Is "preemptive severance" the same as being fired?

Question

I read a recent article about someone quitting their job at Netflix. One part of the article confused me:

I spent two weeks after the performance review thinking about my next steps and decided to have a candid talk with my manager. In a one-on-one meeting with him, I proposed that we discuss a "preemptive severance package."

I told him: "My performance is declining because my motivation is declining. My motivation isn't improving because the team's goals diverge further from my career goals. What if we discussed a preemptive severance package out of Netflix now rather than drag this on? That way Netflix saves money, the team finds a better fit sooner, and I can go do what I want. A win-win for everyone."

After he discussed this with human resources, I had a final meeting where Netflix agreed to preemptively terminate me, and I received my severance package.

What is a "preemptive severance package"? Wikipedia defines severance package as pay and benefits received when an employee leaves unwillingly. If an employee wants to voluntarily leave, why would the company give them anything?

The last sentence ("Netflix agreed to preemptively terminate me") implies that he asked Netflix to fire him with severance.

So my questions are:

• Is "preemptive severance" actually a thing, or is the author just wordsmithing terminology to portray it more positively?
• Is this different from being fired? Would future employers examining a candidate's employment history consider it differently?

Answer 1

Is "preemptive severance" actually a thing, or is the author just wordsmithing terminology to portray it more positively?

Yes, this is a thing. From Ask A Manager - severance pay: who gets it and how it works:

Can you get severance pay when you quit?

Typically, no. Severance is usually for employees who are being let go involuntarily.

However, there are some exceptions to this. If it’s clear that your work isn’t going well but your employer prefers not to fire you, you might be able to negotiate an exit that includes severance. Or, if you believe you have a legal claim against your employer, you might be able to negotiate a departure that includes severance in exchange for signing a release of claims. In most cases, though, severance isn’t given to employees who voluntarily resign.

I would think that this would also work at organizations where firing people is a difficult and/or timely process.

Is this different from being fired? Would future employers examining a candidate's employment history consider it differently?

That would depend on the agreement the employee reached with their employer. In Ask A Manager - how to ask to resign instead of being fired, the letter writer is advised to get the agreement that the company not contest their unemployment benefits and agree on what's said in reference checks in writing in exchange for a smooth, early exit. (Note that there is no severance in this scenario.)

Answer 2

Keep in mind that Netflix is a very unusual company.

They pay more money than the other FAANGs, but they keep a very small pool of engineers and they're constantly weeding out the non top performers.

https://www.levels.fyi/company/Netflix/salaries/

And yes, if your heart is not in it, you can just tell them, and they'll be happy to give you four months of full pay (and perhaps even more) just to walk away.

https://www.businessinsider.com/netflix-severance-package-4-months-full-pay-2017-6

Is this different from being fired? Would future employers examining a candidate's employment history consider it differently?

It doesn't really matter. Correction: Actually, as @DJClayworth pointed out, this may matter for unemployment benefits.

But outside of unemployment benefits and in this particular case:

A former Netflix engineer is not going to have trouble finding a new job elsewhere. And that's because most people in the industry know that engineers who work at Netflix tend to burn out eventually.

Answer 3

Your definition of severance is wrong. Severance isn't always paid because someone is leaving unwillingly. It's just money given when someone leaves, it can be a mutual decision or even something people want. Other examples:

My father, a public school teacher, accepted a severance payment for retiring at 55 instead of continuing to 60. The payment was basically 5 years of credit to his pension. The school system offered it because they wanted to hire younger, cheaper teachers. He was then free to do nothing, or work for another school district (or even as a sub in the current one). But it was a voluntary option, he signed up for it. In fact he was hoping they' do it (they had done something similar in the past when he was too young to qualify, and he was going to jump on it if they ever did it again).

When I was in my 20s, my employer offered everyone with less than 5 years experience severance if they were to voluntarily quit. This was so they didn't need to run layoffs. I was looking for a new job anyway so I happily took it. Again this was voluntary, the default was not to take it. You had to request it.

After a startup I was working for was bought and the relationship between me and them was... not good, I was offered a month's severance to leave. They had no cause to fire me and doing so would have demotivated and upset my coworkers (I was popular), but due to the economy I was holding onto a job I disliked as it was the bottom of the 2008 recession. I agreed to their proposal, as I recognized the situation was toxic. If I hadn't agreed, I wouldn't have been fired, but it may have lead there- it just would have taken more time (the situation by then was unfixable).

It's not uncommon for severance to be a mutually agreed on option, for people who are no longer a fit but the employer doesn't want to fire.

Answer 4

People like to think that employees are either fired or quit, but in reality, the situations often a lot more complicated.

It's somewhat likely that the employee in question was under an employment contract, which may alter the at-will status of the employee. (Remember that about 1/4 of USA employees are not at-will.) Just for context, the wage in question was $450k a year, which makes contracts important.

Employment contracts are agreements between two parties, which can be modified or terminated, with further agreements between the two parties.

It's unlikely the employee received the full balance of what the severance package would be if they were made redundant.

If an employee wants to voluntarily leave, why would the company give them anything?

We don't know the exact amount of the package, but it's likely that the goodwill generated, from both the leaving employee and remaining employees, will be beneficial to the company.

And what will it look like to other employers?

It will look like the employee and employer worked together to find an outcome that was good for the both of them. This is a positive thing.

Answer 5

This appears to be the same as what Australia terms "voluntary redundancy" (VR for short). A VR is in effect paying somebody to agree to leave. There are various reasons why this might happen, and it's not necessarily a reflection on their performance.

Sometimes an employer finds their revenue shrinking, or decides to change direction and abandon some of their previous operations. In this case, some staff are likely to lose their jobs through no fault of their own.

Offering VRs is one way to manage that process. If my company has 100 widget engineers and I only have enough work for 80 widget engineers, picking 20 people to fire is likely to be a painful process and demoralising for everybody involved. But there may well be 20 people who are willing to leave, in exchange for a few month's salary; it will probably still be a sad time, but not as rough. It also gives room to negotiate a smoother handover - somebody who's accepted a VR may be more willing to spend a month wrapping up their work/etc. than somebody who's been fired involuntarily.

In these cases, a VR might have nothing to do with individual performance and everything to do with what the business needs. Indeed, one of the drawbacks of VRs is that often the people who volunteer are the ones the employer least wants to lose (because they're the ones who have best prospects of finding another job).

In some cases, there may also be legal obstacles to firing employees e.g. contracted periods or the risk of a discrimination/unfair dismissal lawsuit. Again, redundancy by mutual agreement can be a way to avoid this situation.

One thing that is unusual about the article you link to is that the employee initiated this process. In the cases I'm aware of, it's usually the employer that first identifies the need for redundancies and makes an offer. But evidently in this case he was able to convince Netflix that it was in both their interests to have him leave on amicable terms rather than waiting to have him quit (potentially on short notice) or have to fire him.

Answer 6

In france, where you essentially can't be fired, this is even enshrined in law, and called rupture conventionelle (contractual termination).

You negociate the terms of your departure with your employer, and of your severance with your employer - which has to be more than the legal severance, and are entitled to unemployement benefits after, for up to two years.

Answer 7

A lot of the responses focus on the higher end of the pay scale and together I think there is an overall consensus on the main points.

Is "preemptive severance" actually a thing

"preemptive severance" is not yet a legal term, and Severance pay itself is not offered ubiquitously. Some unions, industries or professional organisations have policies that their members abide by that include severance pay. Some Jurisdictions require this by law.

The contract of employment may itself contain an explicit provision for a severance payment on redundancy. Although this was unusual in the past, it is now becoming more common. Alternatively, there may be an express provision incorporating an award/certified agreement that includes an obligation on the employer to make a severance payment.

• Claims for severance payments - Executive Rights Employment Lawyers

Severance Pay, although named differently in some jurisdictions, if offered, it is available on termination of your employment. Many contracts will have specific terms that govern conditions around the termination that may affect the severance entitlements, some conditions may preclude entitlements altogether. Sometimes there will be clauses that specify a minimum term of employment that triggers or alters the severance entitlements, such as bonuses for long periods of service.

Is this different from being fired? Would future employers examining a candidate's employment history consider it differently?

The whole point of this "preemptive severance" is that the employee wants to leave, but they want their entitlements too! (which presumably they would not be entitled to if they quit). So from a legal sense they want their employer to fire them.

How this affects their employment history will depend greatly on how the negotiation played out.

• If the employer felt they were being blackmailed, then they might be inclined to simply fire the employee effective immediately, which would enact any standard contractual obligations on the spot.
• If the employer was amicable to the request they might negotiate a specific date that the employment will be terminated along with some criteria or expectations of duties or tasks to complete before then, such as training their replacement or handing over responsibilities.
• If the employer was supportive then they might offer a form of settlement, which from a legal sense would nullify any severance obligations and preclude you from being able to make future claims to severance entitlements in exchange for an alternate payout or set of entitlements.

How this looks on your employment history therefor becomes part of your negotiation to leave. Different jurisdictions will have legal obligations that your employer may not be able to work around or that may need things to play out in a certain sequence to be lawful.

• Understanding the legal constraints that your employer must abide by will help you in these discussions, know your rights, but know theirs too.
• Make sure you understand what you want this termination to look like on your employment history first, then take the appropriate steps to make it happen.

As pointed out by Geoffrey Brent, in Australia there is a legal term that can be used to cover the last 2 of the above list, that is Redundancy. Accepting a Redundancy in Australia for instance will affect your eligibility for unemployment benefits, and rightly so as a redundancy usually includes a larger payment than standard termination would pay out. However, there are legal precedents that determine the conditions under which a Redundancy can be offered, if this criteria cannot be met then how this looks on your employment history becomes discretional on the part of the employer, unless you make it explicitly part of any agreement you make with the employer.

Is "preemptive severance" actually a thing, or is the author just wordsmithing terminology to portray it more positively?

While not a legal term, I would say this is a creative wordsmithing terminology and I vote for its inclusion in the common employment vernacular. Have a read in Can an employee ever ASK for a severance package for an example of usage back in 2009.

Risk is a good reason to sum up why an employer might accept to offer a pre-emptive severance. Think this through:

It is a common understanding that severance is generally only offered if the termination of employment was initiated by the Employer, but there are steps an employee can take that might push the employer to the point where they would have terminated the employee anyway.

• Poor performance, employee may deliberately under perform or cut corners in their work almost to the point of becoming negligent.
• Lapse of certification, in some industries it might be enough for the employee to not renew a required certification or to deliberately fail an assessment.
• Toxic personality, its pretty easy to become abrasive to fellow employees, or clients without being openly offensive, at some point you will attract enough attention that you will be asked to leave.

A reasonable employer who is made aware that an employee wants to leave, but is hanging on until they become entitled to severance, might choose to avoid finding out what interesting tactics the employee might deploy to bring about their termination.

I once heard a story from some mates from school who started as juniors part time at a supermarket. One of the day shift workers who trained them, who was by all accounts a "cool guy" and a model employee came to them with a dilemma a few months in. He wanted to move overseas, but the opportunity was not going to be open for long and he wanted his long service leave to be paid out as he had been working for 13 years and 4 months, just 8 months away from the magical 14 years needed for his long service. He asked the local manager about an early payout, who said it couldn't be done and that if he took the request any higher he would probably be fired on the spot. What happened next was that his work ethic changed dramatically, it was the job of the juniors to cover for him when he was sleeping behind the pallets in the store room and in return he would provide lunch and snacks for them whenever needed, because he had authority to write off damaged stock and did most of the re-ordering. This and other activities fostered a general distrust of management (and an influx of job applications from school!) and created an overall toxic work culture that pretty much affected or infected everyone who worked there. Eventually a senior staff member who was fed-up with the shenanigans offered an alternate resolution, it turns out that he had a lot of sick leave banked up, that cannot be paid out, so why not use up the sick leave as he was clearly stressed out, then go on an extended holiday to use up any holiday pay that was left, then come back and work for a few weeks to meet the 14 year limit and then you will get the payout that you are seeking even if you choose to quit.

The advice was taken, but the damage was done, the shenanigans had become learned behaviours and part of culture at that workplace, customers even stopped going to the store and it did eventually close. There was no other significant changes in the local community but this perfectly situated store with good prices went from 8 checkouts with lines of customers to a single register being opened that could cover peek times and the store closing during non-peak times. In a period of less than 2 years.

My observation of the whole experience was that in the end it would have been a smart business decision to have come to an early arrangement to satisfy what would have been a reasonable request at the time.

Answer 8

So my questions are:

• Is "preemptive severance" actually a thing, or is the author just wordsmithing terminology to portray it more positively?
• Is this different from being fired? Would future employers examining a candidate's employment history consider it differently?

I've never heard that specific term used before, but I have heard of people asking to be laid off with severance.

If I were the future employer, it would look almost exactly the same as being let go for poor performance to me. It's basically, "my performance was declining so I was eventually going to be fired. I just sped the process up."

If this is something you are considering attempting, remember that in much of the US, you could be fired in this situation (asking for a deal in exchange for resigning) without any severance.