How to Survive a Company Layoff
With the exception of being let go from a retail position after a store closing when I was in college, I have never been on the receiving end of a layoff. However, I was unfortunate enough to have to deliver the news to team members who worked with me at my last job, and it was one of the most unpleasant experiences I have ever had to deal with at work. Through their painful experiences I have been able to gather a few tips for surviving a layoff.
Sink or Swim
I personally don’t believe in layoffs because I am sort of a “sink or swim” kind of guy. When an employee devotes their time and energy to a company they deserve some loyalty in return. Sink or swim, employees and companies should be in it together. Unfortunately, corporate America is mostly concerned with bottom lines, so they frequently take the opportunity to “weed out” employees who earn too much, produce too little, or are nearing retirement benefits. If “dead wood” exists in an organization it should be dealt with individually, but not by taking otherwise hardworking casualties along with them as part of a massive layoff. OK, enough of my rant, back to surviving a layoff.
Keep Your Ear to the Ground
If your company has announced a round of layoffs it means there are storm clouds on the horizon, regardless of how secure you may feel about your particular job. If you are lucky enough to be notified ahead of time, use this advanced warning to your advantage. Put your financial turnaround on hold and quickly begin stockpiling cash. Here are a few ideas to guide you though this most difficult event:
Pay minimums on ALL debt, nothing extra. It is important not to get behind with storm clouds on the horizon, so continue to stay current on all debt accounts. If you were making additional debt snowball payments, suspend those temporarily until the storm clouds have passed, or until you have found another job.
Pile up cash in an emergency fund. Using the debt snowball amount you were previously paying on that smallest debt as a starting place, throw every single dollar you can find in an emergency fund. Have a yard sale, sell stuff on eBay, and look for some quick-to-hire part time work. This emergency fund will have to sustain your family until you can find new employment, a period that could take weeks, or even months.
Negotiate. When you get your pink slip, negotiate as many benefits as you possibly can before your exit interview is over. Don’t be satisfied to just get a promise of a good reference and any unpaid vacation. Companies, especially large companies, want to make this as smooth a transition as possible to limit any negative publicity. Use that to your advantage and ask for an extension of health coverage, or additional paid weeks per year of service. Work any angle you can to maximize your severance package. Remember, you have a family to feed! Don’t worry about appearing ungrateful, or making anyone mad. What’s the worst they could do - fire you?
Use severance funds first, then the emergency fund. It isn’t easy dealing with a drastic drop in income. Consider depositing severance funds in a separate savings account and set up biweekly withdrawals in roughly the same amount as your previous take home pay. Do not touch this money for any reason other than living expenses and perhaps some small job hunt expenses (travel, new suit, etc.), and in that case be extremely frugal. Remember, this money supply is finite. If you get frivolous now because you feel sorry for yourself you will be broke in no time and find yourself feeling even worse.
Find a new job, and fast. Now is not a time to sit around having a pity party. Get out there and find a new job. Work your network of friends and family. Keep in touch with other colleagues who have been rehired and ask them for any leads. Brush up on your interview skills. Learn what not to do in an interview. Treat this job search as your full time job. Sure, it would be fun to take a couple weeks off to rest and relax, but you can’t afford it. The faster you find a job the less you have to use of your severance money, making what’s left a nice bonus towards your financial turnaround.
When employed again use any remaining severance and emergency fund stockpiles to pay off debt, down to the original amount of your beginner emergency fund. Now is not the time to blow money to celebrate. If anything, this experience should have taught you a valuable lesson - there is no such thing as job security. In an ever-changing global economy filled with uncertainty, any work could dry up in an instant leaving you unemployed. There is no better time to get out of debt, build your emergency savings and work towards financial independence.
Have any of you experienced a layoff in your immediate family? Any tips you can share with other readers on surviving a layoff?
Additional Resources on Surviving a Layoff:
- Surviving a Job Loss @ BeingFrugal.net
- What to do Before You’re Fired @ Debt Reduction Formula
image credit: w00kie
Get daily updates for free by RSS feed or email delivery. Sign up today and also receive my free eBook, The 7-Day Turnaround!
Your tips are right on! And thanks for the mention!
Good advice–I really hope I’ll never need it!
Thanks for the mention, FrugalDad.
A book I’d recommend to folks who’ve lost a job is We Got Fired! …And It’s the Best Thing that Ever Happened to Us by Harvey Mackay.
It includes interviews with a lot of well-known people who were fired (sometimes more than once) before achieving success. It’s a great source of motivation to see that you’re not alone.
Also, on a side note, I think some people secretly want to get fired. As if they want to quit but don’t have the guts to do it. These folks are probably the minority, but I know they’re out there because I’ve met them.
I worked for a company once where one Monday morning the owner came in and told us that he was shutting the place down on Friday. It is pretty shocking to suddenly find yourself unemployed. I would highly recommend that people have a nice sized emergency fund for just such occasions. You never really know just how secure your job or business is really. It is better to be safe than sorry.
While I have never been laid off from any job I relate to the financial setback aspect of layoff.
The biggest piece of advice I can pass on is COMMUNICATE.
Communicate with your loved ones about your situation. Maybe a card is enough to recognize a birthday this year?
Communicate with your friends. Maybe the monthly night needs to be just a movie, not dinner and a movie?
Communicate with your social network. Maybe they have a line on a job or something you can do to bring some money in until you land something more permanent.
Communicate with your creditors. Continuing to make the minumum required payments is important, but if that is going to become a problem communicate with them and negotiate something you can live with. While credit companies are often portrayed as the evil ones, ultimately they want to help you stay afloat (so they can get more of your money in the long run). They may temporarily lower your minimum payments. You don’t know if you don’t communicate.
http://thefrugalcanuck.blogspot.com
“Put your financial turnaround on hold and quickly begin stockpiling cash.”
I agree entirely, but two points:
1.) You’re implying that stockpiling cash is NOT a component of a financial turnaround, while I would contend that it is at least as important as paying down debt - and I’m not talking just $1,000 emergency fund, but more like a 12 month emergency fund.
2.) The suggestion that the ‘financial turnaround’ doesn’t apply to bad times IMHO presents a flaw in the plan. Is it possible to create a financial turnaround plan which is equally applicable in both bad times ad good times? Personally, I think a 50/50 between debt payoff is savings is the right approach, and not debt snowball approach, but that’s just my opinion and what worked for me.
My husband has been let go from a job twice in our married life and I am a stay-at-home mom. It was very stressful and if we didn’t have a savings account built up with the first layoff, we wouldn’t have made it.
These are great tips. Fortunately, I’ve never been fired, but I’ve gone through several major life changes involving drastic changes in pay, and I was unemployed for several months after I separated from the US Air Force. I got out without having a job lined up, and it took several months to find something. But I prepared in advance, and amhappy it went the way it did.
I worked in the corporate internet business from 1998-2005 and was laid off not once but 3 times…from the same company (and hired back twice.) Being laid off was just part of being in that business. We got to know when layoffs were going to happen because the corporate security guards patrolled our cubicles the day the layoffs were happening. The last time, right after 9/11, I had my belongings packed and in my car before they gave me the news. That’s the internet for you.
Your advice is great. The only thing I would add is to periodically make and keep copies of your work contacts and key personal work documents and keep them at home. You never know how you will be treated in a layoff. You could have months of severance and they could treat you kindly, or you could be surprised, given 10 minutes to clean out your desk and escorted to your car by security. Both have happened to me; the latter being the most humiliating. Basically I learned to never take my job for granted or to trust the corporation!
This is going to sound harsh, but…
If you see your company not treating employees with loyalty, you should *not* treat that company with any loyalty. Any company that cans a team at the end of a project isn’t showing loyalty and pretty clearly treats employees as cogs in the machine.
My advice is if you see people being fired around you for no real reason, start job hunting NOW. Don’t wait around for the axe. Tug on your social networks and see what’s out there. Polish your resume. Don’t wait until the axe of randomness falls on you.
I would never think to negotiate the benefits when being laid off. That is a wonderful tip!
We survived almost a year of my husband being unemployed and it was hell on earth. I wouldn’t wish that on anyone. We lived in MA and I am surprised we did as well as we did, considering the cost of living. We are so thankful for his job and I constantly feel on edge that we will have to go through that again.
I hope others who are dealing with this will happen upon your great advice.
[…] Dad talks about surviving a company layoff. I remember the one and only time I got laid off like it was yesterday - we came back from […]
[…] How to survive a layoff. With the economy in the early stages of a recession, this may become more common. It’s unfortunate, but a reality. Frugal Dad has a lot of great tips. […]
[…] on their luck, or going through a rough patch. Maybe they have faced a debilitating illness, or a job layoff, or some other tragic event that has derailed them from leading successful, productive lives. Those […]
[…] Frugal Dad tells how to survive a company layoff. […]
[…] is hard to imagine taking an extended break from work on purpose! Most people who receive a pink slip desperately need to be re-employed because they typically have a stack of bills, and very little in […]
[…] totally secure job. Companies have proven that they can hire and fire at will (in most places) and frequently announce layoffs to improve the bottom line. A good way to hedge against this growing trend is to find something you […]
[…] - FrugalDad.com: How to Survive a Company Layoff […]
[…] on their luck, or going through a rough patch. Maybe they have faced a debilitating illness, or a job layoff, or some other tragic event that has derailed them from leading successful, productive lives. Those […]