Severance pay vs. taking new job--question for you all

[Miss Cellaneous]

Thankfully, this is not a question I need answers to! But in the past couple of months, I've had conversations with a few people about severance pay that have left me puzzled.

One was with a person whose job has been eliminated company-wide. She was offered 6 months of severance pay, or she could take a different job at a slightly lower rate of pay. She opted for the severance pay and left the company. When the six months were up, she came back to a job pretty much like the job she had previously rejected. Because she had a longer than three-month break from employment at that company, she lost any employment history with them, per their rules. So the previous 17 years that she had worked for them and that would have counted towards retirement benefits, and how much PTO she gets and a few other benefits were gone. But she feels that getting the six month's of severance was a better deal than taking the job she was offered.

The second was with a friend who is a manager at a store for a large, nation-wide retail chain. She is trying to hire a new commission salesperson for a specific department and not having much luck. When Sears announced that it was closing the store in the mall where her store is, she went and tried to recruit some of the salespeople there, who sell the same products and who will be out of a job soon. Most of them were not interested or at least not interested right now, as they will need to work until the store closes in three months or so to get a severance package.

My take has always been that having a job is better than taking severance. Severance runs out. Hopefully, jobs will last much longer. So if I were one of the salespeople in the second example, I'd jump at the chance to interview for the job, because the job might not be there when the store finally closed. And I would prefer the security of knowing I had a job to the "big payout" of severance pay.

Is there something I'm missing here, as to why everyone seems to want the severance rather than a steady job?

[Teacher Terry]

I would rather have a job. I think they want to get paid and not have to work for awhile.

[razz]

It seems that one could take the lower paying job and then get terminated almost immediately losing out on the severance and still without a job. It depends on the stability and behaviour of the employer and the industry in general to date. If the whole picture is iffy, I would take the severance as well.

[JaneV2.0]

I missed out on a few severance packages while I was working. I would only have taken one that came with my pension. Alas, it was not to be. But a lot of my co-workers got them, and went on to work elsewhere, with generally positive results. And if I felt stuck and was not close to retirement, I would have taken a severance package gladly.

[lhamo]

I think we are as close to full employment as you can get, so most people think they will have no trouble getting a new job after the severance runs out.

[jp1]

It's a tough call. I don't especially want severance, but I've spent 10 years at my current mega corp employer. Severance would be almost six months for me if I got laid off tomorrow. I'm meeting with a potential future employer in a couple of weeks. Will I take potential severance into consideration? Absolutely. Because I'm at the point where all my job decisions are focused on my future retirement. I don't "think" my job is in jeopardy, especially since a key team member just quit today, but one never knows for sure.

[ApatheticNoMore]

I've only once been in a position to get severance and it was the last job and I'm sure they did it mostly to make me go away quietly. I took it and was careful to shut up in any way that mattered, not that there was that much reason not to. I initially thought it meant I couldn't get unemployment, but that's not true at all!

But if I had a job offer yes I'd take the job. Those people are idiots it mostly seems. They don't know how bad it is out there. However, as mentioned there is one situation in which it makes sense, if 6 month severance is a near sure thing, and the job you are considering taking has such high turnover that few people last 6 months at it as nobody lasts there - then the severance is rational.

It seems that one could take the lower paying job and then get terminated almost immediately losing out on the severance and still without a job.

I never thought of that, the whole thing could be a ploy by the employer to get people to give up their severances. wow so evil.

[SteveinMN]

I think we are as close to full employment as you can get, so most people think they will have no trouble getting a new job after the severance runs out.

This, as well as the eternal optimism of the human spirit (well, many of us, anyway ).

I think it's highly situational. What is the demand for the job the person does? How easy would it be to find a similar job? Can that person pick up stakes and move -- across town or across the country -- for a job? Is it just the employee or are they the sole breadwinner? Do they have money saved up for just such an event or does severance look like a really big pile of dough to them? And some of it is the mentality people have of money, which doesn't always lead them to do the "logical" thing.

[ApatheticNoMore]

well unemployment office around here says it's taking people 6-12 months to get a job now, and these people thing 6 months severance is going to cover them. someone is smoking crack, that is all.

Yea if you've never seen that much money before it might seem like the lottery, woohoo jackpot, but while the lottery if one won it especially lately (ha) really would be a jackpot, 6 months wages is not exactly there, you aren't going to take it and ride off into the sunset, or find a whole new career doing something entirely new in 6 months (be real it takes WAY more time and work and more than a fair amount of luck than that) etc.. Better to just take the first real job offer if you can get one.

[rosarugosa]

Back in 2000, my job was being eliminated and I had 22 years of service. I would have gotten 39 weeks of severance, but I tried very hard and succeeded in finding another job with the company. It was a slight demotion, but I really valued my 6 weeks of vacation time and my overall benefits package. In retrospect, there were some pros and cons, but overall I guess I'm glad I made the choice I did since I'm receiving a pension and retiree medical and dental benefits from that company.