There are three basic reasons most government workers regardless of age love buyouts.
For longtime feds, those most likely to get buyout offers, it’s an unexpected chunk of change that may be enough to make them decide to retire.
For midcareer employees, the departure of a boss or department head means a chance to move up in the increasingly narrow promotion ladder.
For newer feds, buyouts lessen the chances of layoffs, which are run under a last-hired, first-fired procedure. They often hit women, minorities and non-veterans hardest.
Nearly a dozen federal agencies plan to offer longtime employees buyouts over the next couple of years. They either want to reduce their work force or reshape it. Or both.
Unfortunately, all but one are offering buyout payments that are pegged at 1992 price and living-cost levels.
The $25,000 payments (worth about $16,000 to $18,000 after deductions) were decent but not overly generous then. Now they look like bargain-basement offers compared with severance packages some private firms, and at least one federal agency, are offering.
The Federal Deposit Insurance Corp., which can and does avoid regular bureaucratic rules from time to time, is offering up to 2,500 selected employees the equivalent of six months’ salary if they will leave.
In the case of some attorneys and bank examiners, the buyout payments will exceed $60,000 before deductions. That’s a far cry from the $25,000 gross other agencies are offering, or the nearly $40,000 estimated cost of laying off a midgrade (GS 9) civil servant.
Layoffs include such costs as personnel processing, appeals, unemployment compensation and severance pay. Costs involved in reduction-in-force (RIF) actions also can escalate when senior employees displace, or “bump,” others out of jobs others who then must be compensated.
Citing studies by the General Accounting Office, the Office of Personnel Management says, “Buyouts are generally cheaper than RIFs and save more money over a 5-year period.” It says a buyout can generate $60,000 in net savings, and RIFs, where no job bumping actions are required, can save even more.
During the Clinton administration, when buyouts came into being, 128,000 civilians (mostly in Defense agencies) received buyouts, and “only” 27,000 federal workers were RIFed. The average buyout taker was 53 years old and got a gross payment of just over $24,000.
Defense, Department of Veterans Affairs, Energy and the Internal Revenue Service are among the dozen agencies not including the FDIC with buyout authority. But how many feds will take the $25,000 bait, when the FDIC is offering its people half a year’s pay, remains to be seen.
The effect of the FDIC action could convince senior feds in other agencies to delay retirement (including a buyout) in hopes that Congress will allow other agencies to offer more generous buyouts.