When General Motors last month offered buyouts and early retirement packages to 113,000 hourly workers, the move focused new attention on a key aspect of the continually evolving relationship between employers and employees.
Buyouts are essentially management's attempts to trim costs and make their operations more efficient -- usually when the company is in a slump or under attack -- by offering workers incentives to voluntarily leave their jobs. Buyouts are a clear alternative to layoffs, in which management gets to choose who heads for the door rather than give employees the opportunity to make that decision for themselves.
But layoffs leave managers facing sticky legal issues, especially with regards to union contracts, and also require the companies to pay unemployment compensation. In addition, layoffs can create bad will among the remaining employees.
Buyouts, frequently described as a "humane" way to handle employment reduction, show up in a variety of industries. In 2003, Verizon offered buyouts to 152,000 employees. Ford is trying to eliminate 30,000 jobs through buyouts by 2012. Federal agencies have increased the buyout offers to government employees, resulting in more than 22,000 federal workers leaving their jobs over the last two years. Insurance company Allstate announced this month that 1,000 employees had accepted a voluntary buyout offer extended to 6,800 members of the workforce. Pulitzer Prize-winning reporters at The New York Times, Boston Globe and Philadelphia Inquirer are among those journalists who recently took buyout offers at their newspapers.
While members of a company's human resources department and general counsel's office are often consulted about a buyout's structure and terms, the final agreement usually comes from the very top of the company, says Daniel P. O'Meara, an employment law attorney with Montgomery, McCracken, Walker & Rhoads in Philadelphia, Pa.
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