When Anne Manning became eligible in 2003 for a voluntary employee buyout through her employer, FedEx, she discussed it with her accountant, her financial adviser, a career counselor and even her therapist. The night before the buyout expired, she still didn't know what to do, so Manning invited her girlfriends to a restaurant patio to drink merlot and discuss her job future.

Finally, the communications specialist decided. After more than 20 years at FedEx (FDX), Manning took the employee buyout — part of a trend by companies trimming their workforces to offer voluntary cash or other incentive packages instead of dreaded pink skips.

"I was afraid to go out on my own," says Manning, 64, of Memphis, who now works full time in communications at the University of Tennessee Health Science Center. Through the buyout, she received an enhanced pension deal, which credited her with more years than she'd actually worked. "The difficulty factor of the decision-making process was greater than going through my divorce."

In an increasingly competitive economy that has employers eager to stay lean and agile, voluntary buyouts are reshaping retirement for many employees while changing the way many companies downsize. This year, in a historic offer and largest corporate downsizing in U.S. automotive history, General Motors (GM) said nearly all of its 113,000 union-represented hourly workers were eligible for buyouts, with incentives for employees to retire early or payouts of up to $140,000 for younger employees based on years of service. GM hoped to cut 30,000 manufacturing jobs by 2008, but now the target has been exceeded about two years early: more than 34,400 took the buyouts.

"The painful reality is that we have too much production capacity," says Dan Flores, a spokesman at GM. "This allows us to cut costs but do it in a way that has a positive impact on employees."

Such buyouts are considered a more humane way to shed workers while preserving morale and maintaining a public image as a benevolent employer. But the age of buyouts is also bringing new, and sometimes unexpected, complications.

For companies, buyouts can eventually make them leaner and more competitive, but the packages also mean substantial upfront costs. It's also a gamble, because the company could find its most productive employees leaving while the so-called deadwood sticks around. And for employees, it's a corporate version of the game show Let's Make a Deal: Pick the wrong door, and employees may take a buyout only to find out they can't find another job. Or they may forgo a buyout and wind up getting laid off later.

While some employees use their voluntary buyout packages for long-dreamed-of career switches or financial rewards, others may squander money they take as a lump sum and wind up with scant savings and unable to retire.

"We worked with an individual who took an early buyout and bought a couple of cars and blew it," says Dale Klamfoth, a vice president at New York-based WJM Associates, which provides organization effectiveness and executive development.

Others do quite well. David Wright worked at IBM (IBM) before taking a buyout in 1997. He launched several successful ventures, including running a sub sandwich franchise and now a Proshred document-shredding franchise in Charlotte.

Buyouts first came into vogue about 20 years ago, when the United States went through its first large-scale downsizing wave. But, "The techniques companies have used have gotten smarter," says Ed Jensen, in Atlanta, a partner at Accenture's human-performance practice, referring to programs that may target specific departments rather than being across-the-board, for example. Accenture is a global management consulting and technology services organization. "Buyouts are an evolution from the first generation, when layoffs where much more one-sided and had an adverse reaction on the company's reputation and relationship with employees."

But he adds that there also are risks.

"Companies have lost key performers and didn't expect that," Jensen says. "They've been surprised by who has accepted (buyouts)."

Buyouts have become more common in a number of industries, even in the federal government. The government is using buyouts with increasing frequency to reshape its workforce, according to a Government Accountability Office report in March. Since November 2002, at least 22,600 employees left federal service after accepting buyouts and other programs that encourage workers to leave.

In the private sector, buyouts also are popular. Ford Motor (F), The Dallas Morning News(BLC) and Wendy's International (WEN) are some of the major employers that have offered buyouts. In 2003, Verizon Communications (VZ) made a buyout offer to 152,000 workers, and about 21,600 of those employees accepted. Also that year, 14,000 FedEx employees were offered early retirement or buyouts. About 25% accepted.

"The whole focus is on aligning the workforce with business needs," says Robert Herta, a GM spokesman.

Typically, buyouts provide some sort of financial incentive that is offered to employees to leave. Those incentives may include a pension based on more years of service than an employee has actually worked or a lump-sum cash payout. Eligibility is often based on job title or tenure (this is why buyouts are also known as early-retirement packages). But a company can structure buyouts in myriad ways. Employers may offer buyouts to only one department, for example, or to employees in certain job categories.

Employers are legally required to give employees time to consider a package (workers have 45 days to respond), and those who accept the packages generally sign away any rights to later sue.

The most commonly used incentive in an early-retirement package was cash, with 43% of firms offering a cash severance payoff, according to a study by benefits consultants Watson Wyatt Worldwide. About one-third of responding firms enhanced retiree health benefits as part of their early-retirement plan.

Feeling unwanted

While the deals can be a boon for employees, especially those who want to start another career or top performers who are easily able to land another job, buyouts can leave workers feeling unwanted or easily replaced.

Richard Berman, 63, had worked for 12 years as a news editor and segment producer at NBC News (GE) when in 1991 he was offered a buyout that provided him with nearly a year of his current salary and health insurance. He says he was getting less-desirable assignments and almost felt as if he had no choice but to take the deal.

"It was very psychologically debilitating, because everyone had told me I'd done terrific work. I traveled all over. I had tons of accolades. And then someone tells you to leave," says Berman, of Chappaqua, N.Y. "You feel like you're getting up and getting dressed every day to take the train to work for a place where they no longer want you."

He took the buyout and forged his own career path, working as a contractor (yourtown.com/berman/kudos) putting together website testimonials for companies such as IBM.

In hindsight, he says, he wishes he'd not taken the deal and instead spent time preparing to go into business for himself while he was employed.

"I don't think I was smart," he says. "I should have stayed on the job and tested the waters."

Buyouts are especially common after mergers, which typically cause job duplication, says Paul Sparta, CEO of Arlington, Va.-based Plateau Systems, a provider of learning management systems. Often, they occur in management and white-collar ranks and have been concentrated in industries such as financial services, telecommunications and high-tech.

Employees who take buyouts can also make fatal financial mistakes, which is why many large employers offer career-decision-making courses for employees and spouses, and financial awareness seminars through an accounting firm. And while the buyouts may be more humane than across-the-board layoffs, they can still infuse the remaining workforce with a sense of loss and leave managers struggling to motivate those who are left behind.

"A lot of anxiety is going to come into the organization," Sparta says. "Older employees may worry, 'Are they going to get rid of me?' "

George Torres, 41, worked for The Miami Herald in circulation, sales and collection, and remembers when buyouts were offered about three to four years ago to co-workers with long terms of service. Buyouts caused departments to merge and positions to be eliminated, he says, creating more work for those, such as himself, who were left behind. He resigned as director of marketing and community affairs of The Miami Herald and El Nuevo Herald in January.

"The buyouts had a very significant impact on the people that remained," says Torres. He now works as senior director for corporate communications and development for the Miami Dolphins. "For many people, you go through the same stages as when you lose someone close to you. You have anger, then denial, then accepting it. At first, it's a shock."

But it can also be a blessing. Alan Perlman, 63, of Highland Park, Ill., worked as a speech writer at Kraft Foods (KFT) from 1991 until he took a buyout. He left in 2002. The buyouts were offered to employees 55 and older with a certain number of years of service; Perlman got the same pension as if he worked at Kraft for an additional five years. He took that amount as a lump sum and invested it and is satisfied with how he's done with those investments.

Forging new paths

"I looked at how much time I had left and other things I wanted to do," says Perlman, whose wife, Judith, works as a therapist in private practice. The company, he says, had been under a lot of profit pressure and turnover at the executive level. "It wasn't an atmosphere I minded leaving."

Since leaving, he's forged a new path. Perlman does freelance writing, helps lawyers with forensic linguistics and plays jazz piano at local clubs. He also wrote a book, An Atheist Reads the Torah, which explains the Torah.

"It's really nice to have the time," he says. "You have to look carefully at the numbers, the terms they're offering, and truly assess your level of job satisfaction. There's no price on happiness."