What Is a Golden Boot?

A golden boot is a slang term for a package of financial incentives offered to employees to encourage them to retire early. It is a variation of the golden parachute offered to some top executives when they are fired.

Understanding the Golden Boot

A golden boot is a lucrative severance package offered as an incentive to leave a company.

Such packages are sometimes offered selectively to older and better-paid employees in order to entice them to leave voluntarily. In other cases, it is a company-wide offer. In any case, it is usually taken as a signal that the company wants to cut back staffing, and the next round might not be voluntary.

Key Takeaways

  • A golden boot is a set of financial incentives made by a company to selected employees as a way to reduce staff.
  • Companies often target older and better-paid employees.
  • Generous incentive packages are often followed by forced layoffs.

When the offer selectively targets older employees, a golden boot can be controversial. The companies that offer them are clearly trying to remove highly-paid employees, possibly to replace them down the road with younger and cheaper workers. Age discrimination is illegal in the United States.

The Golden Handshake

Then there is the golden handshake, which may fall somewhere between the golden boot and the golden parachute.

This is a severance package offered to an executive, whether the separation is a layoff or a voluntary departure. The handshake adds some of the benefits given to top-level executives, although not the lavish perks that are sometimes written into employment contracts at the CEO level.

Red Flags

Company-wide layoffs, with or without a golden boot, start with management decisions, and there are several indicators that staffing cuts are likely or imminent. Many companies follow the actions of their successful competitors, so they may react when others make staff cuts, which eventually can lead to industry-wide layoffs.

In the scale of the payout, a golden handshake generally falls between a golden boot and a golden parachute.

Office leasing is a big expense for most businesses, so it can be one of the first line items to be cut before reorganizing labor. If a company reduces leases or sells assets, it may indicate weakening profit margins.

Ahead of a poor quarterly earnings report, businesses may seek to cut back on even small expenses. When the bosses get frugal about routine expenses such as business travel and supplies, it may indicate a downturn in the company's fortunes. If a company or its competitors close branches, performance may be under scrutiny. Pay freezes or pay cuts in an industry or within a company are red flags.

Even though these measures may postpone layoffs, they don't always protect workers in cyclical, slow, or shrinking industries.

When a company is acquired by a competitor that offers many of the same services, there are bound to be redundant positions, with job cuts to follow. A falling stock price can lead management to promise drastic measures, including layoffs, to dissuade shareholders from selling.