How to prepare for a layoff

You better prepare for a layoff (because it can happen to anyone)

And it literally just happened to my team

Let me start with a bit of personal story. Two weeks ago, I got a call from HR. Like, from a HR director I had never talked to before. Thankfully, he went straight to the point so I didn’t even have the chance to overthink it: my boss and my coworker were being let go. Hmm, WTF? I was to be reassigned to another team. The 3 of us were basically our own little team so team there was no more.

I obviously strongly sympathize with them. I am also unsure how upset am I allowed to be: at the end of the day, I still have a job and they don’t. But man, that is a lot to take in. Why would they keep me and just let the other two people go? Pretty sure I developed a mild case of survivor guilt right on the spot.

Being great at what you do may not be enough to protect you

My boss in particular was nothing short of extraordinary: extremely results-driven and productive, in constant relationship with the entire company’s leadership team, hands literally on all the strategic initiatives going on. He truly is a role model to me, one in a lifetime kind of manager. Never in a millions years would I have imagined he could be let go. From the amount of feedback and people reaching out in the days that followed, I think this was a shared feeling across the company. Well, I mean clearly at some point, someone did come up with this brilliant suggestion “Hey what don’t we let go of that amazing person so we cut some cost and can blame him for everything that’s been going wrong?”, and probably multiple someones agreed to that suggestion.

“Lesson learned: you can be an amazing asset and still be impacted by a layoff.”

Then why my coworker and not me? Second lesson learned: layoffs are random too. Considering that I am being reassigned to work on a project I do have experience on, there might have been some logic involved but I strongly suspect there was some kind of quota to reach, then maybe a game of rock-paper-scissors and that was that.

How to prepare for a layoff in 4 steps

Now that we have established that you can be let go even if you are the most productive employee ever for no apparent reason outside of poor company’s results (“termination without cause”, a.k.a. “redundancy”), let’s talk how to prepare for this potential unfortunate turn of event.

1- Emergency fund

The number one thing to consider to prepare for a layoff is an emergency fund. An emergency fund is a critical must-have and should be your number one priority to build a healthy personal finance state. From impromptu repairs in the house, to unexpected loss of employment, that money is a safety net that will help you in times of hardships. And hardships are coming, always, at some point.

A few general aspects of an emergency fund

• you should be able to withdraw that money immediately if you need to
• it should still generate some interests (right now, typical interest rates are 2-3%, sometimes with a temporary welcome offer of 4-5%)
• you should aim to have between 3 to 6 months of expenses saved. However this indication is to adjust to your own situation and I talk more about this in the next paragraph.

How to determine what amount suits your needs?

It is important to understand what is this money planned for to know how much you need. Here are 3 steps to go over:

1. First, start by making sure you know what is your monthly expenses budget. You may want to have a couple of scenarios:
   • regular monthly expenses: what if you want to just continue with the exact same lifestyle. (Don’t forget you may need to enroll for a private health insurance to replace your employer’s benefits.)
   • the bare bone budget: what is the minimum amount you need to keep the lights on and food on the table
2. Second: these savings should help supporting you while you are looking for another job. Based on the job market needs for your specific skill set, you may want to target larger emergency funds. If you think you will be looking for a job for 3 or 4 months, then you should have at the very least 3 or 4 times your bare bone budget set aside.
3. Third: keep in mind that an emergency fund is not only here to help in case you loose your job but also for all kind of other stuffs. Like, what if your furnace broke? Your car needs to be fixed? Unforeseen medical expenses? What if your household has 2 income earners and you both loose your job? And a bunch of these could happen simultaneously. (Can you tell I am a worst scenario kind of person?). Better make sure you have some sort of cushioning there too.

2- Check if you are eligible for Employment Insurance benefits (EI)

In Canada, you could be eligible for EI which could help support you until you get back on your feet. There are a bunch of rules but main points are:

• you were employed in insurable employment (which is true of most employer-employee relationships)
• you lost your job through no fault of your own (you won’t qualify if you quit by yourself)
• and based on the unemployment rate in your area, you’ll need between 420 and 700 hours of insurable employment
• you could receive up to 55% of your earnings, up to a maximum amount. As of January 1, 2023, the maximum yearly insurable earnings amount is $61,500. This means that you can receive a maximum amount of $650 per week.
• you should look into submitting an EI application as soon as you’ve lost your job

Knowing ahead of time what you could expect there can help you to prepare for a layoff and make sure you know how much you want to have in your emergency fund.

3- Diversify your source of incomes

I wrote a post about side hustles here. There are many advantages to having a side hustle and it can bring you some peace of mind if you are losing your job unexpectedly. It gives you something to focus on as you may have more time on your hands that you wished for and obviously help making ends meet. So yay, side hustle, and don’t wait until you’re lay off to start.

4- Severance pay & layoff package

In Canada, the Employment Standards Act defines minimums of severance pay you are entitled to based on some conditions such as length of employment. These amounts can be ridiculously low and also vary by provinces so there are difficult to estimate. In Ontario, you would need to have worked for 5 years for an employer to be entitled to your weekly salary x number of years worked. About 2 months worth of pay if you’ve worked 10 (TEN!) years at your employer’s. Nowadays, most people change of roles and companies much more often than that.

Conclusion? Not much, and certainly not enough to forget about your emergency fund.

Your company might have some kind of layoff package, such as a week salary for each year worked that may provide more than the basics of the Employment Standards Act. I find that’s typically not common knowledge. Not really the kind of benefits that a company advertises if you see what I mean: “We offer minimum 3 weeks vacation, a great pension plan employer match and also a 4 weeks package in case of layoff ! Come work for us!”. Because it is difficult to use to prepare for a layoff, I would suggest to avoid relying on this.

You may want to make sure you know your rights, based on your specific situation, you could have a court ordering a more comfortable severance pay.

4- Maintain your resume up-to-date and don’t neglect your network

Last step when to prepare for a layoff? Every once in a while (like every year or so), spend some time updating your resume and your LinkedIn page. At least you’ll have some relief there and will quickly be in a position to start applying to new roles. You should also take the time to maintain your professional network, inside and outside your current company. I am an introvert and hate small talk, especially with people I don’t know well. Maintaining my network is not my forte but something I’m trying to improve on because it will make it that much easier if I have to reach out to anyone when looking for a job.

Prepare for a layoff so you are ready to navigate the change

Major layoffs have been happening since the end of 2022 as the fear of an economic recession continues to linger. It is principally affecting big techs companies but all kind of industries have been navigating these dangerous  “pre-recession” waters and struggling to meet their financial objectives. Workforce reductions are unfortunately a very normal tool to address these challenges.

After realizing it happens much more frequently than I thought, I had to spend time understand this a little bit more so I would feel less anxious about it. I am guessing that some people don’t have the “chance” to have this wake up call and just have to figure it all out after the facts. So if you are reading this, I hope that this post can help preparing you a little bit.

Because layoffs can happen to everyone, I strongly believe we should all prepare for this type of situation. This way we can set ourselves up to success and change the narrative from failure to opportunity.