Buyout agreement

Buying out staff through agreement is a way for employers to get rid of employment relationships they do not have the right to terminate. The employer pays you to be able to terminate your employment relationship.

A buyout agreement is always a voluntary agreement and if you receive a buyout offer there is much to be gained by finding out your rights and assessing how the buyout agreement affects both the present and the future - before accepting an offer to be bought out.

Unionen does not normally negotiate buyouts. Redemption is a voluntary agreement between you and the employer.

Consider carefully what you are agreeing to

You should carefully consider what you are agreeing to. How would the employer have had to act if the buyout agreement had not been reached? What consequences can the buyout agreement have for other opportunities for compensation?

The duty of loyalty also applies during your notice period

When considering a buyout agreement, it is important that you consider that the duty of loyalty also applies during your notice period. This means that you must put your employer's interest before your own and avoid situations where you risk being disloyal to, or harming, your employer.

How is your unemployment insurance affected?

Before you sign a buyout agreement, you should always contact your unemployment insurance fund to find out how the agreement will affect your right to compensation.

Evaluate your buyout agreement

A good guideline for valuing a buyout agreement is to look at both the current situation and the future.

• How much can you get in the settlement itself; how much is it worth?
• How much will the settlement affect your future compensation from social security or from another employer?

The employment consists of a work-exempt notice period

Most buyouts take place by the employee receiving an extended and exempted from work notice period with full payment, even if you were to find a new job during the notice period.

• Benefits
  The advantage of continuing the employment is, for example, the earnings issue, you continue to earn holiday pay during the notice period and the other usual salary benefits (such as pension) applies.
• Disadvantages
  The disadvantage of continuing the employment is that your duty of loyalty to the employer and any non-competition clause in your employment contract normally remains during the notice period, even if you are exempt from work. If you intend to work for a competitor or run your own competing business during the notice period, it is therefore important that the agreement states that you are free to take any new employment without restriction and start your own business without restriction.

An end date is set, and severance pay is paid

Another type of buyout that is not as common is that a severance payment is paid in connection with the termination of your employment.

• Benefits
  Severance pay can be beneficial if you want to take up employment with another employer soon without getting approval from the current one. Your freedom to take a new job requires that you do not have a non-compete clause in the employment contract that restricts you even after your last day of employment.
  
  A severance pay is pensionable for the state income pension just like "ordinary salary".
• Disadvantages
  If you have had an occupational pension as an employee, the payment to your pension ceases when you terminate your employment and the severance pay is not pensionable for your occupational pension.
  
  You don't earn holiday pay on the amount to which the severance pay relates.
  
  It happens that companies want to pay out severance pay as a lump sum to be able to book the sum on the "correct side" of the year-end. A severance pay in connection with the termination of your employment is considered as salary and is taxable. Contact the Swedish Tax Agency regarding questions about tax and cut-off points.
  
  Severance pay is not income from one's own work within social insurance and therefore does not qualify for sick pay. If you receive severance pay without starting a new job, you must register as an active job seeker with the Employment Agency in order not to lose your sickness benefit-based income, SGI. If you do not register as a job seeker, you lose the right to sickness benefit and also risk receiving lower parental benefit. Your rights are only renewed when you get a new job.
  
  The unemployment fund (A-kassa in Swedish) considers severance pay as salary which means that a-kassa starts from your monthly salary and calculates how many months the severance pay replaces the time you go without pay. Only then pay A-kassa out unemployment benefits.

Checklist for buyout agreements:

• Redemption is always a voluntary agreement between you and the employer.
• If the reason for the termination of employment is due to labour shortage is it good if it appears in the buyout agreement. 
• It should be stated that salary and benefits are earned and must be paid for the entire period of notice.
• Specify benefits and clarify that holiday pay will be earned throughout the entire notice period. 
• The employment continues during the notice period and the duty of loyalty to the employer applies.
• If you intend to work for a competitor or run your own competing business during the notice period, it is important that the agreement states that you are free to take any new employment without restriction and start your own business without restriction.
• Which pension solution applies? This is especially important if your employer is without a collective bargaining agreement. It should be stated that your salary and what other benefits are pensionable during the notice period. 
• Specify when holiday pay /final salary must be paid. According to the annual leave act (1977:480) § 30 holiday pay shall be paid no later than one month after termination of employment.
• If you have more than 6 months’ notice period, it should be regulated that holidays should not be posted during the notice period.
• Conditions for the notice period must be stated, i.e. if you are exempt from work and from which date.
• If the salary is non-deductible - i.e., if you are to receive salary during the notice period, regardless of whether you got a new job or not - this must be stated. 
• State whether the employer should issue a work certificate and when you should receive it.
• Your unemployment fund can answer questions about any consequences that the agreement may have for the right to collect compensation and the Social Insurance Agency can answer questions regarding income qualifying for sickness benefit.
• If you are covered by collective agreement at the workplace you can at termination due labour shortage or illness have the right to various forms of financial support as well as other support to find a new job, start your own business or get guidance for studies. Current transition organisation can provide a more detailed account of the conditions that need to be met in order for support to be granted. 

Anyone who wants support and advice regarding buy-out agreements is recommended to contact Unionens advisers. 

More to think about for you as a manager

If you, as a member in Unionen Manager (Unionen Chef) get a question about being bought out, you can contact Chefslinjen (the executive line) - Unionen’s advice for managers - to get answers to your questions. A common question is whether a buyout offer should be considered good or not. Chefslinjen can help compare what was offered through the buyout agreement with what a termination according to the Employment Protection Act (Lag om anställningsskydd, LAS) had meant and can help you bring pros and cons with a buyout. After that, it's up to you to decide if what you've been offered is good enough.

In connection with a reorganisation, the situation may arise that your position as manager is affected by the reorganisation, while employees in your own work group are also at risk of losing their jobs. In such a situation, you need to manage your employees' concerns at the same time as you need to manage your own situation. If there is an opportunity for you to find ways to manage your own mood in this situation, you also have a better chance of being a good support to your employees.