Layoffs are not the only way companies are shrinking their workforces.
Two major companies in different industries announced employee buyouts on Oct. 26. Microsoft announced plans to extend buyout packages to a quarter of the company. Media and entertainment company Skydance said in a memo to employees that it will offer buyouts to an undisclosed number of workers, according to Reuters. The memo also introduced a five-day, return-to-office mandate for all employees. The announcements sparked fears of potential layoffs at the companies on Reddit and other social media platforms.
Employee buyouts are voluntary and, in most cases, allow workers to leave their job in exchange for a severance package. Buyouts are "becoming more and more popular" as a way for employers to reduce their headcounts and, ultimately, cut costs, says Tammy Marzigliano, a plaintiff-side labor lawyer at Outten & Golden.
While buyouts can provide employees with a financial buffer as they transition into a new role or prepare for retirement, they also can signal layoffs are ahead, Marzigliano tells CNBC Make It.
For workers who feel they are not meeting expectations at work or have already been placed on a performance improvement plan, a voluntary buyout gives employees an exit with severance. A buyout may also be a good deal for professionals who plan to retire soon and employees who already want to leave the company.
But for workers who want to keep their jobs, buyouts can be yet another source of anxiety. Before Disney announced thousands of layoffs on Nov. 3, the company offered some of its executives voluntary early retirement offers in August. "Some of these circumstances could lead to pressure on the employees, and leaving them to feel like they don't really have a choice" to take a buyout, Marzigliano says.
If workers anticipate layoffs, a buyout might seem lucrative, but Marzigliano says the decision to take a buyout "deserves careful consideration." She recommends that employees review several employee documents, "assess their own personal situation" and watch the job market closely.
Employees should first assess their offer letter, employee handbook and plan documents, Marzigliano says. These contracts often include information about benefits and perks, including vesting schedules, or the dates an employee is entitled to cash out various financial awards. For example, while employee contributions to a 401(k) automatically belong to the employee, a company's contributions might be bound by a schedule that determines when an employee receives access to those funds. Workers also risk losing out on other non-cash compensation like company equity.
A severance package might match an employee's salary for a few months, but Marzigliano says to consider the other financial awards you might lose upon signing a buyout agreement.
She also says to compare the voluntary buyout offer against what you'd receive in a layoff, under the company's reduction in force policy, which means the company has eliminated your position and has no plans of rehiring for the role in the future. The policy should state the benefits the company provides to workers, if any, and when employees should expect to receive their severance packages. If the reduction in force policy is more financially lucrative, it might be best to hold out.
A buyout could also cost workers their health insurance, which leaves them with several options. The Consolidated Omnibus Budget Reconciliation Act, or COBRA, allows families to temporarily extend the coverage they received through their workplace for 18 months in cases of termination, though workers usually pay the full insurance premium, including the amount their employer once contributed, and a 2% fee.
Workers can also enroll in a government-regulated ACA plan, but eligibility requirements for subsidies vary by state and some will see a double-digit rate increase on premiums in 2027. Workers should consult their plan provider and assess their severance package to see how much of their premium they will be required to pay out of pocket, according to the U.S. Department of Labor website.
An employee might also forfeit or delay their unemployment benefits upon signing a buyout agreement because it could be considered a voluntary exit . Unemployment benefits, and who qualifies, vary by state, so workers should consult their state's resources . A buyout agreement might also make an employee ineligible for rehire at the company based on the terms of their contract, Marzigliano says.
Marzigliano says buyouts provide employees with a "cleaner exit" compared to layoffs because employees get a greater say in their career trajectory. The agreement also offers employees the opportunity to leave their job with certainty and a financial runway, which could provide some stability in a tough job market.
In some cases, though, buyouts also include confidentiality and non-disparagement agreements. These documents prevent employees from speaking out against the company in the future, according to Marzigliano. In the case an employee believes their employer discriminated against them for a protected characteristic, they may no longer be able to seek legal action against their employer.
The decision to take a buyout is a deeply personal one as it can also impact a worker's sense of identity and their family, according to Marzigliano.
"A buyout's not a gift; it's a transaction," Marzigliano says. "And [workers] should assess what they're giving up as much as what they're getting."
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