The New York Times front-page June 2013 headline read “Even Pessimists Feel Optimistic Over Economy.” Great news.
However, in a turbulent global economy disrupted by technology, there will still be ongoing Reductions in Force (RIFs). RIFs is the 21st century term for that brutal experience of being laid off. According to recent Labor Department data, it takes about 36.5 weeks to find a new job. This blog contains seven financial tips for how to prepare if a layoff seems in the winds. Actually, given the economic volatility, employees should always anticipate the axe.
Reduced earnings, loss of a key contract, criticism by security analysts, management upheaval, need for a turnaround, and new technologies all could generate a RIF. Another factor can be achieving cost reductions by eliminating high-salaried older workers. PBS reports that it takes those over-55, on the average, about a year to find another job.
Ride it out
When layoffs are possible, anxiety surges. Often that brings out the worst in human beings across all levels of the organization. Escaping through quitting is not an option. That is, unless one has an independent source of income. At stake are any severance payouts, unemployment benefits, and access to COBRA or medical coverage. Some of that COBRA premium might be employer-paid for a few months after the layoff. In all situations, COBRA at group rates is available for 18 months after termination.
Figure out how to save the job or find another one in the organization
There’s an expression, “They managed to ‘save’ their jobs.” RIF lists are not cast in stone. Names are added and deleted continuously. Those skilled in organizational politics or how to present how vital their function is might be able to avoid a layoff. Also, while some departments are laying off, others are hiring.
Even before the hint of a RIF, it is wise to consider being hired in functions that are bringing in revenue. Those who don’t understand how to assess the manpower needs or understand the politics of an organization have to find mentors. Some report that they learned more about how to keep a job during a possible RIF than they had in all their previous years of employment.
Search for another job
Some daydream about collecting on the good-bye package like severance and then immediately landing a comparable job. That rarely happens. The exception is those in fields in demand, such as certain specialties in healthcare and technology. It makes good financial sense to search and then accept another job while one is still employed. That constitutes looking for another job from a position of strength. Unfortunately, being jobless imposes a stigma on most workers.
Don’t plan a time-out
Losing a job doesn’t mean a vacation. Those who decided to take a break after years of working found that to be a disadvantage. They got out of sync with the metabolism of the workplace. Skills atrophied. Knowledge bases got old. And the longer one is out of work, the less attractive one can be to employers.
When possible, refrain from purchasing big-ticket items like vacations, a new car, or a bigger house. Apply that money to paying off debt. The biggest drain on fixed expenses after a layoff is making the minimum payments on credit card balances.
Although not everyone is suited for running their own business or even being a “freelancer,” that is becoming a realistic option for the jobless. Their industry, such as law, might be downsizing. There is bias against hiring those over-55. Taking another job might entail compromises such as longer hours or relocation that don’t seem worth the amount of the particular paycheck.
Self-employment provides attractive tax write-offs
For example, every mile traveled on business is tax deductible. For a job with an extreme commute, none of the mileage is. Increasingly outplacement services, hired by organizations after a RIF, are offering briefings about self-employment. Also, there is a growing body of information on the web and through professional societies.
Research affordable health insurance
COBRA may be more expensive than other options for healthcare coverage. Trade associations frequently offer good deals for members. All that requires is joining. Also, there could be lower cost health maintenance organizations.
Those experimenting with self-employment might check out what is specifically available to small businesses and “freelancers.” For example, in New York, the Freelancers Union has established its own comprehensive healthcare facility for members. In the past small businesspeople have been scammed by some vendors promising comprehensive coverage for peanuts. Check out every company with others who are self-employed and appropriate state authorities.
Although layoffs can trigger emotional upheaval, they don’t have to plunge employees into financial ruin. Preparing for them has become as much a have-to in personal finance as saving for retirement.