts with an offer: Would you leave your gig for X amount of money or perks?
When companies tee up a “buyout,” it can either provoke intrigue or fear—intrigue in those who thought about leaving but didn’t have an incentive before, and fear in those who want to keep their jobs during a potential downsizing or restructuring.
If you’re not sure what you feel about a recent buyout your employer is offering, let us help you sort it all out. Here’s when you should—and shouldn’t—take a voluntary severance package, and how to go about the whole process like a champ.
What is a buyout for employees?
A buyout, also referred to as a voluntary severance package (since you’re “volunteering” to lose your job), is when an employer presents its employees with some sort of monetary deal to quit. Typically, it’s a lump sum, or money alongside other benefits, like a promised bonus or continuing education stipend to help your job search. There might also be a time frame—for example, you have 60 days to decide before they rescind it.
Like other severance situations, there could be terms you must agree to before receiving your money, such as signing a non-disparagement agreement. And of course, it’s subject to state and federal taxes.
Buyouts are often deployed to stem the need for layoffs, or just generally cut costs or curb spending. Companies might even change the terms of a buyout as it’s being presented if they’re seeing less interest than they hoped, or they’re eager to make cuts fast.
While buyouts give workers more control over the outcome than layoffs, many people might still feel like their companies are pressuring them to leave before they’re ready. On the flip side, buyouts can be a great opportunity to pursue new, more fulfilling career paths, or ideal for individuals eager to retire with some extra cash on hand.
The pros and cons of a buyout
A buyout might sound great to you but not-so-great to others. Consider the following pros and cons to help you decide if it’s right for you:
Pros:
- It’s more money now that you can put toward professional or personal goals.
- It’s a “push” you need to go after your dream job or retire.
- It’s an opportunity to take a career break or focus on other priorities.
- It incentivizes you to leave a workplace that may be unstable or toxic, or that could face cuts later on.
- If you worry you’re going to be fired if you stay, leaving on your terms will save you the heartbreak and headache.
Cons:
- It may not be enough money to keep you financially sound while you plot your next career move.
- It’s a career break that could negatively impact your chances of landing a new gig.
- It means a lack of a steady income for an undefined amount of time.
- It means leaving a job you love or had seen yourself growing in long-term.
- It means leaving a team or company that may turn things around for the better in the long run.
When should, and shouldn’t, you take a buyout?
When career and leadership coach Loren Margolis coaches individuals on whether to take a buyout, she starts by evaluating three aspects of their situation: their financial well-being, their career stage, and their emotional well-being—the latter of which she says many people don’t consider enough, but is just as important as the other two.
The financial impact
Ask yourself, “Will I be better off financially by taking it or not?” Consider how much money and assets you currently have saved, as well as any debts or ongoing payments, and then doing the math to see how long that buyout amount can hold you over without new income coming in. “Employees who live paycheck to paycheck may need the stability of long-term rhythmic payments rather than knowing that their paycheck will run out in six months,” Margolis says.
Your career stage
Evaluate where you are in your career and whether you need the skills training, connections, and/or confidence boost your job provides. “Employees who are later in their career and are thinking of retiring [in] the next three to five years may be better off accepting a buyout from their organization because they have less room for career and financial growth,” Margolis says.
It may also be worth taking a payout if your skills are highly sought after, as you’ll likely have less of a problem job searching. “You have skills and knowledge that are in high demand, and you may be easily swiped up by multiple competitors,” she says.
The strength of your network matters, too: “Have you formed a solid base, and can these connections help you find an even better position or more senior role than
the one you have?”
Your emotional well-being
Don’t discount your relationship to your work. “For many, their work identity is inextricably tied to their whole identity,” Margolis says. “The thought of losing their job, even if it’s through their own choosing, is disastrous.
“If that is the case, weigh the pros and cons of being and not being tied to a role, a title, and a sector,” she says. “It could be that taking the package is the cut you need, to serve and grow other areas of your life and deepen your relationships with friends and family, as well as take on new hobbies and causes that you truly care about.”
Changing jobs can also be emotionally draining, especially for those already juggling other big decisions. “For example, you may be going through a divorce where you formerly identified strongly as part of a couple and are losing that role and other parts of your life—friends, in-laws,” Margolis says. “Jumping ship now might leave you truly flailing.”
How to take a buyout like a pro
So you believe a buyout will improve your life and career prospects—fantastic! Here’s how best to accept it:
1. Don’t take it on the spot
“Review the terms in-depth yourself and tap into legal counsel or a financial advisor,” Margolis says, to avoid rushing into a decision that you may regret. Also, make sure you know when certain benefits you use, like health insurance, will expire and whether that will impact your finances or personal life.
2. Negotiate
If few people are taking the bait, you have more leverage to negotiate a price that’s appealing to you—or alternatively, extend benefits so you’re covered in other ways while unemployed. “As employees, we often believe that we are at the mercy of the organization, but during this decision-making process, the ball is in your court,” Margolis says. “This is why it’s important to thoroughly read what is proposed to you and negotiate anything that you think is unfair.”
3. Embrace your new circumstances
Buyouts aren’t something to be ashamed about, to family or friends, or potential employers. “There is so much more flexibility out in the workplace now, where portfolio careers reign supreme and shorter tenure is acceptable,” Margolis says. Try not to worry, but make sure that you have your story set.”
How to explain a buyout in a job interview
It’s possible your voluntary career gap will come up in a job interview. Don’t panic—instead, use these strategies:
- Define what happened. Giving context can paint you in a good light by placing the “blame” on external factors and putting you on par with other top performers, and showing you’re honest and trustworthy. “Saying that you are part of 10, 50, or more employees shows that it was nothing that you did wrong,” Margolis says.
- Frame it as a positive step. Dive into why you took the buyout and how it pertains to this specific role—maybe you wanted to make a career change, or find a place with more room for growth, or focus on family.
- Highlight your transferable skills. Especially if you’re making a complete pivot, you’ll want to nail down the pitch for how your previous experience could bring you success in this new job.
- Don’t bad-mouth your former employer. Your payout may have ended on poor terms—but that’s not something you need to emphasize in job conversations. “Hiring managers look for employees who can remain optimistic and a team player,” Margolis says.
What to do if you stick around amid a buyout
Survivor’s guilt for staying at a company when others don’t—or can’t—is real, and worth addressing if you want to carry on effectively.
“You may experience both relief about deciding to keep your job and sadness and grief for those who decided to leave or were negatively impacted,” Margolis says. “Take some time for yourself to adjust if you are emotionally and mentally impacted.” This could mean taking time off, talking it out with a loved one or therapist, or practicing self-care through healthy sleeping, eating, or exercising habits.
Once you’ve sorted yourself out, Margolis suggests sorting out your standing at the company, both for your own sanity and to ensure you’re set up for success long-term. For example, with roles vacant, you might have more work on your plate or less support than before. “Set up a meeting with your manager to understand what your job expectations are, even if you maintain the same role,” she says, and “make sure that you are both on the same page.”
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