Should You Take a Buyout Offer?

That may help a company's bottom line, but for employees there's much to consider before calling it quits.

In a typical buyout offer, a worker is invited to leave the company in exchange for sizable severance payments, health-care coverage and other benefits, such as career advice or free tuition. In some cases, a company may offer "early retirement" to senior employees, promising an array of retirement benefit payout options for leaving the work force early.

"The purpose of severance is to help you transition to another place and time where you can survive," says Alan L. Sklover, author of "Fired, Downsized, or Laid Off." "It's to help you move forward, and to help the company move forward, without lawyers and lawsuits."

Financially struggling GM is currently negotiating with the United Auto Workers to offer buyouts to thousands of workers that the auto maker has deemed eligible to retire. In January, fellow auto maker Ford Motor (F) offered a variety of buyout packages that eligible workers could choose from. One included all-expenses-paid college education along with payments of half their salary and extended medical benefits for up to four years (as long as they're enrolled in classes).

And buyouts aren't just happening in the beleaguered American auto industry. Companies as diverse as chocolate maker Hershey (HSY), utility Progress Energy (PGN) and credit-card company MBNA have eliminated hundreds of jobs in the past year through voluntary severance and early-retirement offers. As more companies consolidate or slash costs, any employee can be affected by a buyout — union workers, senior managers, and so-called "at-will" employees, who work without a contract and comprise most U.S. workers.

A worker faced with a buyout offer must carefully examine the terms and consider where he or she stands in terms of career and finances. One must also consider the health of the company, which may be trimming labor costs in an effort to avoid bankruptcy. "The risk to the worker is that if he doesn't take it, the offer might not be on the table down the road," says Rob Ashmore, an employment lawyer with Fisher & Phillips in Atlanta.

Employees faced with a buyout should review their retirement plans, bonus schedules, stock options, and even additional items such as vacation days and sick time. "The first question is, what are you entitled to under your current plan?" says Sklover. "That's the first thing you ought to make sure you get."

Employees can sometimes negotiate the terms, although unionized workers must rely on a bargaining agent to do the talking. Even with nonunionized companies, many firms like to take a uniform approach in a mass downsizing to avoid the appearance of favoritism or discrimination. This includes senior executives, who may have trouble getting a customized severance package because of new corporate governance rules. An employee who deems a severance package unfair may want to consult an attorney, although the use of outside legal counsel could jeopardize a good relationship with a former employer.

Here are the basics that a buyout package should contain:

Sealing the Deal
A worker who accepts a buyout often must agree to give up all legal claims against the company. "If you believe you have been passed over for a promotion due to gender, this is the time to say 'I appreciate the offer, but there is something else that has happened to me that should be taken into account,'" Sklover says. So employees who harbor any hard feelings must raise them — or forever hold their peace.