Tuesday, November 18, 2008

You can survive being laid off

A couple of my friends and I got together this evening, including my good friend who was laid off from my company two months ago. (You might remember her as as my guest poster a while back.) We rehashed how the past week or two has been on the unemployment front over Baja Fresh tacos and subsequent lattes (I happily picked up the tab), and the overwhelming topic of conversation (no surprise) was unemployment, the state of the economy and how we're all drastically cutting back on our spending to pad any "worst case" scenarios, should they happen.

My friend was laid off in September and has yet to find a job as the end of November is rapidly approaching.

"What should I do? Am I going to be okay?" she asked in her car, as she dropped me off for the night. (This is after broke, laid off ex-colleague #2 sped off with a parking ticket flapping from under his windshield, which was highly amusing and ironic.) I looked at her and answered back with brutal honesty: "You're going to be completely fine."

You all are. With Citigroup's recent announcement yesterday that they were eliminating another 50,000 jobs, law firms folding right and left, and unemployment over 6% in the United States, any of us could be wiped clean from our organization's payrolls in a second. For all you Grey's Anatomy fans out there, being laid off is as instanteanous and jarring as Erica Hahn performing cardiothoracic surgery one minute and then leaving Seattle Grace for good the next, minus all the McSteamy drama to cushion the blow.

So, to quote my friend, what should you do? On the jobs front, all you can do is keep applying to as many openings as you can and stay on top of interviews and callbacks. Don't take it personally if you never hear back after submitting your cover letter and resume -- it's not you, it's the economy. Seriously.

On what to do on the finance front after you've been laid off, SmartMoney Magazine wrote a fabulous article with tips on staying afloat:

  • Negotiate. While not required to do so by law, many employers offer laid-off employees severance packages. Typically, these packages are on the table for a limited amount of time. Pay is usually based on the employee's length of service. (One employee may qualify for an amount equal to two weeks of salary while another, for as much as a year's worth.) The good news: Employees, especially those who've been at the company for many years and have a stellar service record, can often negotiate a better deal.
Try to cash in unused vacation days, for example, says Laura Moskowitz, staff attorney at the National Employment Law Project (NELP), a nonprofit that helps low-wage workers and the unemployed. Employers in 24 states — including California, Massachusetts, Kentucky and Illinois — are required by law to include unused vacation pay in an employee's final paycheck, according to Workplace Fairness, a nonprofit promoting worker rights. Employers in other states may do so voluntarily, or are bound to do so by corporate policy. Unused sick days, on the other hand, won't be included unless it's mandated in an employment contract. So be sure to inquire about your employer's policy.
  • File for unemployment benefits promptly. Even while receiving a severance package from your employer, you're entitled to unemployment benefits. Just make sure to file for those benefits right away because once you apply, there's usually a few weeks lag time until the first check arrives.

Depending on the industry you worked in or the circumstances of your layoff, extended benefits or subsidized training may be available to you through a government program called Trade Adjustment Assistance (TAA). The TAA assists those who've been laid off due to increased imports from, or shifts in production to, other countries, says Maurice Emsellem, public policy director at NELP. Lose your factory job because the company moved its manufacturing facilities to China, and you may be entitled to up to two years of subsidized retraining and up to 52 weeks of extended unemployment benefits, according to the Department of Labor.

  • Access health-insurance options. If you can't join your spouse's employer-sponsored health plan, consider either extending your previous coverage through COBRA or buying an individual policy.

Under COBRA, workers keep the coverage they had through their employers without worrying about getting turned down due to illness or a pre-existing condition. This option is pricey, though: You'll pay the entire premium plus a 2% administrative fee, which for a family, could top $1,000 a month. If you're the head of a family or middle-aged, for example, and have higher use of medical services, then COBRA would make more sense.

If you're young and healthy and just want coverage for medical emergencies, then look into private insurance. These health plans have lower premiums — on average $344 a month for families and $148 for individuals — but carry much higher deductibles.


  • Tap into your 401(k). You're out of a job, have bills to pay and your savings account is dwindling. Your 401(k) might be calling your name, but tapping into the retirement account should always be your last resort.

Beyond the fact that you're dipping into your nest egg, the biggest problem here is Uncle Sam: Say a laid-off worker in the 30% tax bracket withdraws $10,000 from his tax-deferred retirement account. Not only will he pay $3,000 in income taxes, he'll also pay a federal penalty of 10%. Once everything is paid out, he'll be left with just $6,000 in spending cash, the article states.

  • Overuse your credit cards. Interest rates alone should be enough to keep people from using their credit cards too much. If a payment is late — even by one day — your card issuer may jack the interest rate up to 20% to 25%, says the article. Credit-card companies are also tightening lending standards and lowering credit limits for high-risk cardholders, which makes it that much costlier should you get into the habit of overcharging. If you're desperate for cash, take money out of a standard savings account or taxable investment account, such as a stock portfolio, before turning to your credit cards or 401(k). [SmartMoney Magazine]


Budget Mama said...

One thing my friend's husband did after being laid off is look for temp work. It wasn't his ideal job but it was more than unemployment and helped compensate while he interviewed.

All the best to your friend!

Robin Henry said...

Sometimes being fired from a job can be a godsend. Numerous people who have been "laid off" have realised that they didn't really like their job and have moved on to something bigger and better.

If you can't find something immediately, it might be a time for personal growth and development ... do a course. Take an extended holiday.

Friends who have been made redundant tell me it was the start of something much better for them and that while difficult at the time, was the best thing that ever happened.

Stay positive and look for life change.


Anonymous said...

I agree with budget mamma about temping. It can be handy to have money coming in (and you can earn good money from temping short-term) while you look for something more suitable.

While I agree with Robin when he says that a lot of people found being laid-off a life-changing experience for the better, I think the mood is a little different now to what it was a few years back. It's definitely a time to take stock, but as for extended holidays, I wouldn't say it was a great time for that. The longer you are out of work the harder it can be to find a new position.

Keep your options open by meeting with multiple recruiters and try to connect with them on a personal level so that you aren't just another candidate to them - you need them to think of you as soon as they have a great position on the books. :)

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