The probability of you being laid off from a job sometime in your life is pretty high, most likely this will happen to you a couple of times in your working life. This is not a terrible thing - the ability of American corporations to reduce workforce rapidly is also the same reason that allows these companies to increase the workforce rapidly. In countries where labor unions do not allow reductions in workforce keep many people at home unemployed for much longer because companies are reluctant to hire in good times. In any case this is not a discussion on social values; this is a how -to article on what you need to do to prepare for a lay off.
This article will give you a run down of what might happen and help you think of the things you need to plan for now so you can better handle this situation. Some of the preparations will set you up to better deal with most other financial 'surprises' that life might throw at you.
Your ability to survive or even thrive during a layoff or any period of such uncertainty depends on how prepared you are both mentally and financially to deal with the situation. I am not a Psychologist and this is not medical or mental health advice in any way or form. But let's spend a little bit of time on how you can prepare yourself mentally.
First do not for a minute buy into the concept that corporations care. Corporations are unable to care for the simple reason that a corporation is not a person, and corporations do not have much if any memory. A corporation is a legal entity created by a collective enabling the generation of profit. (in the case of a non-profit the profits are just spent on the cause and on the compensation and perks for the employees). You are exchanging your skill and time for the corporation's money. Make sure that exchange is the best one you can get. This is not a heart and soul matter this is a brains and brawn exchanged for cash and comfort matter.
If you think (or thought) you do not need to worry because the company that you work for will never do layoff's well you may be right but you are much more likely to be wrong.
Second a layoff is mostly not personal - what I mean is yes in a layoff someone decides someone else has to go - so it is pretty darn personal. But they had a gun to their head to make that decision. The only people who can truly decide not to lay people off are the owners of a corporation - the share holders - and share holders like you and I buy shares in the hopes of building wealth not to provide social welfare to others. Even then if the shareholders were asked and did vote to not lay people off - if the company's revenues cannot pay for the employees it wishes to retain the company would go bankrupt after a short while and then everyone would be out of a job and the shareholders would lose their capital investments. A bad situation all around. So Layoff's are necessary and someone WILL HAVE (gun to head) to pick someone and it might be you.
Do what you can to make it not you - I will soon have an article on how you might sell you soul to keep your job but until then - everything is a value proposition, is the company getting as much value as they are parting with in the way of compensation and management cycles on you?
You might feel you were singled out because of who you are, because of your age, ethnicity, sexual preference, religion etc. layoff's are convenient times for companies to get rid of troublesome employees, or people that are hard to fire because they fall into a protected class, a layoff provides some easy legal cover for companies to get rid of these people. If you feel you have been terminated unfairly you should be ready to sue - so pick out a good employment lawyer now.
You will not have all the facts on why you were chosen over someone else. So be prepared to take the information and move on. It is pointless to look back and think about - why me? Was there anything I could have done differently etc? Be mentally prepared to move forward.
Third - If you have a low self worth getting laid off will not help the situation, even those of us with a strong self worth will feel a bit down in the mouth after being laid off. So be ready to surround yourself with people that make you feel better about you - friends, family etc. This is not the time to hang out with people that bring you down, not the time to start reading up on Nihilism. If you do not have people in your life that make you feel positive - please get out there and build some such relationships now!
There is a sure fire way to avoid a layoff - find another job and quit. Seriously the only reason to sit and wait to get laid off is if you think you have a large severance package coming your way - remember severance is NEVER a guarantee unless it is in your employment contract. You must weigh the mental anguish of waiting vs the possible financial gain. Also remember to consider the overall financial climate and if conditions are deteriorating would you still be able to find another job if you were to get laid off three to six months later.
Another thing to do now is - what ever training is offered by your current employer, take it - max it out - do it on your own time if you have to. Online, class room what ever is available. These are all line items in your resume for the future.
When it happens
On the Day of
Once you get home
After you have gotten home and had some time to gather yourself, you need to read the documents that the corporation provided, read everything and understand it, if you do not understand it, call a friend, call the number generally provided with the document etc. repeat till you understand everything. If you feel you have some leverage (read you have something they want - like a non compete agreement etc) to negotiate more of a severance package, before you engage legal resources see if this can be done amicably. Corporations have certain protocols that they engage as soon as legal representation is engaged - which would make this process much harder. Also most severance packages are provided when you agree to not sue the company so you may lose what is already being offered to you.
Make sure to inquire if you will be paid for any unused vacation and how many days you will be paid for on-top of any severance you are getting. Now is a good time to make sure the number of days unused is correctly listed for you.
Some companies pay out a pro-rated bonus, some are required to based on your employment contract, if you do not have a copy of your employment contract this an excellent time to ask HR for a copy and to read and understand what you signed up for when you joined the corporation. If you are eligible for a prorated bonus - make sure you know how much bonus money you were paid the last 3 to 5 years - because this data might be used to calculate how much bonus money you would be paid.
If you are getting tuition reimbursement from the company this is a good time to inquire if the company will pay for the current semester or even till the completion of the program. It never hurts to ask. Again it also never hurts to prepare for the worst so you may want to work up a plan on how you might finish your education if you are laid off.
In the USA your health benefits and insurance benefits are generally tied into your employment. This leaves a lot of people exposed when they become unemployed. If your spouse works you may be eligible to be covered under his/her plan, this would be a good time to check on that and ascertain what additional costs would be incurred because of this change. COBRA is provided but this coverage will cost you more than what your health care used to cost prior to being unemployed because the company used to pay some part of this expense. So please remember this additional expense when you start to plan your finances.
You probably have your life insurance policy through the company you work for as well, the company may provide a portable policy that you would be able to take with you but please remember that this too will cost more. It is probably better to look online for a competitively priced term-life policy that you get yourself. The fitter you are the better your chances of getting the same coverage for less money - so if you are out of shape this is a good time to start working out! Having a regular exercise schedule will be invaluable in dealing with the stressful days ahead.
Accidental Death and Disability insurance is a very important insurance that you also generally have through your employer, and this insurance will actually benefit you (vs life insurance where you have to die to collect), so please do not lose sight of this very important coverage, again if your policy is not portable then a quick search on the internet will reveal some companies what would provide this coverage for you and what that coverage will cost you.
The good news is you do not need to worry about vacation benefits - ;) you do have some free time ahead.
Practical Things
Finances
The financial aspect of being laid off boils down to one simple thing - how long can you sustain your life and lifestyle with no income. For the purposes of this article let us assume that you will not receive any severance pay if you get laid off, this way if you do receive some, it is a nice surprise and you will have that much less to worry about. Unless there is a clause in your employment contract that says you will be eligible for severance any severance you get is at the discretion of the corporation. Corporations provide severance to reduce legal liabilities and to make the people who are left behind after a lay off feel kindly towards the corporation - not because it 'cares' about you - this is a business transaction.
Two things are important to know - how much money do you have that you can use for this purpose, and how much spend will you need to sustain? The money that you have saved up for a rainy day needs to be able to sustain you for at the very minimum six months to a year - there are various things that impact how long it will take you to find a job - most people will be able to find some employment to sustain them within a year in most situations. If you feel you need more - go for it.
Money
A practical approach
So how much money do you need a month? Good question let's fire up excel or pull out a notepad and start to make a list, start with the most important expenses you need to maintain the roof over your head and keep the lights (and heat) on. Then add on all other expenses that absolutely must be paid. Everything that you feel you can not live without goes on the top of the list, but this is a prioritized list, meaning there is one thing with a priority of 1 and another with a priority of 2 never more than one item in the same priority - make the tough decision on if you will continue your accordion lessons or buy bread that month - now - when you are not feeling sorry for yourself. When the time comes you have to decide where you draw the line on this list, everything below X priority number goes - ie: you will not pay for anything below this line item - so for example if your list is:
1. Healthcare
2. Rent
3. Utilities
4. Groceries
5. Accordion Lessons
6. Expensive coffee
If you decide that everything below item 3 gets cut then no more Accordion Lessons and no more Starbucks coffee.
One must be careful and responsible in how one develops this list, for example deciding not to pay a credit card is a valid decision but think about the ramifications of this decision to your credit score and by extension to your ability to (not to gloss over the social and legal obligation to pay what you owe) borrow in the future.
Sometimes it is easier to develop this list by tracking your spend for a month or two and then analyzing this list to see where your money actually goes (which is enlightening in itself), but be careful about including quarterly bills that come up like property taxes etc if you are only looking at a couple of months.
How prepared are you?
Where do you stand?
Once you have the list and you have drawn that line through it, add up the amounts above the line that is your monthly must have spend - take this amount and divide the savings you have with this number to get the amount of months you can last without income. If the number you get is a fraction, round down.
If you are in the 0 to 3 month range - well the good news is that you are in the majority and at the very least you are reading this article and are aware of the situation. Your action plan needs to focus on building up your cash reserves. Cut spend now and save like mad.
If you are in the 3 to 6 month range - well you are doing pretty good - but it is best to focus on saving so that you can get to the 6 month mark.
If you are in the 6 to 12 month range - well you are in a good place - you will probably weather most layoff's but do not lose sight of the goal now keep at it the more you have socked away the more you will be able to stay relaxed and enjoy life.
If you have more than 12 months saved up - wow! Maybe it's time to enjoy life a bit more - maybe invest some of this money into more long term investments etc - but this is a personal decision and the fact that you have more than 12 months is a very good place to be as far as being prepared for getting laid off.
What if you are not?
If you do not feel you have sufficient savings remember that you can sell other investments, get funds from friends and family (if you have not been nice to them before this is the time to start to be nice to them), by cashing in a 401k (this is generally a bad idea but the uncle Sam does allow withdrawals for financial hardship - with a stiff 10% penalty. But it is best to be prepared and not have to resort to any of these last resort sources of funds.
Some Tips from others
There are some other little steps people employ that might be useful for you that I have listed below.
Apply for and get a Home Equity line of Credit - do not use it but have it ready - these credit lines are generally approved 5 years at a time and will be available to you in an emergency.
When you buy groceries buy a little extra of things that will keep well for over 6 months - canned foods and other staples that will be always useful to keep in your pantry or basement. Buy them on sale and this way even if you are not laid off you will have saved on things that you would buy anyway.
Do necessary (meaning if you do not do this now you will need to do this in the next six months and it will probably be worse then) maintenance on your house and vehicles now.
If you think you will get laid off soon and a general down turn is in the offing then selling some equity investments now might be prudent.
You must know that you will prevail. There are much worse things in life than being laid off. You will adjust, you will find a new way. Chances are high that you will find a better life. Own your life and move forward.
This article will give you a run down of what might happen and help you think of the things you need to plan for now so you can better handle this situation. Some of the preparations will set you up to better deal with most other financial 'surprises' that life might throw at you.
How Ready are you?
Your ability to survive or even thrive during a layoff or any period of such uncertainty depends on how prepared you are both mentally and financially to deal with the situation. I am not a Psychologist and this is not medical or mental health advice in any way or form. But let's spend a little bit of time on how you can prepare yourself mentally.
First do not for a minute buy into the concept that corporations care. Corporations are unable to care for the simple reason that a corporation is not a person, and corporations do not have much if any memory. A corporation is a legal entity created by a collective enabling the generation of profit. (in the case of a non-profit the profits are just spent on the cause and on the compensation and perks for the employees). You are exchanging your skill and time for the corporation's money. Make sure that exchange is the best one you can get. This is not a heart and soul matter this is a brains and brawn exchanged for cash and comfort matter.
If you think (or thought) you do not need to worry because the company that you work for will never do layoff's well you may be right but you are much more likely to be wrong.
The Why me? Factor
Second a layoff is mostly not personal - what I mean is yes in a layoff someone decides someone else has to go - so it is pretty darn personal. But they had a gun to their head to make that decision. The only people who can truly decide not to lay people off are the owners of a corporation - the share holders - and share holders like you and I buy shares in the hopes of building wealth not to provide social welfare to others. Even then if the shareholders were asked and did vote to not lay people off - if the company's revenues cannot pay for the employees it wishes to retain the company would go bankrupt after a short while and then everyone would be out of a job and the shareholders would lose their capital investments. A bad situation all around. So Layoff's are necessary and someone WILL HAVE (gun to head) to pick someone and it might be you.
Do what you can to make it not you - I will soon have an article on how you might sell you soul to keep your job but until then - everything is a value proposition, is the company getting as much value as they are parting with in the way of compensation and management cycles on you?
You might feel you were singled out because of who you are, because of your age, ethnicity, sexual preference, religion etc. layoff's are convenient times for companies to get rid of troublesome employees, or people that are hard to fire because they fall into a protected class, a layoff provides some easy legal cover for companies to get rid of these people. If you feel you have been terminated unfairly you should be ready to sue - so pick out a good employment lawyer now.
You will not have all the facts on why you were chosen over someone else. So be prepared to take the information and move on. It is pointless to look back and think about - why me? Was there anything I could have done differently etc? Be mentally prepared to move forward.
Get Tough and Get Connected
Third - If you have a low self worth getting laid off will not help the situation, even those of us with a strong self worth will feel a bit down in the mouth after being laid off. So be ready to surround yourself with people that make you feel better about you - friends, family etc. This is not the time to hang out with people that bring you down, not the time to start reading up on Nihilism. If you do not have people in your life that make you feel positive - please get out there and build some such relationships now!
One way out
There is a sure fire way to avoid a layoff - find another job and quit. Seriously the only reason to sit and wait to get laid off is if you think you have a large severance package coming your way - remember severance is NEVER a guarantee unless it is in your employment contract. You must weigh the mental anguish of waiting vs the possible financial gain. Also remember to consider the overall financial climate and if conditions are deteriorating would you still be able to find another job if you were to get laid off three to six months later.
Another thing to do now is - what ever training is offered by your current employer, take it - max it out - do it on your own time if you have to. Online, class room what ever is available. These are all line items in your resume for the future.
On the Day Of
When it happens
On the day of the layoff most likely you will be called into your manager's office, he will recite a standard speech that Human Resources has carefully crafted for him, at this point there really is no going back - you are being laid off today. You do not need to sign any documents on this day, if asked to do so, say you need time to read and understand all documents and will do so tomorrow. You are generally given at the very least one week.
There is no point in getting upset or getting angry and burning bridges, this will be a traumatic experience specially if it is your first time, try your best to control your emotions - remember that this is just one aspect of your life and not your whole life. You need to leave this meeting with two pieces of information 1. How do you get a letter of recommendation? 2. Who do you call with regards benefits and your dignity intact. Any other question you ask will be answered by a scripted answer and any unprofessional behavior by you will be remembered. At this time you will not be given any useful information.
There is no point in getting upset or getting angry and burning bridges, this will be a traumatic experience specially if it is your first time, try your best to control your emotions - remember that this is just one aspect of your life and not your whole life. You need to leave this meeting with two pieces of information 1. How do you get a letter of recommendation? 2. Who do you call with regards benefits and your dignity intact. Any other question you ask will be answered by a scripted answer and any unprofessional behavior by you will be remembered. At this time you will not be given any useful information.
On the Day of
Once you get home
After you have gotten home and had some time to gather yourself, you need to read the documents that the corporation provided, read everything and understand it, if you do not understand it, call a friend, call the number generally provided with the document etc. repeat till you understand everything. If you feel you have some leverage (read you have something they want - like a non compete agreement etc) to negotiate more of a severance package, before you engage legal resources see if this can be done amicably. Corporations have certain protocols that they engage as soon as legal representation is engaged - which would make this process much harder. Also most severance packages are provided when you agree to not sue the company so you may lose what is already being offered to you.
The Next Day
Things to find out
Make sure to inquire if you will be paid for any unused vacation and how many days you will be paid for on-top of any severance you are getting. Now is a good time to make sure the number of days unused is correctly listed for you.
Some companies pay out a pro-rated bonus, some are required to based on your employment contract, if you do not have a copy of your employment contract this an excellent time to ask HR for a copy and to read and understand what you signed up for when you joined the corporation. If you are eligible for a prorated bonus - make sure you know how much bonus money you were paid the last 3 to 5 years - because this data might be used to calculate how much bonus money you would be paid.
If you are getting tuition reimbursement from the company this is a good time to inquire if the company will pay for the current semester or even till the completion of the program. It never hurts to ask. Again it also never hurts to prepare for the worst so you may want to work up a plan on how you might finish your education if you are laid off.
In the USA your health benefits and insurance benefits are generally tied into your employment. This leaves a lot of people exposed when they become unemployed. If your spouse works you may be eligible to be covered under his/her plan, this would be a good time to check on that and ascertain what additional costs would be incurred because of this change. COBRA is provided but this coverage will cost you more than what your health care used to cost prior to being unemployed because the company used to pay some part of this expense. So please remember this additional expense when you start to plan your finances.
You probably have your life insurance policy through the company you work for as well, the company may provide a portable policy that you would be able to take with you but please remember that this too will cost more. It is probably better to look online for a competitively priced term-life policy that you get yourself. The fitter you are the better your chances of getting the same coverage for less money - so if you are out of shape this is a good time to start working out! Having a regular exercise schedule will be invaluable in dealing with the stressful days ahead.
Accidental Death and Disability insurance is a very important insurance that you also generally have through your employer, and this insurance will actually benefit you (vs life insurance where you have to die to collect), so please do not lose sight of this very important coverage, again if your policy is not portable then a quick search on the internet will reveal some companies what would provide this coverage for you and what that coverage will cost you.
The good news is you do not need to worry about vacation benefits - ;) you do have some free time ahead.
Practical Things
Finances
The financial aspect of being laid off boils down to one simple thing - how long can you sustain your life and lifestyle with no income. For the purposes of this article let us assume that you will not receive any severance pay if you get laid off, this way if you do receive some, it is a nice surprise and you will have that much less to worry about. Unless there is a clause in your employment contract that says you will be eligible for severance any severance you get is at the discretion of the corporation. Corporations provide severance to reduce legal liabilities and to make the people who are left behind after a lay off feel kindly towards the corporation - not because it 'cares' about you - this is a business transaction.
Two things are important to know - how much money do you have that you can use for this purpose, and how much spend will you need to sustain? The money that you have saved up for a rainy day needs to be able to sustain you for at the very minimum six months to a year - there are various things that impact how long it will take you to find a job - most people will be able to find some employment to sustain them within a year in most situations. If you feel you need more - go for it.
Money
A practical approach
So how much money do you need a month? Good question let's fire up excel or pull out a notepad and start to make a list, start with the most important expenses you need to maintain the roof over your head and keep the lights (and heat) on. Then add on all other expenses that absolutely must be paid. Everything that you feel you can not live without goes on the top of the list, but this is a prioritized list, meaning there is one thing with a priority of 1 and another with a priority of 2 never more than one item in the same priority - make the tough decision on if you will continue your accordion lessons or buy bread that month - now - when you are not feeling sorry for yourself. When the time comes you have to decide where you draw the line on this list, everything below X priority number goes - ie: you will not pay for anything below this line item - so for example if your list is:
1. Healthcare
2. Rent
3. Utilities
4. Groceries
5. Accordion Lessons
6. Expensive coffee
If you decide that everything below item 3 gets cut then no more Accordion Lessons and no more Starbucks coffee.
One must be careful and responsible in how one develops this list, for example deciding not to pay a credit card is a valid decision but think about the ramifications of this decision to your credit score and by extension to your ability to (not to gloss over the social and legal obligation to pay what you owe) borrow in the future.
Sometimes it is easier to develop this list by tracking your spend for a month or two and then analyzing this list to see where your money actually goes (which is enlightening in itself), but be careful about including quarterly bills that come up like property taxes etc if you are only looking at a couple of months.
How prepared are you?
Where do you stand?
Once you have the list and you have drawn that line through it, add up the amounts above the line that is your monthly must have spend - take this amount and divide the savings you have with this number to get the amount of months you can last without income. If the number you get is a fraction, round down.
If you are in the 0 to 3 month range - well the good news is that you are in the majority and at the very least you are reading this article and are aware of the situation. Your action plan needs to focus on building up your cash reserves. Cut spend now and save like mad.
If you are in the 3 to 6 month range - well you are doing pretty good - but it is best to focus on saving so that you can get to the 6 month mark.
If you are in the 6 to 12 month range - well you are in a good place - you will probably weather most layoff's but do not lose sight of the goal now keep at it the more you have socked away the more you will be able to stay relaxed and enjoy life.
If you have more than 12 months saved up - wow! Maybe it's time to enjoy life a bit more - maybe invest some of this money into more long term investments etc - but this is a personal decision and the fact that you have more than 12 months is a very good place to be as far as being prepared for getting laid off.
What if you are not?
If you do not feel you have sufficient savings remember that you can sell other investments, get funds from friends and family (if you have not been nice to them before this is the time to start to be nice to them), by cashing in a 401k (this is generally a bad idea but the uncle Sam does allow withdrawals for financial hardship - with a stiff 10% penalty. But it is best to be prepared and not have to resort to any of these last resort sources of funds.
Some Tips from others
There are some other little steps people employ that might be useful for you that I have listed below.
Apply for and get a Home Equity line of Credit - do not use it but have it ready - these credit lines are generally approved 5 years at a time and will be available to you in an emergency.
When you buy groceries buy a little extra of things that will keep well for over 6 months - canned foods and other staples that will be always useful to keep in your pantry or basement. Buy them on sale and this way even if you are not laid off you will have saved on things that you would buy anyway.
Do necessary (meaning if you do not do this now you will need to do this in the next six months and it will probably be worse then) maintenance on your house and vehicles now.
If you think you will get laid off soon and a general down turn is in the offing then selling some equity investments now might be prudent.
In The End
You must know that you will prevail. There are much worse things in life than being laid off. You will adjust, you will find a new way. Chances are high that you will find a better life. Own your life and move forward.
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