Retiring early with a severance package is one of the smartest ways to leave the corporate world. Leaving without trying to secure can leave tens of thousands, or even millions, on the table.
I also believe that early retirement is better than leaving the rich. For those who choose my preferred retirement option, negotiating separations and layoffs instead of simply quitting is important. Waiver provides a financial cushion, helping you navigate the early stages of retirement, especially during the crucial first year of uncertainty.
The main resistance to this idea often comes from employees, whether they are performing well or not, who do not believe that severance negotiations are possible. “Why would the company pay me to go?” is the most common question I hear. Some even consider asking to be terminated as humiliating, as if the purpose of their lives is to serve their employers forever. How unfortunate.
If you believe something is impossible, it won't be. That's why I like to share real examples of severance packages whenever I see them. These examples help show what is possible. Because when you know what can happen, you have the courage to take action.
Good Severance Package Offered by Automattic
Automattic, the creator of WordPress, has powered Financial Samurai since 2009. Thank you for their content management system, which made it easy to start and maintain my site for so many years. Without Financial Samurai, I wouldn't have had it as a fulfilling retirement journey.
WordPress is an open source system that allows developers to provide added value to website owners and their visitors. For example, I recently upgraded my commenting system using a new plugin, to improve dialogue and reduce spam.
In an effort to reduce the company's long-term costs, Automattic offered its employees a severance package. Here's what the CEO had to say on his blog.
So we decided to design the most comprehensive buyout package possible, we called it the Alignment Offer: if you resign before 20:00 UTC on Thursday, October 3, 2024, you will receive. $30,000 or six months of salary, whichever is higher. But you would lose access to Automattic that night, and you wouldn't be eligible to boomerang (what we call rehiring). HR added more details to make the deal; we wanted to make it as attractive as possible.
I've been asking people to vote with their wallets lately, and this is another example!
159 people took this request, 8.4% of the company, another 91.6% gave up $ 126M to stop living! 63.5% were male. 53% were in the US. Separately it had the most impact on our Ecosystem/WordPress areas: 79.2% of the people taking it were in our Ecosystem businesses, compared to 18.2% for Cosmos (our apps like Pocket Casts, Day One, Tumblr, Cloudup) .
18 people make over 200k/year! 1 person started two days before the deadline. 4 people took it and changed their minds.
Some Lucky Workers Were Paid to Go
Surprisingly, 8.4% of Automattic employees voluntarily accepted a severance package. This high percentage may be due to the gift of kindness, differences in the company's views, and doubts about better opportunities for employees. I think Automattic plans for 5% to 10% of employees to accept, so 8.4% falls on the high side of that range.
In retrospect, to effectively cut costs, Automattic might have been better off requiring all employees to return to the office five days a week, as Amazon recently did. Doing so would have resulted in voluntary departures, thereby saving the company millions in severance package payments.
The luckiest Automattic employee may be the one who started just two days before the termination deadline, successfully winning the $30,000 lottery—or more, if their salary is over $60,000. On the other hand, the unlucky employees are those who quit just before the CEO announced the severance package.
When companies seem unstable, quitting can make sense, especially if you have a better offer elsewhere. But traveling without another job is dangerous. In these cases, it is often better to negotiate a severance package, as struggling companies often plan to lay off more people.
Mercy To Those Who Remain
You can see Automattic's CEO's passion and dedication to its open source work from his blog posts. He also seems bitter about the employees who left, which leads me to believe that those who remain will be rewarded when things improve. If you are also a founder, you take things personally if the company feels like your child.
For those who still use Automattic, there's also comfort in knowing that future severance packages are likely to be similar to the current one: $30,000 or six months' salary, whichever is higher. This example makes it easy to negotiate out-of-cycle packages, armed with the knowledge of what was previously offered.
If you plan to negotiate a severance package, reach out to former laid-off employees to learn what they received. You can also request this information from HR, but remember that they may inform your manager about your question.
If an Automatic Severance Package Is Offered to You
What if your company offers you a voluntary severance package like the one offered by Automatic? Can you take it?
If the Automattic separation package had been offered to me in 2012 when I left, I would have happily taken it. At the time, my base salary was $250,000, meaning I would have received a severance check of $125,000. But I wouldn't stop at $125,000.
I would also renegotiate my deferred cash and stock compensation. Then I asked about receiving a WARN Act salary equal to three months' salary.
Even if they initially said no, I would suggest that I stay to train my successor and ensure a smooth transition. Additionally, I would prove that my deferred compensation was eligible as it was tied to my previous bonus payments.
Everything Is Negotiable When It Comes To Divorce
In the CEO's email to employees, he said, “Four people took it, then changed their minds.” This shows that the CEO was flexible. Most reasonable managers are willing to work with employees to make plans that are best for both parties. After all, companies offer severance packages to protect their reputation and promote goodwill.
Given that I had accepted the Automattic severance package at age 34, I would have continued to accept it at 35, 36, 37, 38, 39, and 40 if offered. When I was 23, my biggest goal was to retire by 40. I thought that if I saved and invested 50% or more of my income for 17 years, it would be enough to last me the rest of my life.
One key takeaway from Automattic's severance request is this: if you're patient, a generous severance package may come your way. If you happen to receive an unsolicited severance package in the year you planned to quit, you'll feel like you've won the lottery.
The Separation Package Is Your Secret Weapon for HOT
One of the reasons people don't quit jobs they don't like, even if they've saved enough, is fear. They fear that early retirement may be a financial mistake or worry about losing their identity and status. Without something new to focus on, they fear they will feel meaningless.
I had this fear too, which is why I tried to plan ahead. Even after negotiating my severance package, I made sure I stayed for two months, collecting my pay, before my WARN Act pay started. When I knew I was going, I wanted to delay the process as long as possible to give. I had more time to prepare for an uncertain future. In a way, it's like delaying the closing of a home escrow to give yourself more options.
Negotiating a severance package was the catalyst I needed to overcome my fear of giving up money. After 10 years of working, I had lost hope of making more money. At 34, I was confident that I could find another job in finance if quitting early didn't work out. So I took action—and three years later, my wife did too when she was 35.
If you want to retire early, negotiating a severance package is a must. There's nothing wrong with that, and the financial cushion you'll get will give you the confidence to make a lasting change in your life.
And if you happen to be offered a nice severance package, take it if you no longer enjoy your job. At worst, you're happy to get away from the grind with little financial impact, and figure out what you really want to do with your life.
Student Questions and Suggestions
Would you accept Automattic's termination package offer? Why do people who want to retire early quit their jobs without trying to find a financial foundation. What helped you retire early?
If you want to master the art of negotiating your severance package, get your hands on it How to Handle Your Layoff. It is the only book of its kind, having been refined and updated six times since its original release. Collectively, students have received tens of millions of dollars in severance pay following the strategies outlined. Don't leave money on the table—get the financial cushion you deserve for retirement or your next adventure.
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