We spoke with financial advisors and a tech expert about the trade-offs that come with accepting a buyout.
Morning Brew Inc, Photos: Adobe Stock, Getty Images
Should I stay or should I go isn’t just a song title by The Clash. It’s also the thought going through IT professionals’ minds whenever they’re presented with a voluntary buyout offer from their company.
Voluntary buyouts, an incentivized strategy companies use to get employees to leave their roles by choice, might be on the rise. On Oct. 26, Microsoft announced it would extend voluntary exit offers to select employees. According to Business Insider, the offer, which would give financial and career-planning resources to those willing to leave, was extended to around 60,000 Microsoft employees.
Splitting up. Microsoft isn’t the only company offering employees a sweetener to part ways. Earlier this month, Google reportedly offered voluntary exit packages to some Googlers in Canada, France, Switzerland, Germany, and Japan (IT Brew previously reported on a round of buyout offers extended to some US Google teams last year). Last month, mass media and entertainment company Skydance also rolled out a voluntary buyout program to give eligible employees “the option to move on in a way that works for them.”
The tradeoff. Buyouts aren’t decisions to be taken lightly. Minal Mehta, founder and CEO of The In-eff-able Leader, a leadership development and executive coaching firm, told IT Brew the offers can be even more nerve-racking than a layoff: “It’s actually a very stressful time, and almost no work gets done in the month or two where that decision needs to be made.”
Alex Caswell, founder, CEO, and wealth planner at Wealth Script Advisors, a wealth management firm that specializes in tech professionals, added that buyouts often come with trade-offs: “[It’s] the risk of taking the buyout and getting an assurance as to what they’re going to receive versus basically biding their time gambling and hoping that if they choose not to take it, they’re not swept up by a layoff that has less favorable benefits.”
Things to consider before making your decision. While buyouts may be greeted with anxiety, there are a few things employees can do to make an informed decision. Brandon Beckner, director of financial planning at Composition Wealth, told IT Brew that employees should closely examine the terms around healthcare coverage in their individual offer.
“It’s a huge expense, especially if you have a family,” Beckner said. “I mean, even solo, it’s a very big expense.”
Beckner added employees should obtain a clear understanding of how their severance will be paid out, and how a buyout will affect their equity awards and compensation. Questions to ask include:
“These are all things that are huge discussion points, negotiating points, just things that you need to know,” Beckner said. “It’s going to affect cash flow. It’s going to affect your taxes. It’s going to affect withholding. There’s just so much to consider on the equity comp side, and you don’t want to lose out.”
Other things to keep in mind. Caswell said individuals should evaluate the non-financial terms of their offer, as well. For example, he said, employees should take note of any non-compete clauses, which can bar an employee from working with a rival company for a set period of time after leaving a job.
“The worst-case scenario is if you’re working on a very special project [or] you have a very special set of skills and the most reasonable change would be for you to go to a competitor,” Caswell said. “If the buyout prevents you from doing that, that would be a disaster.”
H-1B visa holders contemplating a buyout need to take into account the 60-day grace period that would follow after separating from their company. That’s how long individuals can maintain their legal status while searching for a new position.
“If you’re an H-1B visa holder, which I know quite a lot of people are, that’s one thing they should really be thinking about: whether that’s enough time for them to find another job,” Caswell said.
Beckner added that individuals should assess the current landscape for future employment: “Be realistic about what the job opportunities are if that’s the direction that you want to go.”
Similarly, employees looking to use a buyout as an opportunity to retire should ask themselves what their days will look like after separating from their employer.
“You need to know how you’re going to manage your day,” Beckner said. “It drives some people crazy to have those idle hands, so it’s very important you know what the next steps are going to be on a day-to-day basis beyond just what your finances are.”
Advice. Employees who are considering walking away from a voluntary buyout should be prepared to accept a certain level of uncertainty. “You may keep your salary, your benefits, your original vesting schedules, but when will an involuntary layoff come?” Caswell said. “And what would be the terms that you receive in this involuntary layoff?”
Employees should approach their employer with any outstanding questions about their buyout offer before accepting it—and if those answers aren’t forthcoming, Beckner recommended seeking advice from an attorney: “It’s going to cost you a few hundred bucks, maybe $1,000, but in the grand scheme of things, that is very little relative to what you could potentially be leaving on the table in one of these buyout negotiations or one of these buyout offers.”
Finally, Mehta suggested employees who have been offered a buyout do a “gut check” before making any other moves.
“Are you excited? Are you terrified?” Mehta said. “If there’s a charge, then we need to dig in further. If there’s no charge, then you shouldn’t take the buyout because you actually like your job. You’re excited about what you’re doing.”
