Choosing Unemployment : More Workers Are Selling Their Jobs Back to Employers--for Cash

Who wants to get out while the getting is good? That’s essentially the question many businesses and government agencies are asking their employees these days, particularly their white-collar staffers.

Employers who want to avoid or hold down layoffs increasingly are offering early retirement and so-called voluntary severance programs that dangle financial incentives to entice workers to quit.

These ostensibly voluntary programs are intended to cut payroll costs while minimizing damage to the surviving staff’s morale. They also aim to prevent expensive wrongful discharge or job discrimination lawsuits from workers who otherwise would be forced out.

All the same, coercion often enters the picture. Experts say many staffers worry, justifiably, that if they don’t accept a buyout now they may be laid off later on less generous terms.

“Pressures are brought to bear that, practically speaking, make it anything but voluntary,” said Eric Greenberg, a researcher who has studied work force reductions for theAmerican Management Assn.

Early retirement and voluntary severance programs are structured in various ways, but there are basic patterns they usually follow. Early retirement plans, ordinarily aimed at workersin their 50s or 60s, commonly offer employees a cash payment, continued medical benefits and an increase in their pension payouts to offset the financial impact of retiring younger than they expected.

Voluntary severance deals, on the other hand, generally provide just a lump-sum payment tied to an employee’s tenure with the company. The employee might get, say, two weeks of pay for every year worked.

For employers who want to slash their work forces dramatically, layoffs remain the tool of choice. Still, among organizations cutting staff, the percentage offering voluntary severance climbed from 17% in 1989 to 29% this year, according to annual American Management Assn. surveys of about 1,000 employers. The percentage providing early retirement was 34%, up from 19% in 1990.

This month alone, such companies as Mazda, Travelers Corp. and the Los Angeles Times announced early retirement or voluntary severance programs, which are also known as voluntary separation.

For employees who wanted to quit soon anyway, early retirement or voluntary separation deals can be a dream come true, or at least pleasant news. Take Robert J. Koff, 59, who was a middle manager at Raytheon’s plant in Goleta until taking early retirement last spring.

He had expected to retire at age 62, after working 2 1/2 more years. At least that was his plan until Raytheon offered an early retirement package that boosted his pension benefits, continued his medical insurance coverage and provided half a year in severance pay.

“I started looking for reasons to turn it down, and I really couldn’t find any,” Koff said. “They made an offer that basically said that I could work 2 1/2 more years, and not get any more pension” than if he retired immediately.

But for younger employees worried about finding new jobs in a weak labor market, these voluntary plans sometimes aren’t very tempting. A survey last year by management consultants Wyatt Co. found that 10% or fewer eligible employees accepted voluntary severance buyouts at more than two-thirds of the big companies offering the deals.

At times, employees are given an unwelcome push. Richard R. Torres, who worked seven years for Bank of America, said he accepted a buyout in 1986 after feeling as though he was being shoved out.

Torres said a bank manager called him into an office one day and told him that he had to choose between two main options: He could either accept $3,700 in severance pay and leave immediately or he could take two weeks to look within the company for another job. The problem with the second option, Torres said, was that the severance and final two weeks of pay would total only $2,000 if he couldn’t find another position with the bank.

“I really didn’t have an option,” said Torres, now 44 and a supervisor with a transportation service company. “I wasn’t offered a job by the bank . . . and you couldn’t foresee there’d be a job because thousands of people already had been laid off.

“What could I do? I have to pay my rent. I have to eat.”

In exchange for the buyout, workers nearly always are required to sign waivers forfeiting the right to sue their employers for wrongful discharge or discrimination. For employers, that’s one of the key advantages of a voluntary program. Layoffs of white-collar workers often lead to lawsuits that can easily cost an employer more than $200,000 in legal costs alone.

For employers, an advantage of voluntary severance programs over early retirement is that they easily can be directed at specific employees. “You can walk into someone’s office, ask, ‘How can I get you to leave?’ and you can negotiate,” Greenberg said.

Early retirement offers, benefits consultants say, are less flexible because they typically involve pension funds and thus are governed by federal law. Consequently, early retirement offers often are made uniformly to broad categories of employees, and they sometimes draw more volunteers than the employer wants.

Many employers, to be sure, have developed ways to better pinpoint the workers they want out without violating the law. Still, governments and businesses often find that some anticipated savings are eaten up by the cost of hiring replacements for workers they didn’t want to lose.

Because of related concerns, Bank of America--despite embarking on big staff cuts since merging in April with Security Pacific--has relied on layoffs and hiring freezes in recent years rather than voluntary buyouts. In fact, it hasn’t used buyouts since the mid-1980s.

“In voluntary programs, you tend to lose the wrong people,” said Norm Snell, Bank of America’s director of compensation and benefits.

Snell explained that voluntary programs work best for companies that mainly want to cut expenses across-the-board. With a merger such as Bank of America’s, Snell said, a company may need to make cuts in certain branches or departments that are being consolidated but not in other areas. On Monday, the bank announced that it would close about 450 branches in California, nearly one-third of its total in the state.

The voluntary approach may also fail companies that need to cut expenses urgently.

“Nobody really likes to do layoffs. It’s a painful process for everyone in the organization, including the CEO,” said John J. Parkington, a Wyatt consultant. “Unfortunately, it may be the best way to get the most people out the door as quickly as possible.”

How Companies Shrink

These figures, derived from a survey this year of about 280 companies that have cut staff, indicate what percentage of the companies have used each of the following techniques over the past five years. The percentages total well over 100% because many companies use more than one technique. Shut down some operations: 64% Combined operating units: 62% Sold business units: 50% Substantial layoffs: 47% Voluntary programs (early retirement and voluntary severance): 40% Shifted full-timers to part-time jobs: 10% A separate survey of about 1,000 employers showed an increase in the use of voluntary severance and early retirement plans with companies that have reduced their staff. Percentage of companies offering voluntary severance: 1989: 17% 1992: 29% Percentage of companies offering early retirement: 1990: 19% 1992: 34% Sources: Commonwealth Fund; William M. Mercer Inc.; American Management Assn.