Hear that drum beat growing ever louder? It’s the HR timpani, an ensemble of employers offering older workers voluntary buyout packages. Earlier this year, Fidelity Investments joined in, dangling such a package to the 3,000 employees who are 55 or older and have been with the firm at least 10 years.
If you’re in your 50s or 60s and work for a mid- or large-size company, there’s a decent chance your firm may make a similar offer. In the past few years, the Pittsburgh hospital giant UPMC, Blue Cross and Blue Shield of Illinois and the Philadelphia Media Network, to name a few, have offered buyouts to their older workers.
Buyout Offers to Older Workers: A Corporate Trend
“It’s a corporate trend that is showing no signs of abating,” says Mike Kennedy, who runs the Your Future Reimagined business and lifestyle coaching firm for people 50+ in Cambridge, Ontario.
If a buyout is truly voluntary and offers incentives that enable employees to take early retirement and not lose key benefits, then it’s probably okay.
— Donna Ballman, employment lawyer
And although the buyouts can provide short-term savings for employers because the companies and nonprofits will lose people with the most generous compensation and benefits — thinning the herd — they can backfire long-term.
“Organizations whose staffing decisions are focused on some perceived value in ushering older workers out the door are shortsighted because these same organizations may find themselves missing the skills and characteristics many older workers bring to the workforce,” says AARP senior vice president Jean Setzfand. “Older workers frequently bring traits that are highly sought after in the workplace: experience, maturity, professionalism, a strong work ethic, loyalty, reliability, knowledge, strong communication skills and the ability to serve as mentors.”
Nevertheless, it’s a certifiable trend, which may have you wondering: Are these kinds of offers a form of age discrimination since the Age Discrimination in Employment Act forbids discrimination against employees age 40 or older at most employers? And what should I do if my employer offers me a buyout?
The Double-Edged Sword of Buyouts
The answer to both questions is: It depends — which is why such offers can be double-edged swords.
To answer the first question: Voluntary buyouts offered just to people over a certain age aren’t discriminatory if they’re made the way Fidelity has done it. There, workers can choose to accept payouts that include from six months’ salary to more than two years’ salary, plus 18 months of continued health-care coverage on their current plans, and then the option to stay on the health plan at a higher cost until they’re Medicare-eligible at 65.
“In general, it isn’t illegal to favor older employees, so if a voluntary buyout is truly voluntary and offers incentives that enable employees to take early retirement and not lose key benefits, then it’s probably OK,” says Donna Ballman, a noted employment lawyer and author of Stand Up for Yourself Without Getting Fired.
In cases like Fidelity, says Next Avenue blogger and career coach Nancy Collamer, the firm “can easily argue that they are simply making it easier for people who might be thinking of retiring soon to take advantage of an attractive early exit plan.” In fact, Fidelity said it’s offering “associates who are considering the next phase of their life a generous financial package.”
On the other hand, Collamer adds, “the age requirement does make it clear that they prefer not to lose younger talent.”
When Buyouts Are Illegal
Age-based buyouts can be illegal, however, if they come with strings attached.
Says Ballman: “Many employers use ‘voluntary’ buyouts where the employees are told they can take the package or take a demotion; take the package or take your chances in the upcoming Reduction in Force; take the package or you’re getting laid off anyhow.” In those cases, where older employees are targeted in a layoff or downsizing, she says, it’s illegal.
Even worse, older workers who decline those offers can wind up getting clobbered financially. “I’ve seen employees take a demotion instead of a buyout package and then get targeted for write-ups and criticisms until they are fired,” says Ballman. Then: no severance package.
What If You’re Offered One
That brings me back to question No. 2: What should you do if your employer offers you a voluntary buyout package?
“The first step requires a bit of honest self-examination,” says Bruce Frankel, author of What Should I Do With the Rest of My Life? and editor of LPN-Q: The Quarterly of The Life Planning Network. Have you already been thinking about changing careers, downsizing your job or retiring? And are you in good financial shape? If so, Frankel says, it may be a “great idea” to take the package.
People in that position, Frankel says, could use the package to “go back to school, bolster their resumé or skills, learn new skills or use it to try out something they’ve been thinking about, without the stress.”
Or, says Kennedy, you might want to “explore the option of becoming self-employed. It is the opportunity to take control of your employment future.”
But — here’s the other edge of the sword— if you haven’t made plans for your next stage in life, if you’re not emotionally and financially ready, “it may not be so great,” notes Frankel, one of the organizers of the Age Without Borders Virtual Summit, which will end March 4. Finding a job after 50, as you likely know, is no cakewalk.
Questions for Older Workers to Answer
Either way, Ballman advises, weigh the financial pros and cons of taking the package. “Are you being pushed out before you are able to retire? If so, is there a noncompete clause that makes you unable to work at some other places? Are you losing benefits like retiree medical benefits?” she asks. “Make sure you really understand what you are signing and your risks.”
Frankel also says employees offered packages who have spouses or partners need to have realistic conversations with them about their future plans.
And if you’re even considering grabbing a voluntary buyout package, you might want to bring in one or more professionals for advice. Susan M. Larson, a transition reinvention life planning coach, suggests calling in a labor lawyer and/or a benefits consultant as well as a financial adviser and a life planning coach. “We will benefit from sound advisers and partners as we navigate, to ensure intentional and well-considered decisions at this important crossroad,” she says.
Ballman’s especially keen about having an employment lawyer review the package’s wording before you sign on the dotted line. “You may have leverage to negotiate a better package,”says Ballman. “And sometimes, you’re better off saying ‘No.’”
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