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Losing your job can be scary, but it's not the end of the world. Instead, think of it as a chance for a fresh start. Knowing what to do when laid off is the key to returning to normalcy quickly and making the most of the opportunity provided.
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What to Do When Laid Off: Laid Off vs Fired
Getting laid off is never a good feeling, but it happens to millions. Large companies like Amazon, Meta, and Google started the year with mass layoffs, and Amazon furthered the count in March, laying off 9,000 more employees.
But being laid off isn't your fault. It's not because of wrongdoing, your attendance records, or anything else. Instead, it's a sign that the company must cut costs, which unfortunately includes labor costs.
However, there's a significant difference between laid off and fired. When you're fired, it's usually due to some wrongdoing, and it may affect only you, not a group of people, as often happens when a company lays people off.
What Happens When You Get Laid Off?
It's scary to think about losing your job, but what does it mean to get laid off?
First, it means you no longer work for the company. But, laid-off workers may get a severance package if the company can afford it. There isn't a law requiring companies to offer severance benefits; if they can't afford the pay, they can't provide it. However, laid-off workers should be eligible to file for unemployment benefits.
Some layoffs are temporary, meaning you can collect unemployment benefits during the time you aren't able to work but then must return to work at the end of the period. However, you cannot collect unemployment benefits after you can return to work.
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Common Layoff Causes
Companies have different reasons for sending a layoff letter, but here are some of the most common.
- Poor economy - If the economy is struggling, companies may be forced to do a mass layoff because they cannot afford to keep employees.
- Too many employees - If a company has too many employees doing the same job, they may cut costs by eliminating a position.
- Company restructure - Some companies restructure after being bought out or under new management and are forced to let some employees go.
- Company downsize - If a company can't turn things around in a down economy, they may downsize, eliminating entire departments or many positions
- Company closing - When a company closes its doors, everyone loses their job.
What to Do When Laid Off - 7 Steps
Getting laid off can feel overwhelming, but there are some critical steps to make it easier on yourself.
1. Apply for Unemployment
As you figure out what to do if you get laid off, prioritize applying for unemployment benefits. All states offer some type of unemployment insurance benefits, but the requirements to apply, qualify, and receive benefits differ.
The key is not to wait, as some states have short windows of opportunity to receive unemployment insurance benefits, and typically you can collect unemployment and severance pay simultaneously.
2. Update Your Budget
Your income will likely be lower if you get laid off, so you must revisit your budget. When creating a new budget, consider any emergency funds you have saved or any other sources of income you may have.
Your new budget should eliminate unnecessary expenses, focusing only on the necessities while you are laid off. However, if cutting back on luxuries isn't enough, you may also consider cutting back on extra savings, such as retirement investments or other accounts you have set up in your budget.
3. Gather Documentation on Employer-Provided Stock Options
If you have employer-provided stock options, gather your documentation to determine how to handle them. For example, look at your vesting schedule, decide which options you can take with you, and if you'll incur any tax liabilities for exercising any options.
- Incentive stock options
- Restricted stock units
- Non-qualified stock options
- 409a valuations (for private companies)
4. Consider Your 401K
If you have a 401K, you don't have to act immediately but should consider your next moves. For example, if your company closed, you should act immediately, rolling your 401K over into an individual retirement account if you don't have another 401K to move it into.
However, if the company downsized or laid off employees, you can leave the 401K for now, take a deep breath, and work on your job hunt. If your next employer has a 401K, you can determine how to roll over your existing account to avoid tax penalties and keep your retirement plan going.
As you consider your 401K, determine if any employer contributions you've received are fully vested. If they aren't, the contributions will go back to the employer, but you keep any contributions you made.
5. Evaluate Insurance Coverage
A job loss usually affects your insurance coverage unless your spouse carries the insurance for your family. If you're laid off from work, consider the following insurance coverages you might lose.
If you have health insurance benefits at the job you just lost, talk to your HR department about COBRA health insurance coverage options. You may also look at your state's insurance marketplace implemented with the Affordable Care Act to provide more health insurance options.
- FSA - If you have FSA dollars, spending them before you're laid off is critical. Of course, that's not always easy to predict, but if you know it's coming, use your FSA funds for eligible expenses.
- HSA - You don't have to worry about losing your HSA funds; they roll over with you no matter where you work. You can keep the funds where they are or roll them over into the HSA at your new job.
If you have disability insurance with your current employer, you'll likely lose the coverage, another one of the downsides of job loss. However, there are individual disability insurance policies you can purchase, or you can wait to see what benefits your new job offers.
6. Meet With HR
It might not be the most comfortable conversation to have with your former employer, but you must meet with the human resources department to get your final details, including the following.
- Remaining pay - If you still have outstanding pay, determine when you'll receive your final paycheck.
- Severance pay - Inquire whether the company is paying severance packages, and if so, find out details, including how much and for how long.
- Vacation or tuition reimbursements - If you have unpaid vacation time accrued, or tuition reimbursements outstanding, determine how you'll receive them.
- Ensure personal and contact information is current - Provide your human resources department with your correct contact information, especially if your contact number will change.
- Letters of recommendation - Don't leave on a bad note; ask your HR department for letters of recommendation to help with your job search.
- Collect references - Get as much contact information for reputable references as possible, including phone numbers and emails. When you're job hunting, future employers may ask for professional contacts as referrals.
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7. Evaluate Your Options
After you've had time to take a deep breath and process the situation, it's time to search job boards and find prospective employers. It can be challenging to determine your next steps when you get laid off, but giving yourself time to grieve and then digging in deep will help you move forward.
Here are some steps to take.
Update Your Resume
Before starting your job search, update your resume with the most current information. For example, change the dates on your current position to the day you were laid off, and include any new information, such as new skills you've acquired.
Create a Job Search Schedule
Keep yourself on a schedule when searching for a new job. Set specific times of the day to search job boards, make phone calls, and set up interviews. Don't overwhelm yourself, but also don't let yourself get lazy.
Consider Interests and Potential Careers
Being laid off can be an excellent time for a career change. If you've been toying with trying something new, now is the perfect time. However, if you aren't sure where to turn, consider a career coach or career services.
Sometimes it's more about who you know versus what you know when looking for a job. For example, you never know when you may find a few options just by letting people know you were laid off and are looking for a new job.
Visit Job Boards
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What Is a Furlough?
A furlough is a temporary break from your job. You aren't necessarily laid off; instead, you aren't working for a specific period but are expected back at the end of that time.
What Should I Ask if I Get Laid Off?
If you get laid off, immediately talk to human resources about any outstanding pay and benefits, including severance pay, health insurance, and any other benefits or money you're owed from your time at the company.
How Do I Best Prepare for the Possibility of Being Laid Off?
If you're concerned about the possibility of a layoff, get your ducks in a row. Re-evaluate your budget, determine how much money you have saved, assess your insurance needs, and take advantage of any benefits you have now that might expire, such as spending your FSA funds.
Will Getting Laid Off Affect Future Employment?
Getting laid off shouldn't affect future jobs because you weren't fired. However, when comparing being fired vs. laid off, there's a big difference. If you were fired, you might have done something wrong, but being laid off means the company had to cut positions and possibly multiple employees because of their financial situation.
How Much Notice Should My Employer Give Me if They’re Laying Off Employees?
Whether an employer must warn you of an upcoming layoff depends on what your employment contract states or if they fall within the parameters of the WARN Act that requires employers to give employees 60 days' notice before a mass layoff.
The Bottom Line
Knowing what to do when laid off is hard, so give yourself some time. If it was a shock, let yourself grieve and determine your next steps. There are thousands of potential employers, and this could be a chance to try your dream job you've never let yourself consider.