Best Buy employee package may help in recession

ATLANTA (Reuters) - Best Buy Co's plan to cut corporate staff is a disappointment for some workers at its home city of Minneapolis, but experts say the enhanced severance package offered would be a much used blueprint for companies looking to ride out the recession.

The top U.S. consumer electronics retailer offered voluntary exit packages to most of the 4,000 workers at its corporate complex as weak consumer spending hurts earnings.

The exit package for the average worker includes 7.5 months of salary, health and life insurance for 12 months and free outplacement services. The severance deal is sweeter for higher-level workers.

Best Buy did not disclose how many employees would accept the offer or estimate the cost for the plan.

The company said it would also keep an arrangement that gives many employees more flexible work times and lets them do their job outside the office, as long as they produce, even with the lower staff levels.

Labor and corporate governance experts said the severance plan was more generous than those seen in some other industries, and could help relatively healthy companies like Best Buy weather the downturn better.

Kevin Shaughnessy, partner with national law firm Baker Hostetler LLP in its Employment and Labor Group, said he expects similarly enhanced severance packages to be used by more companies as they cut staff.

"That's a fairly good-sized package. I've dealt with other industries where the packages would be much lower," he said.

The year of company-paid medical coverage offered under Best Buy's voluntary severance plan was a significant plus, he said. Best Buy may also help its remaining staff cope better with downsizing by being generous with those who leave.

"A company that is viewed as generous to its employees typically long-term engenders more loyalty and ultimately greater profitability," said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware. "These days any kind of severance given this economy can't be viewed negatively."

Companies from Bank of America Corp to AT&T and Citigroup Inc have also announced tens of thousands of job cuts in recent weeks to save costs and navigate the recession.

MINIMIZING FORCED LAYOFFS

Chief Executive Brad Anderson said Best Buy decided to offer the best severance package it could afford and asked for volunteers in an effort to keep forced layoffs, should they become necessary, at a minimum.

"The lens we tried to use is if we were on the other end of that decision, what would we like to see the company do," Anderson told Reuters in an interview.

News of the staff cuts comforted investors in Best Buy, which missed second-quarter profit estimates in September because it over-invested in store redesign and labor. Best Buy shares are up more than 21 percent since Tuesday, when it announced the job cuts and posted better-than-expected profit.

"We don't know how long this recession is going to last and the prudent thing to do is batten down the hatches and buckle down," said Brad Thomas, an analyst with KeyBanc Capital Markets. He expects Best Buy will gain market share now that rival Circuit City Stores is operating under bankruptcy protection.

In Minneapolis, where Best Buy has been praised for letting employees work flexible schedules and being a good corporate citizen, the cutbacks were met with regret.

"Any layoffs are significant at this point," Minneapolis Mayor R.T. Rybak said. "We will definitely see pain in this community and will try our best to mitigate that."

Best Buy's headquarters was designed with employee convenience in mind. The complex includes a bank, cafes and fitness center.

Jody Thompson, a former Best Buy employee, said the flexible scheduling has boosted Best Buy's productivity. She co-wrote "Why Work Sucks and How To Fix It," a book that describes the concept of a results-oriented work environment.

"They have built a results-only work environment at their corporate campus," Thompson said, which she believes puts Best Buy at an advantage in tougher times.

(Additional reporting by Todd Melby in Minneapolis; Editing by Bernard Orr)