It's not a pleasant prospect, but it's a reality many people have to grapple with each year: the pink slip. This "everything you always wanted to know" list of things to consider covers the basics of job loss – from anticipating possible termination to preparing for your next career. Read on, and don't be caught unaware.
How do You Know You're About to be Laid Off?
Let's start with the basics: take a look around. There are signs that would indicate a negative future for your company (or, at least, your job). If others in your department are losing their jobs, if your company recently instituted a hiring freeze, if newly budgeted positions are not being filled or if retirees are not being replaced, it's time to start looking at your own standing and performance in the company. Were you the last person hired, or are you having problems keeping up with the work? If the answer's yes, you may be summoned soon. (To read about how businesses are affected by an economic downturn, see The Impact Of Recession On Businesses.)
Beyond this, be aware if training budgets are cut or there's a slowdown in new projects on offer. Though your particular department may be immune to the general malaise in the company, it's best to check with superiors to see if your group is meeting targets.
How Best to Prepare
Consider the following proactive steps once you expect to be laid off. First, update your resume then build your network. Of course, you should be doing both on an ongoing basis – especially the latter. Both inside and outside your company, that rapport may ultimately secure you a few warm leads after a layoff.
Next, fix an appointment with the human resources department to determine all your invested assets with the company, including pension, healthcare rights, etc. All of this will be valuable when it comes time to negotiate a severance package. Be sure to familiarize yourself intimately with your company's severance policy.
Also, remember to remove all your personal files off the office computer.
There are a number of important financial steps that will ensure an orderly transition between jobs.
First up is to prepare a net worth statement that identifies all your debts and assets, so you know exactly where you stand financially. Also, it's worthwhile to create a spending log that determines what you spend for necessities and what's discretionary. In the event of a job loss, you will have to know where to cut. A budget that you adhere to (and don't keep just for vanity) is a must.
Next, establish an emergency fund of between three and six months' of living expenses to carry yourself and your family through the job search process. This should be done by everyone and not just those expecting to be on the chopping block. Be a good scout: be prepared.
The ability to access money after a layoff is of the upmost importance. That being said, if you need to use credit to stay afloat after a layoff, use a line of credit before using a loan or credit cards. Lines of credit commonly offer much lower interest rates than the other two options and offer more flexible payments, as well. Loans and credit cards should only be used as a last resort.
Finally, understand that cashing in your IRA, 401(k) or selling your home in order to raise funds for living expenses during this period may trigger unwanted tax implications. Get advice now and avoiding acting out of desperation. (For another look at borrowing from your 401(k), see our related article Sometimes It Pays To Borrow From Your 401(k).)
Also, contact your creditors quickly and explain your new employment status. Request a revised, temporary payment schedule to help keep up with your payments. You'll be surprised at how forthcoming many will be.
You have certain rights as a terminated employee, and you owe it to yourself to know them. The most important of which is severance compensation. Figure out exactly what your company's guidelines obligate them to pay and demand the maximum, and stand firm. Your company may not want to offer you as much as you're worth, but it's up to you to fight for it.
Consider, too, the benefits (and cost) of using a lawyer in the process. Depending upon your rank and years of service, the company's human resources department may even offer you one. If your case is tricky, a lawyer may mean the difference between an all-or-nothing payout package.
This is crucial: keep your family involved in the process. Your spouse, kids and parents should all be aware of the new reality you're facing. A team approach will yield great emotional support. Hiding the truth from your family will only make things more stressful in the long run.
Post-Layoff: Immediate Steps
Once the mud has hit, it's time to get busy. Obtain personal references immediately. Your bosses will likely be vulnerable and sympathetic at this point. It's best to write your own letter and have it ready to sign. Waste no time in starting your job hunt. Try to be out the next day. Momentum is key, and a quick start will help keep emotions in check and reduce the possibility of depression.
Finally, use your severance wisely. Prioritize: pay your rent/mortgage, car, electricity and food bills. And wherever possible, avoid using credit. If you qualify, register yourself for unemployment insurance.
While you're still employed, be sure to use your current health coverage for everything you need, from new eyeglasses to matters more serious. While current legislation, known as COBRA, allows you to keep your existing coverage after you're fired, it can be prohibitively expensive. The best practice is to price your old policy against one in the private insurance market. There are new options coming available all the time, and premium prices fluctuate quite often. And while it may be tough to find coverage if you have a pre-existing condition, an agent can always help. There's likely a policy out there that can be tailor-made to your needs. (Read more about finding affordable healthcare in our related article, Get Sale Prices On Healthcare With Discount Plans.)
Consider, too, the option of coverage on a spouse's plan – even temporarily if it's available. Going without coverage can be a risky proposition. Anyone not covered for 63 days after a job loss loses certain legal protections. Your employer's human resources department can help you determine the law in your state, and what should be done to maximize your family's benefits. As well, check potential coverage through Medicaid and the State Children's Health Insurance Program in your state.
Education and Retraining
If resources permit, you may want to develop skills the market is currently demanding. Start by assessing your needs, then determine how best to acquire those skills; online training, attending a community college or taking industry courses can all be beneficial. However, be sure to consider your family and social responsibilities, as well as the cost of such a venture vs. the potential reward.
If you go this route, consider alternate funding sources, such as industry loans, grants and scholarships.
The Bottom Line
Preparing for the worst is the best practice. It will not only increase the likelihood of a successful parting from your old job and quickly landing a new one, it will also help you navigate the process confidently. Your attitude is crucial. Without stress or depression, you and your family stand a far greater chance of smoothly weathering the transition.