You’ve been laid off but offered a severance package. And while you may have day dreams of warm beach vacations and lazy time off, it’s time to think about how to make this layoff pay off.
At first you may be flooded with thoughts about your value to the company, how and why this could have happened but in today’s environment the next step is to figure out how to make your severance package work for you. Here are some questions to ask should you find yourself in this dilemma (or jackpot, depending on your perspective).
Do I take or refuse the severance package?
That depends on the terms and what’s being offered. Does the package prohibit you from working for a competitor for a specified period of time? Are you being offered a comparable position within your company though you may be losing your current position? What happened if you choose to decline the position and take the package? Will the package will be available? How long will it take you to find another position? These are all questions that must be weighed carefully as every company is different with it’s own set of policies for employees.
What’s included in my package vs benefits to be paid out?
There’s a big difference in your past paycheck and severance package. If you are not being offered a package then you may be eligible for example, to have all accrued sick and vacation leave paid out to you in your last paycheck. This may also include a bonus depending your company policies. This is all separate from your severance package. Your severance package will typically cover monies and benefits elected to be given to you upon your departure beyond your last paycheck.
Salary.com reports that the following agreements are typical within a severance package:
Your severance pay terms
Your vacation pay terms
Cobra (Benefits) Information
Return of Property
A General Release of Claims and Covenant Not To Sue
Severance pay based on terms of service
Commission, Bonus and deferred compensation payouts due
Rights under pension, profit sharing and 401(k) plan
Stock option statement and exercise schedules
Restricted stock and acceleration schedules
Loan Repayment terms
Unreimbursed business expenses*
What You’re Not Going To Do
- Pay Off Debt
- Start a Business
- Sit On Your @$$
For most people, the above-mentioned are a no-no unless you have alternate streams of income.
Paying off your debt now puts you at risk of getting further into debt in the event that finding a new job takes longer than anticipated.
Starting a business requires “long money”. In other words, you’ll need ongoing cash flow to cover the shortfalls until you become profitable. Think of your day job as your first investor and without one you run the risk of running our of cash. Can it be done sans day job. Yes. Just keep in mind that it pays to have a back up “just in case”. Still, for some not having a plan B or C keeps the fire going to make it happen until revenue starts to come in from the new business.
Sitting on your @$$ is self-explanatory. Sit too long as your money runs out and you’re not longer ahead of the game, you’re behind. Get ahead and even double dip by finding a job fast and bank the cash from your severance package. That’s making a layoff pay off!
Now isn’t the time to sit around and feel sorry for yourself. In fact, in today’s economic environment it might help to look at the severance package as a blessing in disguise. While you can certainly choose to take a few days off to decompress, you can and should be thankful that you have one and use this time to plan your next move concerning employment. The optimist can certainly see this as an opportunity to knock on previously hidden doors and on the other hand the pessimist may choose to have pity parties screaming “why me!” in the bathroom. Your choice. Your attitude determines your altitude.
Finally, depending on your state, you cannot collect unemployment while you are still receiving severance payments. However, you are eligible to continue your healthcare plan under COBRA. This should all be explained away in your severance package documents. Remember, everything is negotiable. If something doesn’t seem quite right, sit down with HR and ask all the questions you have to give you peace of mind about your transition.
What tips can you offer to help a layoff payoff?