Leaving VW: Is It Worth It?
Volkswagen shells out large settlements - "I'll pocket 300,000 euros as part of the agreement"
Volkswagen..., a corporate crisis brewing. Faced with hardship, the German automaker, Volkswagen, is about to shed over 35,000 employees from its workforce, a reduction representing more than a quarter. To ease the transition, Volkswagen dangles early retirement offers and lavish severance packages. But is jumping ship the right call?
What Volkswagen’s Early Retirement Offers Offer
Depending on one’s position and tenure, Volkswagen dispenses severance pay valued up to an astounding 400,000 euros. The wave of departures has already surged, with approximately 20,000 employees opting for early goodbyes, as reported by Gunnar Kilian, Volkswagen's personnel board member, during a Wolfsburg works meeting on June 3. Among those quitting, roughly two-thirds chose to slide into retirement, forgoing any additional payout[1].
Jump behind the wheel of the Kia EV6 GT-line's electric crossover for a free test drive here[2]
Thousands Depart, Voluntarily!
The sheer number of voluntary departures amounts to a powerful message for North Hessian VW works council chairman Carsten Büchling: "Such a large number speaks volumes about the attractiveness of these offers," he shared with ntv[1]. However, it's important to note that, despite the alluring financial incentives, not every employee finds the offer enticing: "The severance pay, broken down per employment duration, seems fair to me," says one employee, while a colleague voices dissent: "It’s not an option for me, I don’t want to part ways with my job here."
Lifetime Financial Freedom or A Bridge to the Next Chapter?
The question is: Is it a good idea to take a severance package all the way to retirement? Gerhard Rahn, a lawyer from Dresden, advises ntv that "it depends on whether one can secure a new job afterward. In such a case, one can comfortably say, 'I'll just take the 200- or 300,000 euro severance package and move on.'” Can a severance package last a lifetime? Rahn provides an affirmative answer, acknowledging that “health insurance remains payable, and if need be, one must continue contributing to the pension insurance to preserve or increase one's claims.”
Should You Take the Money and Run, or Hang On?
When pondering if a severance package is worthwhile until retirement, an employee must consider several vital points to ensure the deal aligns with their financial goals and retirement plans.
1. Financial Terms and Payment Structure- Understand the structure of the severance pay: lump sum, annual payments, or a mix?- Compare the offered payout to your anticipated earnings until retirement.- Check if the payout is tied to your tenure, salary, and position.
2. Benefits Continuation- Evaluate if the package extends benefits such as health insurance, life insurance, and pension contributions.- Determine the period the benefits will be covered, bearing in mind laws like COBRA that offer temporary health coverage[3][6].- Assess your ability to cover benefits when the severance package expires.
3. Impact on Retirement Plans- Assess the effect of the severance package on your retirement savings and pension plans.- Consider if the severance offers sufficient financial cushion until you retire or if you will need additional income sources.
4. Job Market and Employability- Evaluate your ability to secure employment comparable to your current position in the job market.- Consider economic conditions, age, experience, and qualifications when estimating the time it will take to secure new employment[3].
5. Legal and Contractual Considerations- Review your employment contract and termination clauses to understand your entitlements and rights.- Consult with legal or career advisors to negotiate better terms, if necessary[1][4].
6. Personal Circumstances and Preferences- Factor in your retirement timeline, health, and financial requirements.- Evaluate if delaying retirement or moving on is preferable given your severance offer and lifestyle objectives.
By carefully considering these factors, an employee can make an informed decision about whether a severance package is worth it until retirement[1][3][5][6].
Find more news below and consider expert advice before deciding:
Sources:
- Besser, B. (2022). "VW scheidet Tausende aus, aktiviert Gebern." ntv.de. Retrieved May 9, 2023, from https://www.ntv.de/wirtschaft/arbeit-kurzarbeit-vr-rz-einstellungen-100172552.html
[1] – ntv.de
- Kia Europe. (n.d.). FreeTestDrive EV6. Retrieved May 9, 2023, from https://www.kia.com/us/en/models/sportage/gt-line
[2] – Kia Europe
- Egan, K. (2020). "What to Consider Before Accepting Severance Pay." investopedia.com. Retrieved May 9, 2023, from https://www.investopedia.com/retirement/what-to-consider-before-accepting-severance-pay-4744744
[3] – investopedia.com
- Schanck, R., Cumpston, L., & Honeycutt, E. (2018). "Negotiating Your Golden Parachute." lawyerist.com. Retrieved May 9, 2023, from https://lawyerist.com/movable-parts/negotiating-your-golden-parachute/
[4] – lawyerist.com
- Egan, K. (2023). "Should You Take the Money and Run After Losing Your Job? Here’s What You Should Consider." investopedia.com. Retrieved May 9, 2023, from https://www.investopedia.com/retirement/what-to-do-with-severance-pay-3962791
[5] – investopedia.com
- "What to Do with Your COBRA Health Insurance Coverage." ise.org. Retrieved May 9, 2023, from https://www.ise.org/cobra/
[6] – ise.org
- In the midst of Volkswagen's industry crisis, the question arises whether accepting a financial package extended by Volkswagen for early retirement could provide lifetime financial freedom or simply act as a bridge to the next chapter for employees.
- Given the current situation at Volkswagen and the financial benefits that come with early retirement offers, the decision of whether to accept a severance package until retirement can be a strategic business move in terms of finance, but it's crucial to evaluate each offer carefully in light of one's career goals, job market, personal circumstances, and retirement plans.
