When you’re downsized, you will likely be presented with a severance package from your employer, which will be calculated according to statutory regulations, and agreements between you and your employer.
Employers generally expect you to negotiate the first offer presented. Obviously it’s in the employer’s best interests to reduce costs, so they may not initially offer the amounts outlined by common or provincial law. That’s why I recommend one of the first things you do after being terminated is to have your severance package reviewed by an employment lawyer.
This is even more important if you work in Canada for a U.S. company, where they have different employment laws and may not understand that severance agreements must abide by the law in the province where the employee was terminated.
How to manage your severance payment
A severance payment is not a gift or a windfall like a lottery prize. It’s a package to help you over the rocky road of career transition.
While a brief hiatus to recharge your batteries may be one of the best ways to start your career transition, it would be a regrettable mistake to blow through your severance pay on an extravagant holiday, gifts, cars, boats, or a new house.
A job search is a multi-week process. Even if you’ve been given a year’s worth of pay, that’s not so you can take a vacation for 11 months and then start looking for a job. Do that and you’ll soon be living off savings, credit, or money from friends and family.
The best scenario is that you begin a new placement early in the severance period, so you can bank the rest of that money and retire sooner. I’ve had clients who’ve been terminated several times, and they’ve been able to add a good portion of that money to multiple investment products.
Start your job search as soon as you can, as you can’t assume a new job will fall in your lap tomorrow.
A severance package isn’t always just about money. If your position and length of service meet certain criteria according to the law, you may also get outplacement services to help you transition to new employment.
Corporate outplacement services run the gamut from career coaching and executive career management, to resume writing and interview coaching. When you meet with your employment lawyer, be sure to discuss your eligibility for outplacement services, whether provided by the organization directly or obtained on your own.
Note: The cost of outplacement services cannot be deducted from your severance pay. It should be over and above the money you receive.
Time to recharge? Extra money in your investment portfolio? Personalized career management services? Being downsized could turn out to be a good thing, if you manage your severance well.