Open Windows

Incentives to resign or retire

Thousands of employees at Eastman Kodak are seriously pondering whether they should quit their jobs. This wave of soul searching does not mean that morale or working conditions at the company have suddenly deteriorated. Employees are thinking about leaving because management is tempting them with severance payments as high as half their annual salaries. Employees who are 55 or older with 21 or more years of service will get, on top of the lump-sum bonuses, at least 55% of the pension benefits they were expecting at age 65.

Kodak is one of a growing number of recession-plagued companies that are trying to make their payrolls lean without being mean. Seeking to avoid demoralizing layoffs, many corporate managers are designing special incentives, sometimes called open windows, to recruit volunteers who are eager, or at least willing, to resign or retire. Most such offers are good for a limited time only, because the companies want to trim, not decimate, their staffs. Kodak's program began Jan. 4 and expires Feb. 28.

Kodak's open-window plan is similar to the efforts launched last year by Exxon and Du Pont. Hurt by falling profits, Exxon last summer sent letters to some 30,000 employees in divisions judged to be overstaffed, promising cash payments in exchange for resignations. Supervisors warned that layoffs might become necessary if not enough people quit. The company will not disclose the terms of the deals or how many workers accepted.

Du Pont has been much less secretive about the results of its staff-cutting drive. The company offered resignation bonuses, as well as early pension benefits for older employees, to the management staff at its Wilmington, Del., headquarters and workers at 38 of its 86 manufacturing plants nationwide. Some 18% of the 16,900 eligible employees took the money and left. Du Pont, burdened by interest payments on the $3.9 billion it borrowed to buy Conoco, estimates that the staff reductions will save the company $30 million over the next three or four years.

While Exxon, Du Pont and Kodak have offered resignation incentives to all age groups, other companies have focused on workers nearing retirement. Because these employees command the biggest salaries, their departure can generate the greatest savings. Ordinarily, workers are reluctant to retire early because they are not eligible for Social Security until age 62, and most early-retirement plans offer sharply reduced pension benefits. Now many companies are encouraging employees to leave by guaranteeing them monthly pension payments that come close to what they would have received, including Social Security, had they waited until standard retirement age.

In a study of 108 companies, Charles D. Spencer & Associates, a Chicago-based research firm, found that 27% were offering special incentives for early retirement. Among the corporations that have started such programs in the past two years: Polaroid, Deere and Xerox. A recent addition to the list is R.J. Reynolds, the largest U.S. tobacco company. In January, Reynolds offered pension benefits and a bonus of a year's salary to workers in its headquarters town of Winston-Salem, N.C., who by next year will be 55 or older and will have worked at least ten years for the company. Reynolds is concerned that its sales may drop because Congress doubled the federal excise tax on cigarettes to 16-c-, effective last month.

A big drawback to offering resignation or early-retirement bonuses is that the company cannot control which workers choose to leave. Talented employees may go because they feel certain of finding other jobs, while deadwood workers, with no other employment options, may hang on. Polaroid, for example, suffered an unintended loss last May from its early-retirement plan. Richard Young, 56, who was Polaroid's $210,000-a-year director of worldwide marketing, "retired" with a hefty pension and later became president of Houghton Mifflin, the book publishers, at a slightly lower salary.

Nonetheless, Polaroid insists that it has few regrets. Says a spokesman: "We may have lost some good people, but we eliminated the need for a major layoff." More and more managers seem to agree that it is easier to let employees jump through open windows than to try shoving them out the door. This file is automatically generated by a robot program, so viewer discretion is required.