For the Lucky Few, the Double Dip Is a Sweet Treat
Back in January, 36-year-old Keith Jones lost his job as vice president of government affairs at Associates First Capital Corp., a financial services company in Dallas. Less than three weeks later, he was behind the desk in a similar role at Tricon Global Restaurants, also based in Dallas. Jones scored a 15% pay increase when he joined Tricon, which owns familiar fast-food chains Taco Bell and Pizza Hut. But that wasn't the only extra change jingling in his pocket. For six months, Jones also collected his former salary from the Associates, which laid off most of its 6,000 Dallas-based employees when it was acquired by Citigroup.
Jones, who worked at the Associates for nearly nine years, spent some of his severance money painting his house and making other home improvements. He and his wife stashed away the rest in mutual funds. "We're planning for the next rainy day," he says. "You just never know. Doing a good job is not enough these days."
Granted, most axed workers aren't finding a new gig the second after they hand over their building security passes and leave their offices for good. The job market remains cool, and outplacement counselors and recruiters say it's taking weeks, even months, for many downsized employees to get an offer. But with the unemployment rate still at a near-record low of 4.5%, there are handfuls of folks like Jones who are landing a job soon after losing their old one -- and, as a result, taking home a new paycheck along with their severance.
It's hard to say exactly how many pink-slipped workers are finding themselves in such a sweet spot. Fred Stang, owner of recruiter Ackerman Johnson in Houston, estimates that 10% of the 200 to 300 candidates he places each year are double dippers. That figure may undercount the actual number, however, since the people who typically call him "have severance through September and are now in panic mode," he says. On the other hand, he notes, "the people who can double dip are the ones who are very hirable. [They] get snapped up immediately."
Having marketable skills certainly plays a role in whether a laid-off worker gets a job quickly. But the likelihood of double dipping also hinges on the generosity of corporate severance policies. Companies aren't legally required to dole out parting gifts to axed employees. Indeed, a number of now-dead dot-coms have closed their doors without giving staffers a dime.
"If somebody doesn't get severance of at least a week per year of service, I consider it pretty stingy," says Taunee Besson, career counselor and owner of Career Dimensions in Dallas. In a 1998 poll of 1,800 companies by outplacement firm Lee Hecht Harrison, roughly 60% said they calculated severance solely based on tenure, and of those, 66% used the one-week-per-year-of-service formula for exempt employees.
For executives higher up the corporate food chain, however, the payoff can be much heftier. An employment contract -- the workplace equivalent of a pre-nuptial agreement -- often spells out exactly how much severance a senior-level manager will get if the company goes out of a business, gets acquired, or if other circumstances change.
Laurence Stybel, founding partner at consulting firm Stybel Peabody Lincolnshire in Boston, knows of one senior manager with a decade of service at his company who bagged a year's worth of salary when he was recently let go. He'll continue to draw a regular paycheck, and if he lands a job somewhere else, he'll get whatever remains of his severance as a lump sum. "[The company] has already written off the money," Stybel says. "They don't begrudge this person who gave them 10 years."
The job-hopping nature of today's workforce has led many companies to establish bare minimums for severance as well. "Years ago, if you worked at two or three companies during your whole career, it was astounding," says Bill Hollett, senior vice president of outplacement firm Drake Beam Morin. "Now the average is eight or nine. There's no time to build up years of service." Hollett, who has designed more than 50 severance policies in the past two years for Drake Beam clients, says that the average minimum runs about four weeks for non-exempt employees and eight weeks for exempt staffers.
Still, eight weeks isn't much time to regroup, find a new job, and collect two salaries simultaneously. Career counselors say double dippers often are people who start sending out resumes and networking with contacts long before their boss calls them into the office and breaks the bad news. "They're the ones who smell what's happening," Stang says.
Jones sensed that his job might be on the line after Citigroup announced plans to buy the Associates last September. He started to flood recruiters with his resume and hit some 40 online job boards every day. "I was terrified that I'd be out on the street," he says. Jones's instincts turned out to be right: Later that fall, he learned that his position would be eliminated in two months. He found his current job at Tricon through a listing on HotJobs.
Or consider Robert Mohan, a 29-year-old certified public accountant who was one of 15 people axed last month at a dot-com music service in San Francisco. The company officially gave staffers two weeks' notice, but Mohan began his job search a month earlier, posting his resume online and going on interviews. "The writing had been on the wall for some time," says Mohan, who joined the dot-com 11 months ago as director of finance. By the time he walked out the door, he had three job offers lined up -- two from software startups and another from a public accounting firm. Two days later, he accepted a position as an audit manager with the accounting firm, even though it meant a 15% cut in total compensation.
That's O.K. with Mohan, who has held five different jobs since college but now says he wants to settle down with a stable company that offers room for advancement. Plus, the pay cut won't really sting for the next few months: Thanks to his severance package, he'll bank about eight weeks of double earnings.
Like a true number cruncher, Mohan plans to save and invest most of his windfall. "I try not to brag about it," he says. "Other people haven't been so fortunate." That's true. But for Mohan and other downsized workers who snag a new job in short order, getting pink slipped just may have a silver lining.
By Jennifer Gill in New York