Layoffs are a sudden blow that can knock anyone out of their comfort zone.
Even if you knew your company was going through financial issues, or even if you knew your firm was about to conduct layoffs, getting the notice itself can still be a shock. That’s both unfair and unfortunate—because shortly after you’re laid off, you’ll need to tackle a number of steps to keep yourself financially afloat. And you’ll need to do so with as clear a head as possible.
Today, I’m going to provide you with a simple checklist of tasks you’ll typically need to complete after a layoff. These actions will clarify your financial picture, ensure you get whatever is still owed to you, and put you in a better position for your upcoming job search.
Featured Financial Products
Recently Laid Off? Follow These Steps
Your life has changed, suddenly and for the worse.
Being laid off doesn’t mean you stop working—it just means you start doing a lot of different work without the benefit of a guaranteed paycheck. You have to become more financially organized. You need to work on your resume. You need to put in applications for both jobs and unemployment benefits.
It’s vital to remain organized and disciplined during this period of your life. Knocking out the following tasks will help you keep your act together as you try to find new employment.
1. Ask HR for a Layoff Letter
Layoffs are different than firings.
Being fired means the company could keep you but is choosing not to because of your performance (or lack thereof) or certain actions.
Being laid off can happen to even the best of employees if a company is downsizing, restructuring, or simply doesn’t have sufficient resources to retain all workers.
A layoff letter details why you were let go, and acts as proof to potential future employers that you weren’t fired. If it’s not offered to you, request this letter. And once you have it, check for any inaccuracies.
If you know you were a high performer, you might ask your employer (or any of your immediate bosses or coworkers) for a recommendation letter.
Related: Should You Tap Into Retirement Savings After a Layoff?
2. Ask About Health Insurance
Health insurance is among employees’ most pressing concerns following a layoff.
If you had employer-sponsored coverage, you’ll want to clarify how much longer that coverage will last. Often, you have until the end of the month of your firing, but that isn’t always the case. Sometimes your coverage stops at termination. If you’re receiving a severance, you might get coverage for longer.
You should also ask if you qualify for temporary coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA). The upside? You get to continue coverage at current levels, usually for 18 to 36 months. The downside? COBRA premiums can be pricey, and you might be asked to pay the whole premium, up to 102% of the cost of the plan.
Also, layoffs typically count as a qualifying life event. If that’s the case, you should be granted a special enrollment period to either join your spouse’s plan (if you have a working spouse with an employer-provided health care plan) or shop for a plan on the state health insurance marketplaces.
Related: Tax Implications of Getting Laid Off
3. Check on Your Last Paycheck
Some layoffs are just the run of normal business. People leave in an orderly manner, they’re paid their final checks, and life goes on.
But sometimes, layoffs occur during restructurings or even as the company is shutting down. Or sometimes, you’re one of thousands of people being laid off at the same time. For these and other reasons, it’s possible that the task of paying you could fall through the cracks.
Make sure your final paycheck isn’t forgotten. If you haven’t already, ask management when to expect your check, and who you should contact if you don’t receive your final check on time.
Also, make sure your final paycheck is for the correct amount. In addition to your regular pay, you might owed severance, unused paid time off (PTO), or other one-off sums.
Featured Financial Products
4. Review Your 401(k) Options
Do you have a 401(k), or equivalent plan, with the employer who just laid you off? You have several options for what to do with the money in that account, including:
- Leave it alone until retirement.
- Roll your 401(k) into an individual retirement account (IRA).
- Wait until you start a new job, then transfer the funds into your new 401(k).
- Liquidate the account.
Although liquidating the account might seem appealing after a layoff, it’s one of the worst 401(k) mistakes you can make. If you’re under age 59½, liquidating your account not only puts you on the hook for ordinary taxes, but also an additional 10% penalty. Because this would deal a massive blow to both your current level of savings, and how much you could accumulate over time, you should only liquidate your account if you absolutely need the money to live.
If you recently started a job and have less than $1,000 in your account, your employer is permitted to automatically empty the account and send you a check for the balance. However, under this circumstance, you can avoid the penalty by putting the money into a qualified retirement plan within 60 days. Your employer would withhold the income taxes.
Generally speaking, Nos. 2 and 3 are the best options because they allow you to continue determining how you want to invest those funds. No. 2 especially—rolling over your balance into an IRA—will give you maximum control and the most investment options to use.
Related: 5 Costly 401(k) Rollover Mistakes You Must Avoid
5. Discuss Severance
No, not that Severance (though my wife and I did watch that).
I’m talking about a severance package—one in which you are given compensation and sometimes benefits as part of a layoff.
If you’ve been offered a severance package, carefully read the fine print, and even consider having an attorney look it over. Given that you’ll now be without a regular flow of income, you’ll want to know every minute detail of the money and benefits you’ll be receiving.
Also, some details might be negotiable. For example, rather than continuing health insurance through COBRA, you could ask your employer to extend your health insurance coverage. You might be able to temporarily retain other job perks, such as gym memberships or employee discounts. Indeed, your previous employer might even be able to assist in your new job search in some way.
Related: What Is the Rule of 55 for 401(k) Withdrawals?
6. File for Unemployment
The sooner you have a new form of cash flow, the better your financial situation will be.
You hopefully have an emergency fund you can dip into while you’re unemployed. But emergency funds are limited, and you never know what other unexpected financial event might arise.
Unemployment insurance benefits can make you less dependent on your emergency fund while you apply for a new job.
Assuming you’re eligible, the amount you receive and how long you can receive payments depends largely on your location. To file your claim, contact your state unemployment Insurance agency. You typically file with the state where you worked, even if you live elsewhere. You might be able to file online or over the phone. And it could take two to three weeks to begin receiving benefits, so it’s best to file as soon as possible.
Be prepared to supply information about your employer’s location and how long you worked there. Also, this isn’t a one-time task: You’ll need to keep filing weekly or biweekly claims to keep your eligibility.
Related: Financial Prep If You’re Worried About Being Laid Off
7. Adjust Your Budget
Whether you’ve never created a formal budget or used to plan your finances out to the last penny, now is a good time to take a close look at your money situation.
List all remaining income sources, including a spouse’s income, severance, and/or expected unemployment payments. Then list all expenses. From there, create a first estimate of how long your savings and other financial resources could last until you find new work.
Is the timeline too short for comfort? Temporarily cut out any nonessential expenses to stretch your savings longer. Start with reducing any overpayments to debt, then move on to cutting discretionary spending.
If your situation looks particularly grim, and you have a mortgage, student loan, or other significant debt, you might want to inquire about forbearance (a pause or temporary reduction in payments). Mortgage servicers sometimes need a forbearance request to be made within a set amount of time after a layoff, so don’t delay—take action as soon as you can. Also, the details of forbearances can differ from one provider to the next (for instance, some require repayment of any missed payments at the end of your mortgage, while others want to be repaid immediately after the forbearance period), so understand your provider’s terms before making that commitment.
Related: What is Rule 72(t) for Penalty-Free Retirement Account Withdrawals?
8. Update (And Upgrade) Your Resume
Depending on how long you worked for your previous employer, your resume could be years or even decades old. So, if you suddenly need to send it out again, don’t just give it a quick once-over—consider a major upgrade.
You’ll find more complete resume advice from media outlets that specialize in employment, but one piece of advice I live by is to focus on accomplishments, not tasks.
Don’t just say that you organized the annual company fundraiser—mention how much that fundraiser actually brought in. Did you break donation records? Say so.
Don’t just list what you did to fill your day. List your results, whether that was higher retention rates, growth in customers, improvement in quality of services … really anything you can quantify.
Many people try to be humble and actually downplay their accomplishments. It’s a noble mindset, but your resume is the wrong place for that. If you struggle to speak highly of yourself, ask some trusted coworkers about anything noteworthy you accomplished in your role.
Featured Financial Products
Related: Is Your Personality Limiting Your Income? Here’s What the Research Says
