Get Severance Pay
An employer is not obligated to pay severance pay to laid-off employees, but large companies do so under their policies or collective agreements. Severance may be, for example, one week’s pay for each year worked. Professionals and managers receive the equivalent of 3-month or half-year salaries.
Severance may seem like a godsend, but it rarely compensates for lost or reduced employee retirement benefits. In a new workplace, you have to start your years of service from scratch. Your situation is better if you had a 401(k) retirement savings plan at work, because you can take the accumulated money with you.
Severance can be paid in a lump sum or in several installments. It is worth taking installment payments for tax reasons. Severance is subject to taxation in the year it is received.
How Severance Affects Unemployment Benefits
Note: Remember that severance pay disqualifies you from receiving unemployment benefits.
If the amount of installment severance is equal to or higher than your previous earnings, the severance is considered a continuation of wages and you will not receive unemployment benefits. If the severance is a lump sum, the unemployment office will calculate how many months of payment it equals and disqualify you for that period. Rules vary by state.
Don’t Sign Anything Hastily
To receive severance pay, you must sign a severance agreement. But this agreement is not just an acknowledgment of receipt of severance – its purpose is to prevent you from suing your employer for wrongful termination.
The agreement may include a non-compete clause, which prohibits you from working in your profession for a certain period in a certain territory. In the past, non-compete clauses were reserved for high-ranking managers. As unemployment decreases and labor becomes scarcer, employers are trying to make it difficult to leave by imposing non-compete conditions even on security guards or music teachers!
Take the proposed agreement home, show it to your lawyer. Don’t rush, because your employer can’t do anything to you – they can’t fire you a second time.
Do Not Submit a Resignation Letter
If you have been fired, do not let yourself be persuaded to sign a resignation letter. HR might slip it to you along with other papers. If you resign from your job yourself, you will not receive unemployment benefits. This letter can be used against you if you later decide to file a lawsuit for wrongful termination due to discrimination, breach of contract, or whistle-blowing. If pressured, use it as a bargaining chip and negotiate a more generous severance package.
Don’t think that for your next employer, leaving voluntarily will look better on your resume than being fired. Companies often restructure, and there is no shame in being laid off.
Take Your Retirement Money With You
Many people have an employee savings plan, known as a 401(k). Some companies allow you to leave money in the account, while others require you to take it out. In such a case, you should transfer the money to your IRA account or to a 401(k) account with your new employer. You have 60 days to do this after withdrawing the money.
Warning: The worst scenario is withdrawing money from a 401(k) account in cash or depositing it into a regular (non-retirement) account, because you will then have to pay income tax on it. In addition, for withdrawals from a retirement fund before reaching 59 and a half years of age, an additional 10 percent penalty must be paid. In total, you will pay about 40% in taxes, and the remaining 60% will no longer grow with deferred taxes for the future. Don’t make this mistake.
Apply for Unemployment Benefits
If you lost your job through no fault of your own, you are entitled to unemployment benefits. You can apply online. In Google, type “unemployment” and the name of your state. While unemployed, you are obligated to look for work and report your results, so do not go on vacation or to Poland unless you inform the Unemployment Office of your departure.
Check Your Credit History
A new employer will want to check your credit history, and even your criminal history. Do it first. At each of the major credit bureaus: Experian (www.Experian.com), Trans Union (www.TransUnion.com), and Equifax (www.equifax.com), you can get a free copy of your credit history once a year, for a total of three reports annually. This can be done conveniently through www.annualcreditreport.com. You are also entitled to a free copy of your credit history every time you are denied credit.
How to fix errors in your credit, criminal, driving records, etc. You can read about it in the book titled “Life Anew: How to Organize Outstanding Matters in Offices.”
Look for a New Job
Refresh your resume and use all possible job search methods. There are many popular online job portals: Monster, Zip Recruiter, SimplyHired, CareerBuilder, Snag, LinkUp, Craigslist Jobs, US.jobs, and many others.
Check newspaper ads, use employment agencies, open an account on LinkedIn.com, send letters to the most promising companies. Don’t be ashamed in front of your friends that you’ve been fired. New jobs are often found through personal contacts. Americans know this very well. There are even clubs that help their members with networking and finding jobs.
Good luck on your new path in life.
