When Elon Musk took over Twitter this past fall, he issued an ultimatum to employees: they had until the end of the day to decide if they wanted to comply with his new “hardcore” work demands, or quit and receive severance pay in the form of a “voluntary separation” agreement.
Voluntary separation, in which an employee willingly quits to receive severance pay, is not a new concept, though it is not often issued with a 24-hour decision deadline.
With layoffs still rampant, ResumeBuilder wanted to find out if other businesses have taken their cue from Musk and offered voluntary separation agreements to employees this year, and if so, what their plans are for 2023.
Our survey of 1,000 businesses in December 2022 found that:
- 3 in 4 companies offered voluntary separation to employees this year
- 3 in 5 will offer more separation agreements next year than they did this year
- Half who didn’t offer voluntary separation this year plan to start next year
- 95% say the agreements have been successful in helping to avoid layoffs
- 53% need at least 20% of their workforce to voluntarily quit to avoid layoffs next year
- 89% say the voluntary separation policy was at least somewhat inspired by Elon Musk
3 in 4 Companies Offered Voluntary Separation Agreements This Year in Order to Avoid Layoffs
Seventy-seven percent of respondents say their company offered voluntary separation to employees this year in an attempt to avoid layoffs. Ninety-six percent say their company is ‘somewhat’ (46%) or ‘highly’ (50%) likely to continue offering voluntary separation next year.
Of this group, 61% say their company will offer more agreements next year as compared to this year, 20% will offer fewer next year, and 19% will offer about the same amount.
“Voluntary separation is a great way for companies to quickly reduce their highest cost, labor, without having to lay off a part of their workforce,” said Chief Career Advisor Stacie Haller. “This is not new, but seems to be coming more into favor, especially with the high percentages of those who will most likely be implementing it next year.”
“The disadvantage though, and highlighted at the end of our survey results, is when the employees who organizations want and need to retain may take advantage and leave the company,” she continued. “However, an advantage is that those employees who are ‘quietly quitting’ will be the ones most likely to leave and at some point, the company will replace them with hopefully more engaged employees.”
Half of Businesses That Haven’t Offered Agreements Will Start Next Year
Of the businesses who didn’t offer separation agreements this year, 49% say they are ‘somewhat’ (36%) or ‘highly’ (13%) likely to start offering the agreements next year.
The majority of this group say they will not start offering the agreements until Q2 (39%) or Q3 (41%) 2023.
9 in 10 Say Elon Musk Inspired Company to Offer Voluntary Separation
Of the companies who have implemented voluntary separation this year or plan to start offering the agreements in 2023, the vast majority say the decision was inspired by Elon Musk.
Eighty-nine percent say they ‘somewhat’ (39%) or ‘strongly’ (50%) believe the company took its cue from Musk’s policies at Twitter.
95% of Businesses Say Voluntary Separation Has Helped Them Avoid Layoffs
An overwhelming majority of respondents who have offered the agreements to employees this year say they have been ‘somewhat’ (48%) or ‘highly’ (47%) successful in helping the company to avoid layoffs.
The largest group, at 27%, say they have offered the agreements to 20% – 30% of their workforce. However, a similar percentage say only 20% – 30% of employees who have been offered an agreement have actually accepted.
Additionally, 91% of business owners ‘somewhat’ (44%) or ‘strongly’ (47%) believe that their employees are “career cushioning,” AKA looking for another job while still employed, which makes sense when you consider that only 3% of businesses surveyed say their employees do not know that the company is looking to cut costs and layoffs may occur.
“Now, as our culture needs to label everything, we are calling this practice of being prepared for a job search ‘career cushioning’. Savvy employees should always be up to date here and if and when they need to find a new role, they are already positioned to hit the market immediately,” stated Haller.
More Than Half of Businesses Need at Least 1 in 5 Workers to Quit to Avoid Layoffs
When asked what percentage of their workforce they need to accept the voluntary separation agreements next year in order to avoid layoffs, 53% of companies said that they need at least 20% to willingly leave.
Age and Wage the Strongest Deciders for Which Employees Are Offered Separation Agreements
When asked how they decide which employees are offered voluntary separation agreements, 49% of businesses say they consider who is closest to retirement age, and 40% consider who is the highest paid. Only 8% of respondents say the agreements are offered to all employees.
While the majority of respondents say it is at least somewhat likely that the separation agreements will help them reduce costs (90%) and avoid layoffs (88%) next year, many are also concerned that the agreements will lead to the company losing its best employees (68%) and risking discrimination claims from employees who are not chosen to receive agreements (67%).
9 in 10 Admit to Offering More Money to High-Value Employees to Get Them to Stay
Despite being strapped for cash, 89% of companies who have offered separation agreements this year say they have offered a higher salary to a high-performing employee who wanted to accept the separation in exchange for them staying.
“The result here shows that employers are likely to counter and offer a higher pay and more benefits to retain these high-value employees. The danger is that it can actually be a negotiating tactic for those wanting to stay as well,” advised Haller.
Of the businesses who plan to start offering agreements next year, 92% also say they would be ‘somewhat’ (61%) or ‘highly’ (31%) likely to do the same.
In regards to potential layoffs, Haller had a piece of advice for employees. “I have always encouraged everyone in today’s world to be prepared at all times with regard to your job search,” she said.
“Any event can catch anyone by surprise. A company may be sold, or bought, or go into bankruptcy, or any scenario that can suddenly affect anyone’s employment status without any notice. Your resume should always be up to date and compelling as well as your LinkedIn profile and you should always be regularly networking,” Haller finished.
Methodology
This survey was commissioned by ResumeBuilder.com and conducted online by the survey platform Pollfish from December 14 to 15, 2022. In total, 1,000 participants in the U.S. were surveyed. All participants had to pass through demographic filters to ensure they were age 25 or older, currently employed for wages or self-employed, have an income of $50,000/year or more, work at a company of at least 51 people, and are a C-level executive, owner or partner, HR manager, president/CEO/chairperson, or senior manager at their business. The survey used a convenience sampling method, and to avoid bias from this component Pollfish employs Random Device Engagement (RDE) to ensure both random and organic surveying. Learn more about Pollfish’s survey methodology or contact [email protected] for more information.
