26 Sep 2016 13:27 IST

How to be prepared for a lay-off

Losing a job can be stressful, emotionally and financially

It’s hard to miss the gloomy headlines these days about layoffs. Infosys, Cisco, IBM, Ola, Flipkart — these and other big names in the IT and e-commerce space — have let go of employees in the recent past.

The winds of change and consolidation sweeping the technology and start-up sectors could add more casualties to the list. Layoffs have been reported in other sectors too. Being laid off can be stressful — emotionally and financially. Here are a few tips to deal with this bummer.

Save and economise

Till you land a new job, which could take a few weeks to a few months, you will be faced with the challenge of meeting expenses without regular cash flows. Hence prep yourself financially for a layoff — always keep contingency funds ready to tide over unexpected situations.

Take stock of your monthly expenses, including loan repayments, multiply the number by 8-10 times, add some more to the count and diligently accumulate and stash away this money for a rainy day. Keep this ‘special situations fund’ in a bank fixed deposit or low-risk liquid fund which you can easily and quickly tap into when required. Don’t touch the money unless absolutely necessary. Use the fund judiciously, trying to make it last till you land a new job.

This will save you from the blush of embarassment while approaching relatives or friends for monetary help or borrowing at high rates. Once you are employed again, be sure to refill the contingency fund.

Deal with debt

Servicing big-ticket home loans could become difficult when you don’t have a regular source of income. Talk to the bank to see whether the loan can be restructured by extending its tenure. This will reduce the monthly EMI though at the cost of increasing the total interest outflow over the extended tenure. When you are back at work, go back to your original tenure. Changing tenures could mean charges, though.

But make sure you repay your credit card dues on time and in full — this debt is extremely expensive (30 per cent plus a year) and could land you in a debt trap over time, if continued without full repayment. This is not to say that you stop using the credit card; use it for the temporary credit period it provides but make sure you settle the dues fully by the due date. If you do need to borrow more temporarily, personal loans that are cheaper are a better option to credit-card borrowings.

Cover yourself

When the chips are down, the last thing you want is a huge medical expense that can blow a hole in your already weak pocket. The health cover provided by your employer, if any, ceases when you are no longer in the job. So, it is imperative to have adequate medical cover for yourself and your family. Always have your own health insurance policy for a sufficient sum in addition to the cover provided by the employer.

Job loss insurance

If you work in a sector that carries high risk of layoff, you may want to consider taking an insurance policy that covers your back in an eventuality.

Some companies such as Bajaj Allianz and ICICI Lombard offer job loss cover along with their personal accident and critical illness plans.

In case of a job loss, the insurer pays a certain number of EMIs (say, maximum three instalments) on the loan borrowed by the insured.

But the cover may be applicable only if the job loss is due to specified reasons such as closure of a department or division, action of public authorities or termination due to illness.

So, if you voluntarily resign or are laid off due to dishonesty, fraud or poor performance, you will not be eligible for compensation.

Go through the policy to see if it suits you.

Negotiate and network

Make sure you collect all your dues from the employer — from leave encashment to gratuity. Submit your unclaimed medical, travel and other such bills. Negotiate well on the severance package and don’t get browbeaten or short-changed. Be polite but assertive about what you are entitled to.

Keep your resume current with your latest experience and skill sets. Update your contact list and LinkedIn profile. Network well and tap into friends, relatives and acquaintances for leads. Spread the word and keep your ears to the ground. Opportunities can show up anytime, anywhere.

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