I recently spoke with a man whose employer had offered him a voluntary exit package.
He wasn’t alone. A number of his colleagues had received the same offer.
His question for me was simple: Should I take it?
I’ve been getting more calls about these offers lately, and there is one important thing employees need to understand before saying yes.
A voluntary exit package is not the same thing as a termination package.
That difference can be worth a lot of money.
Your employer isn’t firing you
When your employer terminates your employment, the company has made the decision that you’re leaving.
That triggers legal obligations, including the requirement to provide proper severance in most without-cause terminations.
A voluntary departure or exit package works differently.
Your employer is essentially saying: We’re prepared to keep employing you, but if you would prefer to leave, here’s what we’re willing to pay you.
You can take the offer. Or you can stay.
Because you haven’t actually been fired, the normal rules governing termination severance don’t kick in in the same way. There isn’t a specific amount your employer automatically has to offer you simply because it has invited you to leave voluntarily.
That makes the decision much more personal — and much more important to assess properly.
The voluntary package may be less than your full severance
Here’s where employees need to be careful.
In my experience, a voluntary exit package is usually worth less than the employee could receive if the company actually terminated them and had to provide full severance – an amount that can reach as much as 24 months’ pay.
I’ve often seen voluntary packages land at roughly half of what an employee’s full severance could be. Every situation is different, but the reason isn’t difficult to understand.
If the company were prepared to provide your full termination severance simply to have you leave, it could terminate your employment and do exactly that.
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Instead, it is offering you money in exchange for choosing to go.
That doesn’t mean the offer is bad. It means you need a frame of reference.
READ MORE: She called about vacation pay — but was owed months of severance
Before accepting, find out what your full severance could look like if your employment were terminated. Our Severance Pay Calculator can provide a starting point, although an individual assessment is important when significant money is involved.
Then ask yourself a different question: Is the amount being offered worth giving up my job?
Sometimes taking the package makes perfect sense
There are situations where a voluntary exit package can be an excellent opportunity.
Maybe you were planning to retire next year.
Perhaps you were already thinking about resigning.
Maybe you’re ready for a change and would happily leave if your employer paid you several months of compensation to do something you were considering anyway.
In those circumstances, the offer could be a win. Why resign for nothing a few months from now if your employer is willing to pay you to leave today?
For another employee, the calculation may be completely different.
Someone who wants to stay with the company, likes the job and isn’t planning to leave may decide that the money simply isn’t enough.
There is nothing wrong with declining the offer and continuing to work.
What if you say no and get fired later?
This is another issue I discuss frequently with employees.
I’ve seen situations where an employee declines a voluntary package and continues working. Then, sometime later, the company decides to eliminate that employee’s position anyway.
Now the situation has changed.
The employee didn’t choose to leave. The employer terminated the employment.
At that point, the employer’s normal severance pay obligations come into play, and the employee could be owed significantly more than was offered under the voluntary program.
That’s why looking only at the cheque being offered today can be a mistake.
READ MORE: He was fired for job hunting — could his boss withhold severance?
You need to compare that amount with the value of keeping your job and with the severance you could receive if the company ultimately terminates your employment.
Only then can you make an informed decision.
Can you negotiate a voluntary exit package?
Usually, there isn’t as much room to negotiate a voluntary exit package as there may be with an inadequate termination offer.
Remember, the employer doesn’t have to offer the voluntary package in the first place.
It has decided what it is prepared to pay employees who choose to leave, and it can generally say: That’s our offer. Take it or continue working.
But there is another possibility employees often overlook. You can ask for one.
If you were already considering resigning or retiring, there is little harm in approaching the company and saying that you’re willing to stay, but would also consider leaving if it offered you a voluntary package.
The company may say no. But I’ve seen employers agree to that arrangement successfully many times.
If you were going to resign without compensation anyway, asking the question could potentially put money in your pocket.
Be cautious if only certain employees are being targeted
There is one situation where a voluntary exit program can raise a very different concern.
Imagine an employer offers packages broadly across its workforce.
That’s one thing.
Now imagine it offers those packages only to employees over 60. That could raise serious questions about age discrimination.
An employer shouldn’t use a supposedly voluntary program as a way to target employees because of their age or another characteristic protected by human rights law.
If you believe you’re being singled out for that reason, get legal advice before making a decision.
Don’t decide until you know both numbers
The biggest mistake you can make with a voluntary exit package is looking at the amount offered in isolation.
Maybe six months of pay sounds fantastic. But what if staying gives you another year of income?
What if you were already planning to retire in four months?
What if your full severance following a termination would be considerably higher?
Those facts can completely change the answer.
There is no universal rule that says you should accept or reject a voluntary exit package.
It depends on your career plans, the strength of the offer and what your full severance could be if the company ultimately terminated your employment.
Find out what you’re comparing before you sign away your job.
If you’ve received a voluntary exit package, have it reviewed by an employment lawyer at Samfiru Tumarkin LLP before accepting it. Understand what you’re being paid to leave, what you could receive if you were terminated instead and whether leaving now actually makes sense for you.
