As the end of the year approaches, many companies have been reviewing 2016 and forecasting into 2017. For some, shortfalls on current plans require cost cutting in the form on early retirements offers or layoffs.
In Michigan, The Detroit News and Detroit Free Press are reportedly looking to make such cuts. One publication offered buyouts to editorial staff, while the other targeted certain employees asking for volunteer layoffs. Struggling media companies across the country have also announced staff reductions over the last few months.
What is the difference between a buyout package and a severance agreement? We will explain in this post. But it is important to understand the terms and conditions before accepting either or you could give up certain rights.
Your company is not required to offer an ‘early retirement’ or severance agreement. Why is in their interests to offer these packages?
Buyouts are frequently used by a company that is struggling and seeking to reduce costs and increase efficiencies. As an alternative to layoffs, buyouts offer a choice. They also have another benefit of skirting certain legal issues related to union contracts and unemployment compensation. Buyouts have been used by companies in many industries from Verizon and Ford to federal government agencies.
You generally need to be within years of retirement for a company to offer early retirement. At one of the Detroit publications, the buyout included two weeks of pay for every year of service. A twenty-year veteran would be eligible for the maximum 40 weeks of continued pay. These offers often also involve ongoing pension payments and medical insurance coverage. Depending on the pension plan and years of service, it might be possible to start receiving pension benefits as early as 55.
What is usually in a severance agreement?
Severance agreements may be required by an original employment contract or company policy. Generally, employers have discretion and may offer a severance agreement to avoid future litigation and make the termination final.
These are often not as generous as an early retirement offer. Severance offers often combine an up-front cash payment with continued benefits. If you were with a company for five years, the offer may include 5 weeks or pay along with three more months of medical and dental insurance coverage. In some cases, career counseling and other services may be added to assist you find a new position.
Know what you are giving up
The prospect of job loss is scary, especially when it comes around the holidays. You may not be given much time to accept the offer. The prospect of the continued paychecks is good in the short term, but you also need to consider the larger picture.
In either of these scenarios, you may wonder where to turn for counsel. How do you know whether there might be a claim against your employer for discriminatory practices related to your age? What if you are being wrongfully terminated? Why is a non-compete part of the agreement?
You do not need to immediately agree to what is offered and there is often room for negotiation. At NachtLaw, we can review the offered buyout package or severance agreement, so you can make an informed decision before you sign anything. If necessary, we may also be able to negotiate a better deal that meet your needs.