What are voluntary layoffs?

Adding the word “voluntary” in front of separation, retirement, and severance packages seem to be the new, empathetic way for companies to handle layoffs whether it’s the tech industry or higher education.

These programs, also broadly known as voluntary incentive separation programs, have been around for decades. They first gained traction in the ’80s and ’90s and saw a resurgence of popularity during the COVID-19 pandemic.

Voluntary layoffs are programs that offer employees incentives to leave. These incentives may include extra pay for a few months, healthcare coverage, and other employment services such as career counseling.

Why is this beneficial for employers?

Typically, voluntary programs are offered in order to avoid involuntary layoffs down the line.They allow for employees to retire early or make a career change. Christopher Nickson, vice president and senior consultant for HR firm Segal, explains that voluntary layoffs are often beneficial for companies looking to downsize their highest paid employees.

 “Oftentimes you are taking somebody who has worked for the organization for many years, and as time has gone on, their wages have gone up steadily as a factor of increased experience,” Nickson said. He points out they’ll typically be replaced by someone with less experience. “The result is they come in, typically at a [lower] compensation rate that’s beneficial to the company,” Nickson said.

Essentially, companies view the voluntary programs as a more empathetic and transparent approach to cost savings than layoffs where employees are given no choice.

But not all who are offered these programs agree. 

In April, Duke University announced a voluntary layoff program in order to cut 10% of the university’s costs, or roughly $350 million. The offer included compensation for one week of regular pay multiplied by years of service, maxing out at 26 weeks. 

In response members of the Duke community wrote a letter entitled “Duke, Don’t DOGE” to the university’s administration and president, Vincent E. Price, pointing out that cuts could be made elsewhere. 

The letter calls the voluntary layoffs “institutional hoarding.” It notes that some of the highest paid members of the institution (those making over $1 million), including Price, could take a 25% pay decrease, and those earning $500,000 to  $1 million, could take a 10% decrease voluntarily and save Duke $6.6 million.

“Duke is one of the first major universities in the country to enact sweeping layoffs across its workforce. This is a historic and devastating move,” the letter states. “And while workers are losing their jobs, housing, healthcare, and immigration status, Duke’s top administrators and athletics personnel continue to pull six-and seven-figure salaries. There are no cuts at the top. There’s no shared sacrifice. Just more for them—and less for everyone else.”

Nickson argues that universities like Duke are in a tight spot since enrollment rates are dropping, and universities are seeing grant and funding cuts. Overall, Nickson believes these programs are a good way to minimize or avoid involuntary layoffs later on. “It’s a win for both the institution and for the individual,” he said.

What to consider when offered a voluntary layoff

It can be difficult to decide whether or not you should take part in a voluntary layoff or buyout. Here are some factors to consider:

• Your likelihood of being laid off.

Ask yourself—how likely is my position to be impacted later on? And, how strong is the current job market for someone with my  experience and skills?

“If you feel like you’re going to get laid off if you don’t take the severance, you may as well do it,” career coach and founder of Life after Layoff Bryan Creely said. “The voluntary severance is generally going to be more attractive because they’re trying to incentivize people. If you don’t take the voluntary severance and they move to eliminate your job anyway, it’s likely not going to be as attractive of a package.”

• Where you are in your career and what you want next

Taking a voluntary leave could open the doors for a career change, offering an exit from an unwanted job, or a ramp into retirement. Consider how easy will it be for you to pivot. Are you looking to switch industries entirely, which may take longer to find a job or gain additional certification? Or are you mid-level, at your career “prime” with a niche or specialized background where there’s demand for your skills? Are you close to retirement? Would taking a voluntary layoff allow you to financially and emotionally move on comfortably without having to find a new position?

“Hypothetically, if you’re close to retirement and you have the option to take part in a voluntary layoff for one year’s payment, this is a great opportunity for you,” said Micah Alpern, senior managing director at CEO global advisory firm Teneo. “But, if you’re a young person, like a newer, tenured employee, this might be very negative to you if you receive four months’ severance but have to find a new job.” 

• What is being offered and what are your rights?

It may be helpful to enlist the help of a financial adviser, career coach, or legal counsel to understand the full scope of your needs and rights. As each program has different  incentives and financial offerings, it is important to fully understand your offer before accepting or declining it, as each program varies with their incentives and financial offerings. 

Typically, taking a voluntary layoff means you still qualify for unemployment in most states. But, you should get a written statement from your employer, stating the reasons for the layoff.

For better or for worse, there’s a good chance these programs will continue, as general rates of layoffs have remained consistent over the past few years in the U.S.

“The layoff cycle is getting shorter and shorter. It used to be that there would be a layoff cycle that would happen once a decade,” Creely said. “Then COVID-19 hit, and now the layoff cycles have now gone from roughly every 8 to 10 years down to two years, or even shorter than that. I think they’re becoming a much more prevalent part of corporate culture unfortunately.”