Society For Human Resource Management (SHRM) Certified Professional Practice Exam

A buyout is typically used when terminating an employee who:

1. Has engaged in illegal activities

2. Has time left on one's contract

3. Has unused vacation pay

4. None of the above

The correct answer is: Has unused vacation pay

A buyout is typically associated with instances where an organization seeks to terminate an employee's contract on amicable terms, often incentivizing the employee to leave voluntarily. In the context of unused vacation pay, a buyout can be an effective strategy as it may allow the employee to receive compensation for the left-over vacation days, thus providing a financial incentive for them to accept a severance offer. This approach benefits both the employer, who can smoothly transition out an employee without the potential for conflict, and the employee who receives a tangible financial benefit in exchange for their departure. In contrast, scenarios involving illegal activities or simply having time left on a contract may not warrant a buyout. An employee engaged in illegal activities typically faces more serious consequences and legal considerations that extend beyond a buyout. Similarly, an employee with time remaining on their contract may be more likely to negotiate terms concerning potential fulfillment of that contract rather than opting into a buyout arrangement. Unused vacation pay, as a financial element associated with an employee’s accrued benefits, aligns well with the concept of a buyout, making it the most suitable answer in this context.