Don't You Trust Me???!!!
The employee guide to employment contracts.
Posted Aug 12, 2012
Given the instability in our economy, more leaders ask for employment contracts as part of the compensation package. And more companies are providing them.
Such contracts protect both the individual and the organization.
“YOU DON’T TRUST ME??!!!”
The organization is protected because contracts prevent employees from “jumping ship” to competitor organizations immediately after leaving the employer. It prevents them from trying to lure existing employees to the new company you might join. It may create a penalty if the new employee leaves before the termination of the contract.
In other words, employment contracts make it expensive for employees to leave before the contract terms expire.
The individual is protected because contracts provide assured financial protection in event of new ownership, a new boss, or a firing at the discretion of the company.
Both nonprofits and profit making companies offer employment contracts. But it is not something that companies necessarily advertise that they offer. Remember: “If You Don’t Ask, You Don’t Get.”
The company may respond with, “What, you don’t you trust me?”
You calmly reply, “It is not an issue of trust. It is an issue of managing risks in an uncertain world.”
Remember, if you do not negotiate an employment contact, when things go wrong you must depend on the generosity of the personnel manual or the good will of the boss who has just fired you.
Is that good risk management?
USE A QUALIFIED ATTORNEY WHO SPECIALIZES IN EMPLOYMENT LAW
Who should negotiate the contract?
In many instances, the contract provisions of an employment contract seem straight forward. Why not handle the negotiations yourself? You could save yourself some money.
That logic is as wise as me doing my own electrical wiring at home to save money: I am an amateur and procedure is rare for me. Given the potential of electrical fire, is it not better risk management to use a specialist who does electrical wiring every day?
Find a specialist in employment law who is licensed to practice in the state where the employment contract will be enforced. Enforcement is often based on state judicial interpretation. For example:
Jane hires a local corporate attorney in Colorado to negotiate an employment contract that is going to be enforced in California. If a dispute should arise later, Jane will be chagrined to learn that her attorney was ignorant about the unique ways California judges interpret California law
If you do not know where to find a qualified employment attorney, contact your local Bar Association for references. You want someone experienced with contract negotiations with companies.
If you know outplacement specialists, ask them for references to attorneys. They often work with employment specialists.
WHAT IS OUTPLACEMENT AND WHY WOULD YOU WANT IT?
One component of an employment contract is company sponsored outplacement.
This is a system of services and technology to help you rapidly find new professional opportunities should you be forced to leave the company.
Like the term “financial planning,” the word “outplacement” is more confusing than enlightening:
Some people call themselves financial planners and they are consultants who seek to have long term relationships. Some people call themselves financial planners and they are insurance sales professionals who seek to get you to buy term life insurance. One person is relationship focused; one is transaction focused. And they both call themselves “financial planners.”
Outplacement suffers from the same confusion.
Some outplacement consultants provide customized 1:1 assistance and take an active role in helping you successfully manage your job campaign. And some outplacement consultants provide group training programs, package your resume into standardized formats, have limited time to understand your unique situation, and lack experience in your industry.
You probably have colleagues who have had negative experiences with outplacement firms. They will use words like “worthless” or “of limited value.”
And they will be right.
There are outplacement services that ARE worthless and of limited value—for you.
If you question those who make the complaint, you will probably find that their outplacement firm was selected by an HR representative of the company that fired the individual. When an HR representative decides who will work with you to help you re-establish your professional life, whose interests is the HR representative serving?
I am not being negative about HR.
Many fine HR representatives have a bias for training. It is an economical way to transmit information to the masses. There are many outplacement firms that are little more than webinar shops or group support programs. Such firms do a fine job on the basics of job search: how to write a standardized resume and how to network.
Is that what YOU need?
Perhaps you need more 1:1 consultation by someone who will take the time to better understand your unique situation and will provide customized action plans. Perhaps you need someone who is committed to helping you open doors to new opportunities.
What is the cost of outplacement?
Assume $20,000 for a one year Executive Outplacement program. Assume you remain with the company for three years at a base salary of $150,000 per year plus 35% benefits plus no bonus and no stock options.
Over that three year period, the corporate cost of outplacement services would be 3% of total compensation.
It could be less if you earn a bonus. It could be less if you are with the company longer than three years.
It could be zero if you quit.
In other words, as a percentage of total compensation costs for company, outplacement is a minor issue if it is framed as a percent of total compensation costs.
While inexpensive for the company, quality outplacement does help reduce risk/uncertainty for your career.
And that helps getting your family to a “yes” decision.
Jane is going to relocate her family from Washington, D.C. to Eugene, Oregon. There are significant risks for her and the family should the job not work out. One of those risks are that she will let her network in DC grow cold and not have enough time to develop new relationships in Eugene. Her husband will also have a difficult time finding employment in Eugene. An effective outplacement firm can help Jane return to DC or find new opportunities in Eugene. And that might make the transition more palatable to Jane’s husband.
WHEN SHOULD YOU ASK FOR OUTPLACEMENT?
There is a well known paradox in lending: the worst time to ask for a loan is when you need it. The best time to ask for a loan is when you do not. This paradox also applies with outplacement: the worst time to ask for outplacement is when you have been fired.
You want to ask for outplacement during the pre-employment phase of your relationship.
YOU WANT OPTIONS
I mentioned that “outplacement” is a service that covers firms that provide different levels of quality service. If you do not ask for the right to select the outplacement firm of your choice, then the default is the HR department will do the selection for you.
And HR has a bias towards training.
Web-based training and group support programs may be exactly the right fit for you.
But it should be your choice. It is your career.
Figure a dollar value for the outplacement services. Remember Executive Outplacement usually means a one year program whereas “Outplacement” can mean as little as three months.
Remember that the longer you are employed by the company, the less expensive the outplacement program is as a percentage of total compensation paid to you.
Ask for the opportunity to select from well regarded executive outplacement firms within the dollar amount agreed to.
The Association of Career Firms in North America is the voice of the career management industry. It is a good place to find firms that subscribe to the ethical standards of the industry.
Each firm has a number of individual consultants you could work with. When looking for individual consultants, look at career management professionals who are certified by the Institute for Career Certification International. This is the global nonprofit that certifies excellence in the field of career management. Career management professionals must pass three levels of peer review to achieve Certification.
The designation Career Management Fellow (CMF) is for career management what SPHR Certification is to human resources and the Diplomate is for Ph.D. psychologists.
IT IS YOUR PROFESSIONAL LIFE
It is not your future employer’s responsibility to manage your career risks.
Your career is a way you define yourself in society, how you spend a large percentage of your waking time, and a significant source of your wealth.
Take responsibility for managing your career risks.
“If You Don’t Ask, You Don’t Get.”