A friend of mine just got notice from her employer that after 31 years, her job was being eliminated. In the same package she also was offered a “voluntary severance package” – aka early retirement.
I don’t understand, because every employer I’ve ever heard of first offers early retirement and, only if you don’t accept the package, then they eliminate the job. Or, if their needs change, they may withdraw the offer and you keep your job.
What’s the point of offering you a “take the money and run” package once the employer has already formally eliminated your job. Isn’t that just a layoff?
The way it has worked for the few people I’ve known that this applied to, was that their employer got rid of their position but were offering to put them in another position, at the same pay. But, there was a likelihood that they’d be salary capped and never get a raise again.
If they were thinking of retiring anyway and decide to take the package, it works for the company because they can put a younger, lower paid person in the new job.
Or worse case scenario you don’t take the voluntary package and your employer fires you. It save the company big bucks because they don’t pay the severance, and you are not entitled to unemployment compensation.
I would think that if they do fire you at no fault of your own, you would be entitled to employment compensation.
In any case, when my company twice shook off 10% of our salaried personnel, the voluntary severance worked like this: if you didn’t accept it, then you still received a hefty severance of x-months pay based on your years of service. You weren’t eligible for unemployment until after x-months, though. If you did accept it, then your severance was doubled, but you had to sign a waiver that you wouldn’t sue the company. You weren’t eligible for unemployment for 2x-months. And of course if you were reasonably close to retirement eligibility, there were additional incentives there (e.g., maybe they’d credit 12 months toward your defined-benefit plan).
Severance packages are a bribe from your employer meant to secure your cooperation.
It’s also a bit of an advertisement to the remaining employees. It let’s them know that they will most likely get the same treatment if it happens to them.
The employees that are still valued have less of an inclination to panic, hunt for a new job, and then quit unexpectedly. Transitioning the company for a planned departure is a whole lot easier than finding a replacement in the lurch when one of your employees quits.
When a company is needing to downsize, typically voluntary severance will be offered to everyone in a particular segment of the employee population, (i.e. all line employees with more than year of service over age 50; or something like that). The severance package will normally include so many weeks of pay and or benefits to induce people to take the package. If they don’t get enough takers, they will then terminate enough people, with normally a lesser amount of severance benefit, than those that volunteered.