With hundreds of public and private employers downsizing, some are laying off workers, while others are offering buyouts. Both moves help employers reduce head counts and cut wage and benefit costs. For workers, the difference between a layoff or a voluntary buyout may be dramatic. Here's a look at the issues involving buyouts and layoffs. McClatchy-Tribune Newspapers
What's the difference between a layoff and a buyout?
Suzanne O'Keefe, an associate professor of economics at California State University, Sacramento, says layoffs happen when employers must cut payrolls fast. Workers selected for layoff have no say in the matter but may return later if they have recall rights under a contract.
Buyouts are different. "They are typically packages of financial incentives offered to workers to leave jobs voluntarily. They have a choice," O'Keefe said. "But when they leave, it's permanent."
Why do employers offer buyouts before doing layoffs?
O'Keefe said buyouts are a goodwill gesture that employers adopt when they must reduce staff but maintain morale of remaining workers and stature in the community.
Buyouts are risky, though. The executives must pick who gets downsized – factory workers vs. administrative, for example — and must keep remaining workers motivated.
When companies don't meet financial targets because too few workers took buyouts, layoffs may be the next step.
If you take a buyout or voluntary severance package, are you eligible for unemployment benefits?
Accepting a financial package to leave a job is considered a voluntary quit that makes a person ineligible for unemployment benefits, said Michele Sutton-Riggs of California's Employment Development Department's Unemployment Insurance program.
However, employers use the term "severance" loosely, and some offer supplements. Because eligibility for unemployment compensation is decided case by case, people should apply and let state officials decide, she said.