How to Prepare for a Lay-off


Prepare Lay off

Lately, I’ve been helping a friend prepare for a lay-off.   Her company has given her a couple of months’ warning, so preemptive steps can be taken.

This has gotten me to seriously think about what steps I would take in order to prepare for a lay-off myself.

Concerning the company

What kind of severance

The first thing I’d look into would be if my company has a policy or what is the industry norm in my field. Things to find out would be: how many weeks/months equivalent severance might be offered.  And what are the terms?

Will the severance be paid out in a lump-sum?  If yes, that can seriously impact my taxes.  Or will it be doled out like my regular salary, with the caveat that if I got another job, that it will be withdrawn?

Insurance Extensions

I would also want to find out if the severance package includes an extension of insurance coverage.  Currently, my employer provides me with comprehensive coverage of medical, dental and life insurance.  Would the coverage extend for a couple of months or will it terminate the day I leave the building?

HSA Amounts

As part of the Insurance benefits described above, I also have a Healthcare Spending Account attached.  And frankly, I’d want to make sure I spend that money before my termination date.  Should I be stocking up on contact lenses? Get my teeth cleaned?

Retraining or Transition Services

Some companies, as part of their severance, also pays for a limited number of sessions or months with a career coach to help employees brush up their resumes, update their online business profiles and maybe current interview techniques.  I’d definitely want to maximize those benefits.

Gathering Resources

Now is the time that I’d take home that stack of business cards that I’ve collected along the way.  I’d also link up to my peers and network on LinkedIn so I would have their contacts.

I’d also save a copy of my job description and my job evaluations and take those home.  I’d get contact information for references later too.

Outside of Work

These are the things I’d do outside of work to get me prepared for a layoff:

Figure Out my Bare-Bones Budget

What could I insource? At this point, it’s pretty low since I no longer have a cleaner and I went back to cooking all my own food.  There was a time when I had a housekeeper come in once a month and I had a subscription to one of those food boxes. But maybe there are things I could still cancel; my gym membership or Spotify Premium membership.  I’d learn what those terms were too; are there fees for breaking the contract? How long of a notice do I need to give?

Emergency Funds

Everyone says it: have an emergency fund.  Whether it’s 3 months or 6 months of that bare-bones budget will be up to you. For me, I budgeted for 6 months.

Debt Outstanding

Aside from my mortgage, I’d pay off any debt I had as quickly as possible.  I know a lot of people have student loans that are hard to pay off in a short amount of time.  But if it’s a balance on the credit card or a Line of Credit, I’d hustle on those.  Maybe sell some extra stuff second hand to add to those payments.

Apply for Additional LOC/HELOC

Actually, speaking of that Line of Credit, I’d probably apply for additional room on that while I’m still employed and my credit profile is in good shape.  I’d do that with a Home Equity Line of Credit too.  The hope is that I wouldn’t need to tap into these, but you never know what can happen, so for the cost of administration, it’s probably worth it.  It certainly doesn’t mean I have to spend it.  Maybe it’s just an extra margin or safety.

Inquire about Private Insurance (if necessary)

As it turns out, I discovered that I would not get an extension of insurance benefits from my employer if laid off.  So I’d have to buy coverage from private insurance.  There are a couple of companies with this offering and I’d look into their policies and premiums to see which suits my circumstance best.

Government Sponsored Retraining Programs

I’d also look into any government sponsored re-training programs.   In Canada, one was offered as part of an economic stimulus package and it paid for my friend to go back and get new certification.  From a monetary standpoint, it was very valuable, but it also looks good to beef up a resume with newer, relevant skills.

Upcoming/predictable Cash Requirements

Sadly, there isn’t always a sponsored program to apply for.  If I’d want to retrain, I’d have to foot the bill myself.  I need to figure out what those expenses are and plan for them.

Make Plan for Severance Amounts

With all of the above information, I have most of the inputs I need to make a well thought out plan. If I get a lump sum, I know how I’d ladder a CD/GIC account.  If it’s regular payouts, I know how to restructure my budget to accommodate my plans.

Appointment with Financial Planner

This last step is not strictly necessary, but it’s a good idea.  While I am a professional money manager, I might have missed something.  A financial planner has the advantage of having worked with thousands of people and has encountered many different scenarios.  They might point out something that I missed.  After all, a second opinion never hurts.

What’s next?

Those are the steps that I can think of that would help me prepare for a lay-off.  I think those steps would also be useful if I decided to leave my full-time job too.  To transition to the next phase, I’d need to get all my ducks in a row.

Am I missing any?
Comment below to tell me what steps you’d take!

7 thoughts on “How to Prepare for a Lay-off”

  1. Hi –

    The HSA money (including any matching amounts) is yours to keep forever and ever. It could be used as an emergency fund since you can take that money out at any point in the future as long as you have receipts for expenses that took place at some point. Don’t spend that money on little stuff that’s inconsequential!

    Re the financial advisor – find one that’s fee based since money will be tight. Many advisors charge a percent of your portfolio and that’s definitely not what you want. In fact, if you use anfirm like Fidelity, they have advisors you can meet with free of charge.

    One thing I would add is to make sure you know when your last eye/health/teeth appointments were. Many (most?) employers will cover your COBRA payments for part or all of your severance period and you should immediately make all your appointments while still covered. Cycle through all the biggies. Look into the cost of ACA coverage for your state and compare it with COBRA payments; it’s probably a cheaper option for when your employer coverage runs out.

    Lastly, read everything and save all the severance documents.

    1. Those are all good points!
      The HSA is a good distinction between American and Canadian plans. In Canada, the HSA is attached the the group plan of the company and not investible like those in the States. So for Canadians, it’s use it or lose it. But for Americans, definitely keep it for emergencies!

        1. And why we need to do the planning & research ahead of the actual layoff. Because these differences make a decision right for some and wrong for others. Thanks for pointing out how HSAs work in the States for other readers

  2. This current bull market will end sometime, not that I am wishing for it. Even if it doesn’t these things do happen to people, and I think this advice is timely.

    I would add resume preparation. I would also add borrowing, say from a library, a few books on interviewing. For your friend’s career field, there may be certain interview questions that they could benefit from practicing on. I am a software engineer, so there are many books on the subject. I suspect this is true for other fields.

    I would also look into talking to various utilities. Sometimes they will help people out in these situations to give them some grace period, often penalty free, when they are transitioning.

  3. Pingback: How to Prepare for a Lay-off ⋆ Camp FIRE Finance

  4. Pingback: What Happened In the Stock Market Yesterday? Is This Another Financial Crisis? - Sunday Brunch Cafe

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