If you recently lost your job, or someone in your family got laid off, you should not panic. Instead, you should take certain steps immediately to help you manage the transition in the best way possible. According to the Bureau of Labor Statistics, about 5 million American workers were laid off or discharged from their workstations in the first three months of 2021.
After getting laid off, you should ensure you receive the final paycheck, pension funds, unemployment compensation, severance pay, and other benefits that your employer or state government provides to unemployed persons. You should also ask your employer for a letter of recommendation to help you begin the search for a new job.
Knowing what to do when you get laid off can help you focus on finding a new job, and avoid making irrational decisions.
What Does It Mean to Get Laid Off?
During an economic recession, it is common for different economics to experience massive layoffs as companies struggle to survive. However, layouts may occur at any time, and not necessarily due to economic hardship. Sometimes, when a company is restructuring or being merged with another company, the combined entity may declare certain positions redundant, resulting in layoffs.
In 2020 and 2021, millions of American workers were laid off by their employers, as companies struggle to survive due to the COVID-19 pandemic. As governments enforced restrictions to curb the specific of the COVID-19 virus, certain industries such as restaurants and air transport suffered the most, and most employees working in these sectors were laid off by their employers.
10 Things to Do When You Get Laid Off (Checklist)
Here is are things you should do when you have been laid off:
Ask for a laid off letter
If your position has been declared redundant or you’ve been terminated due to economic, buyouts, merger, or restructuring reasons, you can request a laid-off letter from the employer. This letter will detail your previous roles, significant contributions, and the reasons for the termination. A laid-off letter simplifies things during a job search since you won’t have to explain your job loss situation to every potential employer.
Some employers provide a laid-off letter as part of the exit package for employees who have been laid off. If your employer did not provide one, ask your HR to write one for you before you clear from the company. Check for any errors or omissions on the letter before leaving the company, since any errors on your job description, roles, or division where you work could spoil your chances in your next job.
Check your final payment
Before you leave, you should confirm when and how much you will receive as the final paycheck. If you have accrued vacation, sick leave, and overtime, the employer could pay a lump sum payment using either a direct deposit or mailed check.
Be sure to check with the Human Resource or accounts department to know how much they owe you, and how you will be paid. In some states, employers are required to make the final payment immediately after you are laid off, or after a specific time frame. If you will be paid via mailed check, ensure you provide an updated address.
Tighten your budget
A layoff is always unexpected, and it can strain your finances if you have not built an emergency fund. Once you receive your final paycheck, you should plan how the payment will sustain you before you land another job. You must plan how you will pay your rent, baby supplies, utility bills, healthcare costs, gas, etc.
Immediately you get terminated, you must sit down and plan how you will utilize the available funds to last you several months. You should eliminate non-essential expenses such as entertainment, gym membership, dining out, jewelry, and electronics that you do not necessarily need.
Review your 401(k) contributions
If you had a 401(k) retirement account with your former employer, you must review the amount you’ve contributed and decide what to do with it. Here are some of the options you have with your 401(k) money:
Leave it with your former employer
If you like your employer’s investment options, you can leave the retirement money in your employer’s 401(k) plan. However, you need to have a minimum balance of $5,000 to leave the money in the plan. If your money is below the required threshold, it could be transferred to a forced transfer IRA or automatically cashed out.
Rollover to an IRA
If you have an IRA account, you can move your 401(k) plan from the former employer’s 401(k) to the IRA. You can request a direct custodian-to-custodian transfer to the IRA account to avoid paying taxes and penalties on the amount transferred.
An IRA has a wider investment selection, and you can allocate the money to various investment options to create a well-diversified portfolio.
Rollover to new employer’s 401(k)
After leaving your job, you will have 60 days to decide what to do with your retirement money. If you got a new job within this period, you can ask the former employer to move your retirement money to your new employer’s account via a direct rollover. You can also ask the employer to send you a check with your balance, which you can then deposit to the new 401(k) account within 60 days.
Cash out
If your balance is less than $1,000, your 401(k) account will be automatically cashed out when you are laid off. However, if your balance is higher than $1,000, and you are cash-strained, you can take a cash-out to help you manage your expenses before you get another job. You will owe tax on the distribution and a 10% early distribution penalty if you are below age 59 ½.
Ask about severance pay
Once you are laid off, you may get severance pay from your employer. Severance pay is a one-time payment that is paid as a one-time payment or several installments spread over several months.
It is not mandatory for employers to provide severance pay to laid-off employees, but most employers do so voluntarily. The amount offered varies from company to company, and you should check with the HR department to know if they provide severance pay and how much you could get.
File for unemployment benefits
If you were laid off due to no fault of your own, you could be eligible to collect unemployment benefits. You should not wait to file for unemployment; file your forms immediately after you are laid off so that you can start receiving benefits sooner.
Most states allow residents to register for unemployment benefits online, without having to visit the physical offices. Check with your state to know the eligibility requirements, what you need, how to file, and other information on unemployment benefits.
Review health insurance options
Even after a layoff, you still need insurance coverage. Ask the HR personnel how long you will be covered by the employer-provided health insurance coverage after you’ve been terminated. Some employers offer to pay one month in advance, which is a good thing you are laid off at the start of the month.
If the employer had over 20 employees in the prior year, it is mandated to provide health insurance coverage through the Consolidated Omnibus Budget Allocation Act (COBRA) to terminated employees. You can extend the coverage for up to 18 months after leaving employment. The employer may decide the pay the coverage for a limited period, and you will be required to pay the rest of the premiums.
Update your resume
Whether you are considering a career change or looking for the next available opportunity, now is the best time to update your resume. You can update your existing resume, or use a resume builder service to polish up your resume.
If you are not sure what to include, you can ask your colleague to highlight some of the skills and strengths that you obtained at your former employer’s station. Ensure the resume captures all the elements that recruiters are looking for.
Prepare for reference checks
If you were laid off due a no fault of your own, you should ask the HR personnel how they plan to handle reference checks on your time at the company. You should request a reference while the employer still knows who you are. If you were fired from your position, you could ask a senior colleague from the company for a reference.
You can also request a recommendation letter from HR, which details your experience, functions, and achievements while working with the company. A recommendation letter can help you build your profile when searching for a new opportunity.
Start Job Search
Getting terminated or fired from a company can be both shocking, humiliating, and can at times make you angry. Even as you grieve and think about what just happened, you must start looking for a new position.
Start by letting your family, friends, and professionals in your network that you are in the market for the next job opportunity. Score the internet for job opportunities that match your skills and competencies. Don’t feel embarrassed about it; be confident when you reach out, but don’t explain yourself too much. Use your job loss as a springboard to your next position.