The Recent Grad’s Guide to Surviving Layoffs
Since its peak in 2009, the national unemployment rate has decreased by half. However, in an attempt to save money, companies are continuing to tighten their belts, laying off entire departments or offshoring labor to other countries. Job loss is frequently due to layoffs that have nothing to do with job performance and everything to do with reducing an organization’s headcount.
A layoff can be hard to not take personally, particularly for a young professional in their first job. Ultimately, the formerly-employed who do find other jobs follow similar practices in their quest for new employment. Some even take the opportunity to change directions in their careers by gaining work experience elsewhere.
TAKE A DEEP BREATH
Concern over job loss or a layoff is almost always regarding financial security. There are several steps that you should take right away in order to maintain financial security after job loss. If your job loss was unexpected, your first instinct may be to bolt out of the office; however, you really need to ask some questions first, including those regarding unemployment benefits.
- Most companies offer some sort of severance package. Know the details of your severance, how long it lasts, and what percentage of your salary you will receive.
- Understand where you stand with health benefits. If your benefits aren’t continued, investigate your eligibility and costs for COBRA.
- Ask about your pension or 401(k) account. Do you have access to it? How so?
- Inquire whether you’ll be compensated for unused vacation or sick days.
Once you understand the details of your separation from the company, you can take some immediate next steps:
File for Unemployment Benefits
- Who is Eligible? Any U.S. worker who has been laid off for reasons unrelated to performance is eligible for unemployment benefits. Generally, you will lose unemployment benefits if you return to school, though there are rare exceptions.
- What are the Benefits? Until you find a new job or are enrolled in school your unemployment benefits can supplement your income. The amount you receive is generally based on how long you worked and how much you earned. Most states pay unemployment up to a maximum of 26 weeks. These federal funds are allocated by individual states; your state will confirm with your former employer that you were laid off and not fired.
- How Can I Apply? Contact your state’s unemployment office. In most states, you can apply fully online and start receiving unemployment benefits within four to six weeks.
Apply for COBRA
- Who is Eligible? Anyone who was previously enrolled in a COBRA-qualified employer health plan can extend their coverage through this program. There are a few limitations; you can read about them on the DOL’s COBRA FAQ page. Continuation periods are usually limited to 18 months after your separation with the company.
- What are the Benefits? COBRA entitles you to pay a discounted group rate for the same health coverage provided by your former employer. Coverage rates will be more expensive than they are for active employees. Annual costs average at $2,200 for individuals and close to $5,000 for families. This sounds expensive, but in the short-term it can save you money until you find a comparable individual plan or gain coverage through a new employer. Plans cover everything that your former plan may have:
- Inpatient and outpatient hospital care
- Physician care
- Surgery and other major medical procedures
- Prescription drugs
- Dental and vision
- How Can I Apply? Ask your employer’s human resources department to receive the COBRA election form. They will be required to provide this to you within 30 days of your request. After that, you have 60 days to file for continuation. If you’re concerned about receiving these forms or want them earlier, you can contact the Department of Labor’s COBRA offices. If COBRA is not an option, you qualify for a special enrollment period with HealthCare.gov. Through the marketplace, you can find inexpensive healthcare coverage.
Square Away Your 401k
- Who is Eligible? Anyone enrolled in a 401k sponsored by a former employer.
- What are the Options? You usually have four 401k options when you leave a company:
- You can leave the fund in the former employer’s plan
- Roll the fund into a new employer plan
- Put it into an IRA
- Cash it out
- What are the Benefits? The best advice when it comes to your 401k is to avoid cashing out. Not only will you pay a 10% penalty at the time you withdraw your funds, but you’ll also end up paying an additional 10% on tax day. If you can save money now, you’ll earn more by keeping the cash in an investment vehicle like a rollover IRA or a new employer-based retirement plan once it comes along.
- How Can I Rollover? Contact the former plan administrator immediately and discuss your options and any deadlines involved with your rollover. Not all employers will offer you the option to maintain your 401k plan. If they send you a distribution check, you have 60 days to roll this cash into an IRA or else you will be subject to penalties as if you’d cashed out yourself. The key is to be proactive about talking to your old company and getting the cash that you’ve earned rolled into the best possible investment vehicle you have access to.
How to Save Money
- Budget: Calculate how long you can make ends meet without the financial security of your previous job. Save money by cutting out all unnecessary expenses; now is the time to make your own coffee, cook at home, and find cheap entertainment.
- Student Loans: Find out if you qualify for a forbearance that will defer your payments for a while. This will save money in the short term, allowing you to focus on the necessities like rent and food.
- Other Debt: Contact your creditors if you’re having trouble meeting obligations; often companies are happy to work with you if you contact them and are forthcoming about your job loss or layoff. Resist the urge to live on credit; accumulating debt without a foreseeable way to pay it off is a dangerous move. In worst-case scenarios, it may be in your best interest to take a job in retail or food service; while you may not love the work, you are generating income, and not debt, which is key to financial security.
- Ask for Help: Lastly, if you are young and single (or perhaps if you are not), there is no great shame in living with family until you get back on your feet. Remember that while job loss or a lay off is traumatizing, it’s temporary. Asking for help can help you save money and get back on your feet faster.
Obtain Additional Education
- Certification Program: For some college grads, the sudden free time after job loss or a layoff can make pursuing more education an attractive solution. If finances and your personal circumstances permit, you may take this opportunity to earn a post-baccalaureate certificate in your industry. Additional certifications will build on the experience you already have and make you a more competitive candidate for a new position.
- Graduate School: Some master’s programs require students to have worked in the industry before returning to school; viewed positively, this could be a golden opportunity. Full-time graduate students may defer student loan obligations and may also be eligible for more financial aid. Attending an online school may also be an attractive option. While you earn additional credentials on your own schedule, the flexibility afforded by online study allows you to conduct a job search and schedule interviews during the day. Finally, many community colleges offer free or discounted classes to unemployed students who have experienced a layoff.
- Federal Job Training Programs: The federal government has resources in place for unemployed individuals to acquire additional training. Funds that assist dislocated workers are available through CareerOneStop, a service provided by the U.S. Dept. of Labor. Certifications, apprenticeships, and professional licensing may be earned, any of which can increase your employability. CareerOneStop also offers a job matching tool that not only identifies new positions that match your previous skill set, but also provides wage data, links to job openings and links to training that would increase your likelihood of getting each job. Funding for these programs is limited and must be applied for within 15 weeks of your last day at work.The Trade Adjustment Assistance (TAA) program is designed to assist workers who lost their jobs due to changes in imports to the U.S., offshoring of labor, or business changes identified as trade-injured by the International Trade Commission. Workers in the TAA program have access to up to 130 weeks of career training, skills assessments and mentoring. Reimbursement for travel to interviews and relocation is also available. If you are over 50, and your new job pays you less than $50,000 annually, you may be eligible for temporary wage subsidies. Check your state’s allocation of TAA funding.
Stay Active in Your Industry
- Use Your Former Employer as a Resource: While it may seem counterintuitive, staying in contact with your former employer can unearth opportunities to network that you may not have expected. Ask if outplacement services are offered, and follow up if so. Request reference letters from former supervisors. This may seem intimidating; however, the worst thing they can say is “no.”
- Tap Into Your Network: Reach out to friends and colleagues and explain your situation in simple terms; there is no social stigma to a lay off and no need to be embarrassed. Using social media tools can help you reach people you otherwise would never have met, particularly the networking site LinkedIn. Consider joining a job search club, or create your own from former co-workers in the same situation. Meet weekly to exchange ideas and hold each other accountable for sending out resumes.
- Be an Industry Insider: If cost is not prohibitive, attend industry events like conferences, trade shows or seminars. You will continue to build your contact list, keep your face in front of people who have the potential to hire you, and learn new skills at the same time. If you’re not already a member of a professional association in your field, now is the time to join one; many of them offer job boards as member benefits.
- Continue to Read, Research, and Learn: As you search for new employment, keep up on industry news by subscribing to trade publications or attending association meetings. Look for newly published books in your field, and make yourself aware of technological advances in the industry. If a new software application is making the rounds, take a class and learn to use it while you job-hunt.
Create Opportunities to Gain Work Experience
- Part-Time Work: Consider part-time work, possibly from the company that laid you off in the first place. The concept of Survivor Demotions often doesn’t occur to employers; if you’re about to lose your salaried position, ask if you can take a demotion to a lower-level job in the company or perform your old job on a part-time basis. It’s likely you’ll have more time on your hands to job-search if you’re working in a less-demanding capacity than before, and you’ll still be gaining work experience and maintaining some sense of financial security.
- Work Share: In some states, companies that are downsizing are willing to implement work-sharing programs. Rather than eliminating jobs in the workforce, these companies reduce the hours and benefits of a group of workers. These workers are still eligible for partial unemployment insurance, and therefore don’t experience a loss in income until unemployment resources end.
- Paid or Unpaid Internships: Many companies offer paid and unpaid internships to individuals who seek work experience and the ability to network with industry professionals. Paid internships are a gem among internships, and are often positions with a lot of competition. Unpaid internships may not offer financial security, but they do offer work experience in countless fields, and may open doors to an entirely new industry. Plus, taking part in unpaid internships will tell industry professionals that you are willing to get out of bed for experience alone, which says a lot about you as an individual.
- Contract Positions: Temporary or contract positions also provide work experience and help you meet new people in influential positions. Employers benefit from these short-term offerings because they are not required to provide health insurance or paid holidays to these employees. If one of these opportunities becomes available, take it and continue your job search until you find a permanent position.
- Volunteer: Using your unique skills in a volunteer position can increase your networking opportunities while you perform a good deed and gain work experience. Volunteering may also lead to new business contacts or a full-time position. Consulting is also a popular choice for those with enough industry knowledge; in fact, some workers find so much success in consulting that it becomes a full-time career.
Ultimately, it’s important to see a layoff as an opportunity rather than a catastrophe. In order to free your mind to think about where you want to go next, take care of the few financial details within your control. Once some of the financial pressures are off your back, you can start looking for a new job. Gather professional references, update your resume, and do some serious thinking about what you did or didn’t like about your old job and what you really want from a new one. If you stay connected and sharpen your skills and knowledge through work experience, a new opportunity may present itself sooner than you think.