The optimal moment to ready yourself for potential termination is while you're still clocking in at your job.
While the overall employment landscape appears positive — April saw a decrease of 20 basis points in the unemployment rate to 3.6%, according to the U.S. Bureau of Labor Statistics — indications of workforce reductions are surfacing.
Last month, American businesses signaled intentions to cut 40,023 positions, as per data from Challenger Gray & Christmas.
In total, companies announced 230,433 job eliminations in the initial four months of 2019, marking a 31% increase from the corresponding period of the previous year, according to the outplacement firm's findings.
Sectors bearing the brunt of these losses include manufacturing, automotive, and retail, according to Challenger.
The escalation of tariffs amidst a trade conflict with China further amplifies the strain.
"Within retail, we might witness price hikes and a decline in foot traffic," remarked John Challenger, the CEO of the firm. "This is likely to prompt retailers to expedite store closures, pivot to e-commerce, and enact workforce reductions."
Individuals confronting the specter of potential job loss face a myriad of challenging decisions — often at their most vulnerable state.
"When you're aware that a layoff might be imminent, it's common to become fixated on that possibility and tune out everything else," noted Scott A. Bishop, a certified financial planner and executive vice president at STA Wealth Management in Houston.
"And when your partner brings it up, you end up with two individuals who are bewildered and apprehensive," he added.
Here's the initial course of action if you find yourself on the brink of termination.
Check your severance package
In the event of the most dire circumstance, you could face sudden dismissal without any extension of benefits.
If you happen to be fortunate enough to receive a severance package — potentially encompassing upfront cash and provisional health insurance coverage — it's imperative to thoroughly scrutinize the proposal before consenting to its terms.
"It constitutes a binding legal agreement," emphasized Bishop. "You might be forfeiting your right to sue for termination, particularly if you're aged over 55, or there might be stipulations regarding noncompete agreements."
Address these key workplace benefits:
• Remaining vacation days: Determine if your employer will compensate you for any accrued, untaken vacation days. This policy can vary based on your employer's guidelines and state regulations.
• Equity options: Employers may grant employees the opportunity to purchase company stock at a predetermined price, known as the strike price. Should you depart your position, you usually have a designated timeframe to exercise these options.
Consult with your financial consultant before taking any actions.
Review your cash flow
After being terminated, your initial step should involve enrolling in unemployment benefits, potentially providing up to 26 weeks of financial support.
If your employer grants you a grace period before the layoff, concentrate on bolstering your emergency savings fund, which ideally should encompass expenses for three to six months, advised Marguerita Cheng, a Certified Financial Planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.
Prioritize your financial obligations and trim unnecessary expenditures.
Engage in discussions with your creditors, utility service provider, and other financial entities to determine what payments can be postponed and which require immediate attention.
"The worst scenario would be settling a $3,000 medical bill upfront when it could have been deferred temporarily, and then neglecting essential utilities," cautioned Bishop.
Evaluate alternative avenues for emergency funding. For example, a home equity line of credit, secured against your property, could serve as a fallback option during challenging times.
If you know you’re going to get laid off, a lot of times you just don’t hear anything else. And then when your spouse asks you about it, you’re going to have two people who are confused and scared.
Scott A. Bishop
EXECUTIVE VICE PRESIDENT OF STA WEALTH MANAGEMENT
Know your benefits
Businesses with a minimum of 20 full-time employees and offering health coverage typically must extend continuation health insurance under COBRA, the Consolidated Omnibus Budget Reconciliation Act.
Here's the caveat: COBRA mandates that you shoulder the entire premium cost, previously shared with your employer, along with a 2% administrative fee.
In the event of job loss, you and your eligible dependents qualify for a maximum of 18 months of coverage.
Additionally, employees should ascertain whether they have access to a health savings account (HSA) through their employer.
These accounts commonly accompany high-deductible health plans.
Contributions to HSAs can be made pre-tax or are tax-deductible, they accrue tax-free, and withdrawals for qualified medical expenses are tax-exempt.
The upside is the portability of your HSA.
"It serves as a buffer against medical expenses concerns, and it's transportable to your next employment opportunity for continued savings," highlighted Edward J. Snyder, a Certified Financial Planner and co-founder of Oaktree Financial Advisors in Carmel, Indiana.
