POUSLBO — The City of Poulsbo is offering quitting incentives to employees to save money and avoid future layoffs.

The Voluntary Separation Program, which provides severance pay to employees who volunteer to leave their positions, was approved by the city council Wednesday night. City employees received an email detailing the plan on Thursday.

The city faces a potential budget shortfall between $750,000 and $1.2 million in its 2011 general fund and that gap will likely be closed by adjustments to staffing, city Finance Director Debbie Booher said.

“It’s a very strong possibility, almost definitive based on if we don’t have enough volunteers, we will be laying people off,” Booher said.

Employees have until Sept. 1 to apply for the program, but won’t be required to leave their jobs until the end of the year.

Each applicant must be approved and can be deemed ineligible if eliminating their position would harm their particular department, Poulsbo Mayor Becky Erickson said.

“It just seemed like a natural first-step process to give options to our employees to do other things if they choose,” Erickson said. “If there are people that have the ability to do other things, maybe this is the time for them to do those things.”

The city has so far avoided layoffs, instituting only a hiring freeze and leaving vacant positions open.

Voluntary separation is a common tool used in the private sector, Erickson said. It is unknown who will apply for the program, so the city can’t yet speculate on the amount of money it will save.

“We don’t know what those numbers look like yet,” Erickson said.

If an employee is approved for the program, they’ll receive severance pay based on the number of years they’ve worked for the city, as well as a flat dollar amount to pay for COBRA health care.

Employees who have worked for the city for up to five years will receive two months severance pay. Those who have worked for the city for up to 10 years will receive two-and-a-half months pay, and employees who have worked for the city for more than a decade will get three months pay.

“It pains me to take action on something that is encouraging our best assets to leave, but … that’s not the point of all of this,” Councilman Jeff Bauman said. “The real goal is to save money and to protect our total workforce.”

Consolidating positions could also make way for cross-training of remaining employees, which would increase efficiency, both Erickson and Booher said.

“It has the opportunity to save people’s jobs that aren’t eligible (for the program),” said Councilman Dale Rudolph. “That’s really, extremely important.”