Getting paid to voluntarily quit a job? It might sound like a particularly good deal in a time when the prospect of layoffs looms large across industries.
Buyouts are severance packages designed to incentivize employees to exit an organization. Sometimes they are a warning of future layoffs and other times, they are just a cost-cutting strategy for companies to lower their wage expenses.
For example, after cutting 500 salaried positions in February, General Motors offered voluntary employee buyouts to the majority of its 58,000 U.S. white-collar workers. So far, about 5,000 have opted into the “Voluntary Separation Program”, or VSP, the company’s CFO Paul Jacobson announced on Tuesday.
VSP is the opt-in kind of buyout — it does not necessarily mean that the tens of thousands of GM employees who passed will be automatically let go. But given the gloomy backdrop of the current job landscape, exiting a company by choice (rather than force) might be the preference of some.
Buyouts can also be less voluntary and more “a precursor to layoffs,” says Lindsay Witcher, a senior executive at recruiting firm Randstad RiseSmart. In these cases, a buyout is a severance contract where the company offers certain benefits like compensation in exchange for the employee accepting certain terms like non-disclosure or non-compete agreements. Regardless, these types of buyouts are less voluntary and usually mean that the employee’s position is about to be eliminated.
Both types of buyouts come...
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