Alan Sklover, Esq.
Alan Sklover, Esq., an attorney specializing in employment law, executive compensation and severance agreement negotiation. He is the founding partner of Sklover & Company, LLC, New York City. SkloverWorkingWisdom.com
Requesting a demotion might seem an odd career move, but if layoffs are coming, a step backward on the corporate ladder beats a kick out the door.
An employee might be viewed as a prime layoff candidate in his/her current position but a valued, cost-effective asset in a slightly less well-compensated role. In my experience, employers grant voluntary demotion requests roughly half the time.
Voluntary demotion in the face of layoffs can make particular sense for employees over age 55. Older layoff casualties tend to have a particularly hard time finding new jobs. Volunteering for demotion allows these workers to delay tapping retirement savings and starting Social Security benefits while providing continued access to the employer’s health insurance plan.
But employers almost never think to offer demotions instead of layoffs—employees who wish to pursue this course typically must propose it themselves.
What you need to know…
Employees facing potential layoffs need to move swiftly if they want to ask for a demotion but should still take time to weigh their priorities. Voluntary demotion is worth considering when the top priority is maintaining health insurance benefits or keeping some money coming in. It usually isn’t appropriate when your top priority is continued career growth.
Next, evaluate the current job market in your field. Speak with executive recruiters and contacts to find out whether you would be likely to quickly find another position at close to your current compensation.
Three other factors to consider before requesting a demotion…
It could cost you a severance package. If the severance package is likely to be generous, you might be better off accepting it than volunteering for demotion—particularly if you’re nearing your intended retirement age or considering a job change anyway.
It could affect your pension. Some pensions are calculated based in part on the employee’s earnings during his/her last five years of service (or some other time period). This is most common with public sector pensions. It probably isn’t wise to request a demotion—and corresponding pay cut—if your pension is calculated this way.
On the other hand, volunteering for demotion can make a lot of sense if staying with an employer a little longer will allow valuable stock options to vest.
It could be a black mark on your résumé. Future employers might be wary of applicants who have demotions in their work history—demotions generally signal that the employee failed to perform up to expectations. This isn’t an issue if you’re nearing retirement age and don’t expect to apply for any more jobs, but it is for anyone who expects to continue working.
Helpful: If you do end up applying for jobs, explain to interviewers that you were not demoted for performance, but rather because your employer eliminated your prior position when it “flattened its organizational structure” and was anxious to find a way for you to stay. Interviewers often aren’t familiar with the concept of voluntary demotion, but they do understand flattening organizational structures.
If you do decide to request a demotion, here’s how to get it right…
Try to make your demotion request to the person who is making the final layoff decisions. If you’re not certain who this is, your best bet is the individual highest in the hierarchy who has been involved in staffing decisions at your level in the past. The decision maker almost certainly will not be someone in the human resources department unless you work in HR.
Make your request during a face-to-face meeting, if possible. People find it more difficult to say no to reasonable offers that are made in person. Explain that you know that layoffs are coming…that you like working for the company…and that you would be willing to accept a demotion to a lesser position and a pay cut in order to stay if your current job is at risk. (You can discuss a specific salary later if the demotion idea is accepted.)
Make this proposal too soon rather than too late. Layoff decisions very rarely change once they’ve been made, so your demotion proposal must be made before the list of employees to be laid off is finalized, not after you receive word that you’ve been let go. That means that there is some risk that you might volunteer for demotion when your job actually is safe. If you have a good relationship with your boss or someone else in the company’s hierarchy, consider talking with this person about your job security first.
Pitch your demotion idea in terms of how it helps the decision maker meet his/her needs. You might explain that demoting you rather than laying you off allows the company to lower its overhead without losing an experienced employee…it saves the company a severance payout at your level…and it protects the relationships you have with the company’s key customers and vendors. Specifically mention any reasons for keeping you on that the decision maker might not know.
Example: “Smith Co. is one of our largest customers—and Mr. Smith and I went to college together. Accepting my demotion proposal means that you don’t have to put that client relationship at risk.”
Do not emphasize the difficulties that a layoff would cause you. Don’t try to make your case based on fairness—layoff decisions have little to do with fairness.
Consider fine-tuning your offer to match your priorities. If your goal is to stay with the company for only a discrete period of time, such as until you vest in the pension plan or qualify for Medicare, you could offer to remain at the lower position for only that length of time, then resign.
Follow up your face-to-face meeting with an e-mail to the decision maker. This e-mail should summarize your offer and reiterate how it would help both the company and the decision maker.
Do not share your demotion plan with your colleagues. There isn’t room for everyone to go one rung down the corporate ladder. The odds that your offer will be accepted decrease sharply if you tell your coworkers and then some of them request voluntary demotions, too.
Request severance package protection. If your voluntary demotion offer is accepted, ask for some assurance that if you’re laid off from the lower position within a year, you will receive a severance package no lower than you would have received if you had been laid off from your current job. It’s best to request this assurance by e-mail so that you have evidence if necessary. The employer might not be willing to make this guarantee, but there’s little harm in asking.
