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How to Negotiate a Better Buyout Offer

By Lisa Scherzer | Published: March 6, 2008

 

 

EMPLOYERS CUT SOME 17,000 jobs in January, spurring the first negative turn in job growth since 2003. And, as businesses continue to strain under a slow-moving economy, that trend will likely continue.

The one relative bright spot in this slowing job market is that many companies are opting to offer employees buyouts rather than laying them off. In the past year, Electronic Data Systems, Yahoo  and Southwest Airlines have all offered early-retirement or buyout packages to thousands of their employees. The U.S. auto industry, chronically troubled by sluggish sales and red ink, is an old pro at using buyout offers as a way to cut costs. Just last month Ford announced a plan to offer voluntary buyouts to its 54,000 hourly employees, with package options including tuition reimbursement and cash payments ranging from $35,000 to $140,000.

For these corporations, buyout offers are a way to trim payrolls without firing workers outright or confronting unions. For employees, though, an offer can be fraught with dueling considerations and concerns. Accepting the offer can present new opportunities, be it another job or an earlier-than-expected retirement. But it also has the potential to be disastrous, particularly if you're not financially prepared to live without a steady paycheck.

No matter what the situation, employees can take some solace in the fact that buyout offers aren't always set in stone. Before blindly accepting the first offer that comes your way, consider these factors first.

You can negotiate. Don't assume your employer's proposal is the final offer. While many companies have little to no wiggle room when it comes to details in the packages — particularly in mass buyouts like Southwest's or GM's — it's almost always in the employee's best interest to try and get a better deal.

"No package is a take-it-or-leave-it situation," says Kirk Nemer, CEO of Career Protection, which works on behalf of employees facing buyouts or termination to arrange the best exit package possible. "That's how companies present it. But they can be negotiated; they can be re-worked to fit the employees' personal situation. It's so important they don't leave dollars and other perks on the table."

Nemer says his firm recently negotiated better terms on a buyout package for an employee who was close to retirement but didn't want to stop working just yet. The original offer, he says, included six months of income once the worker left the company. Nemer claims the company agreed to another 18 months of income and says the employee was essentially kept on as an "inactive employee" for that time, with the same health benefits and 401(k) contributions he was getting before the buyout.

Big layoffs no longer limited to finance, housing

Home Depot, Lockheed Martin, others announce head count reductions; restrained hiring in recent years means it’s harder to cut

By Mark Bruno

February 4, 2008

The potential for mass layoffs this year no longer seems confined to just the financial services and housing industries now that major companies in other sectors are starting to announce cutbacks as well. Economic growth ground to a virtual halt in the fourth quarter—the Commerce Department reported a mere 0.6% growth rate for the last three months of 2007, well below expectations—and more companies are now poised to tighten their spending and search for ways to slash overhead. With concerns that consumer spending will wilt as we edge toward a recession, some observers say that a wave of corporate layoffs is coming in the not too distant future. “It’s unavoidable,” said Peter Schiff, president of money manager Euro-Pacific Capital. “Corporations are going to have to get leaner, and there are going to be a number of layoffs throughout the year.” While a number of banks, led by Citigroup a nd Bank of America, have already revealed plans to lay off thousands of employees, companies such as Yahoo, Lockheed Martin and Home Depot announced last week that they would be reducing their head counts by 1,000, 850 and 500 employees, respectively. At the same time, layoffs also started to creep into the picture at retailers such as J.C. Penney and Eddie Bauer, where officials said last week that they would be cutting several hundred jobs combined. “The biggest risk for corporations in 2008 is that consumers stop spending, either because they cannot [spend] or because they are afraid to spend,” said John Challenger, chief executive officer of outplacement consulting firm Challenger Gray & Christmas. “The layoff picture didn’t worsen much last year, but if people stop spending, corporations will be forced to be more cautious.” Part of the reason that layoff numbers were relatively reasonable last year—for all of 2007, there were 15,493 announcements of mass lay offs, according to the Bureau of Labor Statistics, a 10% jump from 2006 levels—was that many corporations haven’t been hiring at the same aggressive rates in recent years as they were before the dotcom bubble burst in 2000, Mr. Challenger added. Moving forward, this could pose a unique management challenge: Because of the more sober hiring rate in recent years, there is less “fat” to cut if a company is considering making layoffs, said Lorraine Hack, a partner in the financial officers group at executive search firm Heidrick & Struggles. This could mean that some companies look at functions such as marketing or advertising, for example, if there is an immediate need to reduce costs. Or, if a company isn’t inclined to pursue acquisitions in the near future, it may choose to make job cuts in its M&A or corporate strategy groups. While it may be uncertain exactly where, or how, the bulk of potential layoffs may take place this year, it is clearly weighing on the minds of corporate executives right now. Last month, in a survey of more than 1,300 senior level executives conducted by employment consulting and legal firm Career Protection, roughly half of the executives polled said that they are planning layoffs and reductions this year. That’s up from only 13% of executives who were considering layoffs last January. “It’s by far the worst forecast that we have had in the last five years, and I was shocked by the breadth of industries predicting layoffs,” said Kirk Nemer, president and CEO of Career Protection. Specifically, he said that his company has been “inundated with calls” this month from employees at Bear Stearns, Citigroup, Ford, General Motors, Sprint Nextel and Indy Mac, each of which has recently announced work force reductions. Mr. Nemer added that most executives cited a recession and the slowdown in revenue during the fourth quarter as their main reasons for considering layoffs. Already, 2008 has seen a notable spike in unemployment levels. The Labor Department reported that for the week of Jan. 21, claims for unemployment rose by 22%, to 375,000—the largest one-week uptick since September 2005, shortly after Hurricane Katrina. To put that in perspective, there were almost 1.6 million jobless claims filed in all of 2007, or an average of 130,000 claims a month. Some think those numbers will easily be exceeded this year. David Rosenberg, an economist at Merrill Lynch, said in a recent research note that he expects to see a total of 2.5 million job losses this year, and forecasts that the unemployment rate will rise to 5.75% from 5% by the end of the year. FW

Firm makes sure workers don't sell themselves short. Career Protection helps those in severance and employment situations.

By Chris Walsh, Rocky Mountain News
September 20, 2006

The phone calls began trickling into Career Protection early last week, fueled by rumors that Ford Motor Co. was looking to cut more jobs.

On Thursday, when Ford announced it would offer buyouts to its 75,000 hourly workers, that trickle turned into a flood.

Many Ford employees wanted advice on whether to accept the offer; others wondered if they'd be able to negotiate a better buyout package. One said he was offered $1,000 for each year of service and asked if he was getting a good deal.

Career Protection's response: "No way," said Kirk Nemer, founder, president and chief executive officer of the company. "It was a ridiculously lowball offer."

Career Protection has been growing rapidly in an economy where mass layoffs and business shake-ups like the one at Ford are all too common.

The firm works mainly with people leaving companies through buyouts, layoffs or retirements, helping them obtain better severance packages. But it also assists those on the other end of the spectrum, guiding new hires through the process of negotiating higher pay and benefits.

"What most people don't realize is that they have employment rights," Nemer said during a recent interview. "Severance and employment agreements are not take-it-or-leave-it situations."

Nemer should know.

He has two decades of experience in employment law and worked in executive-level human resources positions at Fortune 500 companies, conducting more than a dozen layoffs in his career. Other executives at Career Protection worked in those fields as well.

"What we realized, having been on the inside, is that companies have a human resources department and corporate counsel on their side," Nemer said. "Employees need them too."

Career Protection's services include developing pay and benefit plans based on the client's situation, reviewing severance agreements to ensure they comply with federal and state laws, negotiating directly with the employer if needed and providing 24-hour support.

Nemer said most people don't realize they can negotiate for extended pay, health benefits and other terms of their departure. Employees also are quick to sign severance agreements, focusing primarily on the pay and overlooking key areas.

On the hiring side, workers don't know that they can and should negotiate. Or they simply feel lucky just to have landed the job and don't think it's their place to ask for more.

Career Protection has a 20-year database of employment and severance agreements from companies worldwide, so employees "know what they're worth and what they should ask for," Nemer said.

The company boasts an 85 percent success rate of doubling or even tripling severance and employment packages.

It worked for Mary Simpson, who used Career Protection last year to help negotiate a severance package when she decided to leave her executive job at a global software company based in Florida.

"They strategized with me, told (me) what is reasonable to ask for at my level and under my circumstances," said Simpson, who first had tried a law firm but was unhappy with its recommendations. "That way we could go forth in confidence and request what I wanted from the company."

The company has worked with employees at companies ranging from Domino's Pizza and Starbucks to United Airlines and Berkshire Hathaway. Clients include lower-level workers up to senior executives at corporations, and most are between the ages of 40 and 59. About 38 percent come from the finance and professional services industry, and many hail from California, Texas, New York, New Jersey and Illinois, and worldwide.

Coupling the human resources and legal sides together in one company is part of what makes Career Protection different.

"There are companies that focus on each one of those, but I personally haven't heard of the two combined," said Sue Murphy, manager of the National Human Resources Association, an industry trade group.

"The fact is that we know how the game is played," Nemer said. "That's one of the reasons we're growing so fast."

Some advice and insight from Kirk Nemer, president and CEO of Career Protection:

•  When you get an employment offer, take it home and review it, even if you're pleased  with it. Give it 24 hours. The same goes for severance packages. Don't give an immediate answer.
•  When negotiating any type of compensation package, the first person who states a dollar  amount loses. Let the employer make the offer first.
•  Whether it's an employment offer, severance agreement or a buyout offer, it's never a  take-it-or- leave-it situation. Everything is negotiable.
  

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