What Are the Reasons Why Organizations Offer Early Retirement Plans?

What Are the Reasons Why Organizations Offer Early Retirement Plans?
••• business image by peter Hires Images from Fotolia.com

Companies that need to trim their workforces have a number of options at their disposal. One of those options is offering long-term workers an early retirement package. This type of incentive often is enough to convince workers to move on to other careers or to leave the workforce altogether. These types of buyout packages carry a number of benefits for workers, but they can benefit companies as well.

Avoid Layoffs

Some companies pride themselves on the fact that they have never implemented a company-wide layoff. Others simply prefer to avoid the stigma that sometimes comes with laying off workers on a massive scale. No matter what the reason, companies can avoid mass layoffs, and sometimes avoid layoffs altogether, by offering a generous buyout package to their long-time workers.

Boost Employee Morale

Round after round of involuntary layoffs is sure to hurt the morale and the motivation of the workers who remain. After all, those workers may be left wondering if they will be the next to go. Companies can avoid that morale problem by offering their long-term employees early retirement. The more workers who choose to accept the early retirement package, the fewer the company will have to lay off to meet its long-term financial goals.

Trim Costs

Employees who have been with the company for decades are often making significantly more than their counterparts who just joined the organization. The reasons for this disparity in pay include the combined effects of yearly raises, differences in pay scale and greater responsibilities. Older workers can also be more costly to the company in terms of their health care benefits, since those older workers are more likely to suffer from chronic health conditions. By encouraging those older workers to accept an early retirement package, companies can pave the way for younger, and less expensive, workers to take their place.