A Buyout Offer Is Two Decisions

Last week I said Tuesday’s letter would cover the deadlines that can come due before a company’s deal closes. That letter moves to Friday, because of what Microsoft did on Monday.

On October 26, Microsoft offered about 60,000 of its people money to leave. Its chief people officer, Amy Coleman, called it a Voluntary Exit Offer in a memo to employees. It covers teams that are taking part in the U.S., Canada, the U.K. and India, at level 70 and below. Business leaders decide which teams take part. There’s no age requirement and no tenure requirement. Employees were given until the first week of December to decide.

That’s a buyout in the plain sense of the word. The company pays you to leave on your own, by a date. Microsoft says the package is equivalent to its standard severance. Base pay based on tenure and level. Stock that keeps vesting. Health coverage for a fixed period. Career transition help.

Many of the people I work with, I first met while their company was going through a deal. I know how those weeks go. One question takes over every conversation. Should I take it?

That’s the first decision, and it’s yours. Your work, your team, what you’d do next, and what the next year looks like if you stay. Nobody can make that call from the outside, and I’m not going to try.

The second decision is what happens to the money and the stock once you’ve made the first one. It doesn’t come with a memo or a deadline you can see. That’s why it tends to get made by default, in the weeks after, when the choices are smaller.

In the U.S., severance is pay. The IRS treats it as wages, the same as your paycheck, subject to Social Security, Medicare and federal income tax withholding. When it’s paid apart from your regular pay, your employer can withhold federal income tax at a flat 22%. Supplemental wages is the IRS term for things like bonuses and severance. Above $1 million of supplemental wages in a year, the withholding rate is 37%. If you owe more than what’s withheld, the difference is still yours to pay, and some of it can be due before April. State tax, where your state has one, comes on top.

The calendar matters. For U.S. taxes, a payment in December and a payment in January land in different tax years, and that can put the same money in a different bracket. Ask when each payment is made, not just how much it is.

If you have unvested stock, it keeps vesting for a while under the package. How long, and what happens to anything scheduled after that, is in your own offer. Read that part slowly. Each RSU is taxed as pay when the shares are delivered, usually the day it vests, whether you keep the shares or sell them.

The paycheck ends. The shares you own don’t. This is the one I’d look at hardest. If a big part of what you own is your company’s stock, the income that came with the job stops and the concentration stays. At 21 I had almost everything in one stock. It felt like certainty. It wasn’t. If you leave, you get to decide how much to keep on purpose.

Health coverage ends on a date. Know the date and know what comes after it.

The vested part of your 401(k) stays yours. What you do with it has its own choices and rules, and none of them have to be made the same week as the first decision.

Then the order, and it matters more than any single piece. Do the money math before the deadline on the first decision, because the math can change the answer. The same package can look generous or thin once taxes, timing and the grants you’d leave behind are counted. Anything you’d give up by leaving is part of what the offer costs.

I can’t tell you whether to take it. Nobody should, from a memo and a news story. The decision about your life is yours. The decision about the money deserves the same care, and it was never meant to be made alone.

If you’re in the U.S. and weighing one of these offers, the Checkup is free and takes fifteen minutes. bfawealth.com/checkup

Friday I’ll cover the deadlines that can come due before a company’s deal closes.

Talk Friday.

Mateo

P.S. If a coworker is weighing the same offer, send them this letter.