When your company has announced an upcoming layoff, you’re in both a bad and good position — depending on how you look at it. You're in a bad position because you’re going to lose your income, but you're in a good position because you know in advance that the layoff is coming, and can start making recovery plans now.
So, if your corporation is shutting down in the coming months, here's what you can do to try to shore up your finances and survive the lost income without hurting your finances over the long term.
Negotiate your severance pay
In the U.S., around a quarter of workers are entitled to severance pay after a layoff, according to Bloomberg’s coverage of a Randstad survey. When it's available, severance pay usually provides a payment of your normal weekly salary for a certain number of weeks based on how long you were on the job.
It's usually paid in a lump sum, and it can go a long way towards helping you make ends meet as you look for new work.
It's worth trying to negotiate for severance pay if you think it's an option. If your company makes an offer, you may want to have a lawyer or financial advisor review it to make sure it's as fair and comprehensive as it should be.
If you are laid off through no fault of your own, you should be entitled to unemployment benefits. The amount you get is equal to a percentage of earnings, with the amount based on the state where you live.
You typically must file for benefits at a specific time depending on your state's rules, such as the first full week you are unemployed. Still, you can check out your state's unemployment portal in advance to make sure you understand what information you will need and when you can submit your application.
Look into options for health insurance
If you were receiving health insurance through your employer, you'll want to explore your options for getting covered after the layoff. You should be entitled to stay on your employer's plan through the Consolidated Omnibus Budget Reconciliation Act (COBRA), but once your company stops subsidizing premiums, this could become very expensive.
Losing workplace coverage is a qualifying life event that can entitle you to buy coverage through the Health Insurance Marketplace. This may be a cheaper solution, so start exploring plan options in your area so you'll know whether you need to sign up for COBRA or opt for an individual plan.
Since you don't know how long you’re going to be unemployed, it's worth trying to put as much money into an emergency fund as you can in the weeks leading up to your layoff. Cut any non-essential expenses and try to funnel money into a high-yield savings account.
Ideally, you'll have enough saved to cover three to six months of living expenses. This will give you time to find a new job and get back on your feet.
That may mean pausing your efforts toward your long-term financial goals, such as saving for retirement. While it's disappointing to be set back, spending money on future goals could put you at risk of shortfalls today.
Reach out to your network
Since you know you're going to be laid off, it's worth tapping your network ASAP to try to line up another job.
Reach out to friends in your industry, ask your boss if they know of any companies hiring and if they'd give you an intro and spruce up your LinkedIn profile to try to entice employers that may be scouting.
Get professional advice
Finally, you may want to schedule a consultation with a financial advisor. A professional can help you create a budget, determine if you should move your workplace 401(k) when you leave your job and decide what goals you want to pause until you get hired.
By taking these steps, you can be as ready as possible for your layoff, and you can hopefully keep your finances stable and get back to work before you know it.
Christy Bieber has 15 years of experience as a personal finance and legal writer. She has written for many publications including Forbes, Kilplinger, CNN, WSJ, Credit Karma, Insurify and more.
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