The Trump Administration’s offer to almost all federal civilian workers of eight months pay if they resign by February 6, flies in the face of lessons learned in the private sector about how to conduct a voluntary workforce reduction, without undermining an organization’s performance.
Buyout programs are common in the private sector, with companies offering one-time lump sum payments, or months of severance, or pension enhancements, or some carefully constructed combination of incentives, before resorting to mass layoffs. “They are a way for organizations to create an opportunity for people who were otherwise thinking about leaving, often in times of change or transformation,” says Ron Seifert, a senior client partner at Korn Ferry’s benefits practice.
To that extent, the Trump Administration move makes sense, since it’s keyed to a change–an order that most remote and hybrid workers return to the office by or be fired and that agencies submit their back-to-work plans by February 7.
But the blanket Trump pay-to-quit offer–reportedly driven by Elon Musk–ignores a big risk: That the top performers, with the most marketable skills, will take the money and run. “If your very best people leave in the buyout, then you’re going to be left with people who can’t move the organization forward,” says Allison Vaillancourt, vice-president at benefits and H.R. consultancy Segal Group.
This is exactly what happened when Trump pal Elon Musk asked Twitter employees to commit to an “incredibly hardcore schedule” or leave (with severance) shortly after he bought the company in 2022. The email sent with the government offer even used the same metaphor, “a fork in the road,” Musk used. He later admitted he had to rehire some of the people that were laid off in the cuts, telling CNBC that he’d bring them back “if they’re not too mad at us.”
In fact the business landscape is littered with examples of talented employees who left companies taking generous packages to go on to great success. After Wall Street firm Salomon Brothers merged with commodities trading company Phibro in 1981, a 39 year-old Michael Bloomberg accepted a $10 million buyout of sorts and went on to create one of the world’s largest media empires. Salomon and Phibro no longer exist, but Bloomberg is the 17th richest person in the world, with a net worth of 104.7 billion.
Wholesale terminations can also have an impact on company performance. After laying off 17% of its workforce in December 2023, Spotify failed to meet profitability and user growth guidance during the first quarter of 2024. The layoffs “did disrupt our day-to-day operations more than we anticipated,” CEO Daniel Ek said in an earnings call. That’s why private sector buyout offers are usually narrowly targeted–to, for example, workers in the departments a company wants to close, slim down or consolidate. That way the company won’t incur costs for replacing workers who leave. Buyouts are also frequently aimed at higher-paid-workers close to retiring, as a way of culling their ranks without running afoul of anti-age-discrimination laws.
By contrast, on Tuesday, the Office of Personnel Management emailed a “deferred resignation” offer to all two million civilians working for the executive branch. Those not willing to come back into the office full-time and accept a new “performance culture, enhanced standards of conduct” and a more streamlined and flexible workforce, it said, could resign their posts and be exempt from in-person work requirements until September 30, as long as they sent in their resignation notice––an email reply with the subject line “RESIGN”––by February 6. Musk later posted on X, that those who took the deferred resignation offer not only wouldn’t have to come into the office, they wouldn’t have to work. The White House then confirmed Musk’s statement.
The resignation offer excluded military personnel, U.S. Postal service employees and “those in positions related to immigration enforcement and national security, and those in any other positions specifically excluded by your employing agency.” But it’s not clear that all the employing agencies will be able to put together excluded lists by February 6th.
So why didn’t the Administration wait and make narrowly targeted offers to workers in specific government departments and functions it wants to slim down or eliminate, maybe even waiting until the GOP controlled Congress had agreed on the targets for cuts? Wouldn’t that avoid paying off workers who need to be replaced as well as the loss of top performers?
“The cost-benefit analysis the Trump administration seems to be making is that federal employees are simply a cost, and not a benefit,’’ answers William Resh, an associate professor of management and performance at USC’s Sol School of Public Policy who focuses on public management and executive policies. “It’s really a wholesale liquidation of our civil service,” adds Resh, who describes it as the largest and widest-spanning workforce revamp in the last century.
The Office of Personnel Management says it expects about 10% of its workforce to accept the deferred resignation program, one that could amount to the largest job cut in history in the United States.
While senior Trump officials claim the departures should save taxpayers $100 billion, Resh is more than skeptical of that number. “It’s not just optimistic. It’s fantasy,’’ he says. Even if the 10% of the workforce, about 230,000, the Administration says it expects to take the buyout do so, the salary savings should only amount to about $36.3 billion. That’s based on the $158,219 the average federal employee costs the taxpayer in salary and benefits, according to data from the Bureau of Economic Analysis.
Although Musk’s campaign at Twitter produced a huge flood of resignations, there are reasons to be skeptical that 10% of federal workers will race to quit.
Federal worker unions, employment lawyers and Democratic elected officials are already urging employees not to take the resignation sweetener–or at least warning it could be risky, since nothing in federal law actually authorizes the administration to pay workers for a deferred resignation. The National Treasury Employees Union, which represents 150,000 federal employees across agencies like the IRS, has urged its members not to resign in response to the email. “Make no mistake: this email is designed to entice or scare you into resigning from the federal government,” a message emailed and then posted on its website reads.
Then there’s the issue of funding for those positions: Congress has only funded the government until March 14th while the buyout offer promises employees they would be paid through the fiscal year, which ends on September 30th. “There’s no budget line item to pay people who are not showing up for work,” Senator Tim Kaine (D, Va.) said on the Senate floor on Tuesday.
William “Bill” Shackelford, president of the National Active and Retired Federal Employees Association said in a statement that if the offer “fails to survive likely legal challenges, it could leave resigning federal employees out to dry.”
Still, there’s no doubt some federal workers, particularly those possessing skills in demand in the private sector, will find the offer attractive, particularly at a time when they’re feeling (to put it politely) unloved by the White House.
“They’re shaking the tree and seeing what falls out. But the concern is that what falls out is your top-performers,’’ says Robert Miller, a retired federal human resources pro. “I’m not sure that they think they have top performers.’’