With U.S. unemployment at a 26-year high of 9.8%, it's clear that our nation is facing a job loss epidemic. Economists estimated another 175,000 jobs were lost this October after 263,000 U.S. workers were let go this September, according to a Briefing.com survey.
If you haven't lost a job this year, you probably know at least one person who has. In these tumultuous times, we all have to ask ourselves that much-dreaded question: If I were to get laid off today, what would I do? While you may be tempted to curl up into a ball, rock yourself gently and let the tears flow freely, this would obviously not be the most effective solution. As soon as the words, "We're going to have to let you go," fall from your boss' mouth, it's time to take action. (There will be plenty of time for sobbing and gentle rocking later.)
If you get the axe, here are four steps you should take immediately:
- Secure Your Severance Pay
Many companies offer a severance package to laid-off workers. Do your research and find out if your employer is one of them. The amount of severance you receive is generally based on your annual salary and the number of years you've worked for the company. For example, some corporations may offer two weeks of salary for each year you've worked there. Therefore, if you had worked at the company for 10 years, you would receive 20 weeks of severance pay after your lay-off. While some companies pay this severance package over time, others offer a lump sum. If you have the opportunity to choose between the two, consider the tax implications of each option. Let's say your company appears to be a sinking ship. In that case, you should probably opt for the lump sum. Otherwise, your severance pay may go down with the company.
On the other hand, if the company seems relatively stable (other than the fact that they just laid off their best worker, of course), you may consider spreading out your payments. Talk to your financial advisor about which option is best for you. (Find out more in If I take a severance package from my employer, how will it be taxed?)
- Rollover Your Retirement Plans
If you have a 401(k) plan or another employer-sponsored retirement plan, talk to your financial advisor. He or she can help you rollover your retirement plan into another account, such as a traditional IRA. You could take an early distribution from the account, but you would have to pay a penalty on top of some potentially hefty taxes. Most financial experts agree it's probably not worth it. (Avoid paying excess taxes by learning some simple transfer rules in Common IRA Rollover Mistakes.) If you have a traditional pension plan, your retirement benefits are probably based on your age, salary and the number of years you've worked with the company. Typically, you are required to work to your company's specified retirement age to receive maximum pension benefits. That means you'll probably receive fewer benefits if you get laid off. Ask your Human Resources department for a copy of the pension plan summary. This should give you information about the type of plan you have and how benefits will be paid to you if the plan is terminated. It will also tell you whether your plan is covered by the Employee Retirement Income Security Act of 1974 (ERISA). If it is covered by ERISA and you have questions or concerns, you should contact the U.S. Department of Labor's Employee Benefits Security Administration (EBSA).
- Handle Your Healthcare
If you get laid off, your company-paid health insurance will probably be terminated along with you. Luckily, the federal government offers support to people who suddenly lose health insurance through the Consolidated Omnibus Budget Reconciliation Act, also known as COBRA. Under this law, employees who meet certain requirements are eligible for temporary continuation of their health benefits after they lose their job. If you are eligible for COBRA, you'll receive 18 months of extended coverage for yourself and your dependents whether you lose your job voluntarily (I quit!) or involuntarily (You're fired!). However, workers who are terminated due to gross misconduct are not eligible. (That means no COBRA for you, Mr. Harassment Harry.) Of course, as with many programs the federal government provides, there's a catch: COBRA isn't cheap. You'll be required to pay 100% of your health insurance premiums in addition to an administrative fee of up to 2%. This can get painfully pricey for someone who is currently unemployed. You may want to look into other health care options, such as buying a private policy or signing up for dependent coverage through your spouse's employer-sponsored plan.
- Score A New Job
Obviously, the most difficult part about losing your job is finding a new one, especially right now when job openings are as scarce as hen's teeth. However, as daunting as it may seem, it's not impossible to find a new job if you tap into the right resources. For example, many companies offer career placement services for laid-off workers. While you'd probably prefer to get a root canal than have any further dealings with the ungrateful firm that laid you off, you should never turn down a career placement opportunity. Don't burn that bridge just yet. After all, your old firm could help you update your resume, provide career counseling and interview training and possibly recommend you to other employers. Some companies even offer tuition assistance to laid-off workers so they can receive training in another industry. Be sure to ask your human resources rep about these potential opportunities. You should also take advantage of networking groups and other professional organizations. These networks can connect you to countless professionals who could hook you up with some valuable job leads.
The Bottom Line
Above all else, keep looking for that light at the end of the tunnel. This October, the National Association for Business Economics said the number of employers planning to hire workers over the next six months has doubled while the amount of firms cutting job has fallen. So, don't give up. One of those jobs could be yours. (To learn more, check out Losing Your Job: From A To Z.)