Local employees face tough choice: Leave now or risk layoff later
With another round of Hewlett-Packard job cuts looming over Corvallis, hundreds of the global tech titan’s local employees are once again asking themselves: Should I stay or should I go?
In a bid to right the faltering company, new CEO Meg Whitman last month announced plans to slash 8 percent of HP’s worldwide work force, a staggering 27,000 jobs, by 2014.
Some of those cuts will doubtless come from layoffs, but first the corporation is offering what it calls enhanced early retirement, or EER, to qualifying employees.
As with a similar program offered in 2007, eligibility is determined through a point system based on age and years of service. Workers need at least 65 points to qualify.
According to local financial planners who work with Hewlett-Packard employees, the terms of the early retirement deal are much like previous buyout offers. Qualifying employees get two months’ base pay, plus a half-month’s salary for each year they’ve been with the company.
The total payment, which goes into the employee’s retirement account, is capped at 14 months’ salary. Workers who opt for EER also have the option to stay on the company health plan for up to two years.
But they have to make up their minds quickly. HP employees have until June 22 to decide whether to take the early retirement package or stay on and hope they don’t lose their jobs in the layoffs to follow.
“For some it’s perfect timing, and others are nervous,” said Megan Schneider of Hurley Financial Group, a former HP engineer whose financial planning practice focuses on Hewlett-Packard employees.
About 60 people looking for guidance on that decision attended a seminar hosted by Schneider on Tuesday in Corvallis. While it will be a tough call for some, Schneider described the enhanced early retirement offer as generous.
“I don’t think they had to do that,” she said. “We all thought 2007 would have been the last EER offer.”
There are limits to the deal, however. Eric Cheney of Security First Advisors, another ex-HP engineer, said the company has put a ceiling on the number of people who can take the package.
“What they’ve said is that they’ll take early retirees up to the amount that will draw down the pension plan to 85 percent of its funding requirements,” said Cheney, who has scheduled a series of seminars for local employees considering the offer.
Most of those who take early retirement will be gone by Aug. 1, Cheney said. But he added that the company also reserves the right to keep key employees on the job for up to a year.
And after the retirements will come the layoffs.
Hewlett-Packard typically is secretive about these matters, refusing to release job cut details or even current employment figures for individual HP sites. But based on his experience with past work force reductions, Cheney predicts early retirement will make up the bulk of this one here in Corvallis — especially since the site has already shed thousands of jobs over the last 10 to 15 years.
“I think you’ll see maybe a couple hundred who will take this early retirement offer,” he said. “I don’t think you’ll see more than a few dozen layoffs.”
Wall Street has been generally bullish on the job cuts, which are expected to save up to $3.5 billion, since Whitman announced the move in a May 23 earnings call.
But some analysts perceive a risk to the company’s long-term health if the cuts go too deep.
Ken Weilerstein, a vice president for research with Gartner Inc., said some of his clients at companies that deal with HP are feeling jittery.
They’re worried about what could happen to customer service, software support and other high-touch functions as the Silicon Valley powerhouse pushes 27,000 employees out the door. That’s especially true for customers of HP’s increasingly popular managed print services business, a heavily people-dependent offering.
“If they can get away with reducing staff and cutting costs (without sacrificing service), that’s fine,” Weilerstein said. “But it does raise the ante a little bit.”
Both customers and competitors are watching HP’s moves closely right now, said Angele Boyd, a group vice president with IDC. If the company stumbles in its execution of this work force reduction, she warned, competitors will move in and customers may jump ship.
“They really have to be careful,” Boyd said.
“The trick for them is how do you not lose business as you downsize? How do you make sure you’re not cutting to the bone — or cutting the bone?”
Contact reporter Bennett Hall at firstname.lastname@example.org or 541-758-9529.