If you’ve recently been laid off from work, you are not alone. In 2022, there were 15.4 million layoffs in the United States1 and so far, 2023 is looking just as bad. In the first three months of 2023, more than 136,000 employees were cut in major U.S. layoffs from companies such as2:
- Goldman Sachs
- JPMorgan Chase
- First Citizens
- Meta
- Abbott Laboratories
- Disney
- United Services Automobile Association
- Microsoft
- Shopify
- Morgan Stanley
- Lyft
- Vice Media
- Gap
- Dropbox
- Tyson Foods
- 3M
- Deloitte
- Ernst & Young
- David’s Bridal
- Bed, Bath & Beyond
- Best Buy
- Walmart
- McDonald’s
- Amazon
Layoff meaning
A layoff is an involuntary separation from work through no fault of employees, often initiated by the employer for economic reasons to cut costs.3
Furlough vs. layoff
Many people think that furloughs and layoffs are similar in nature, but they are very different. A furlough is an unpaid leave of absence or reduced hours and is usually only temporary. On the other hand, layoffs are actual terminations (due to no fault of the employee) and are usually permanent.4
Layoff vs. Termination for Cause
Again, these are two very different things. As we’ve explained, a layoff is a termination, however, the termination is not a result of something the employee has done. Alternatively, a termination for cause, or firing, means you have been terminated from your job due to something the company deems was your fault like stealing or constant tardiness.5
Layoff vs. Reduction in Force or RIF
While layoffs are actual terminations of employment, there is still technically a chance that an employee could be brought back. However, that chance is eliminated with a reduction in force. A reduction in force occurs when a position is eliminated with no intention of replacing it and results in a permanent cut in headcount. In some circumstances, a layoff may turn into a RIF when a permanent decision is made to not recall employees.6
Why are companies laying off employees?
Business considerations drive layoffs, and there are many reasons why a company might decide to layoff employees, such as financial challenges, business restructuring, technology, or an economic downturn. However, in some cases, employers conduct layoffs even when their businesses are thriving, either to increase profits or amid a shift in markets served or operations.7
What happens when you get laid off?
What happens when you get laid off will largely differ by company, but a typical (unexpected) layoff might go something like this8:
- You are called into a meeting with your manager and a representative from Human Resources
- They will explain the conditions of your termination and tell you what will happen with any benefits you currently receive/options to continue coverage
- You may be asked to give feedback on your experience with the company
- You could be asked to leave immediately and turn over all company equipment, technology, badges, etc.
- Staff or security will walk you to your desk and help pack any personal items
Do you get a severance if you get laid off?
It depends! A severance package is a bundle of pay and benefits offered to an employee upon being laid off from a company. The amount of money received is usually based on the length of employment.9
Your employer is not required by law to give you a severance package, however, many companies choose to do so.
If you are lucky enough to receive a severance package from your employer, it’s important to note that severance pay is taxable in the year that you receive it. Like a normal paycheck, your employer will likely withhold some taxes up front, but that doesn’t mean all your taxes are covered.
The additional income hitting you all at once could also bump you into a higher tax bracket in the year you receive it. For example, let’s say you receive six months of severance at the end of November. Effectively, you’d receive 17 months’ worth of pay during the year, which is a sizeable bump to your income compared to the past tax year10
What to do if you are laid off
Receiving the news that you have been laid off can be devastating. A sense of panic sets in as you immediately start thinking, “What am I going to do?” First — take a deep breath. You’re going to be okay.
1. Know your rights
Federal and state laws grant certain rights after being laid off. These may include your right to advance notice of your layoff (WARN Act), the right to continue your group health insurance plan, and the right to receive your final paycheck in a timely fashion.11
If you have any questions, you should contact an employment lawyer or your state’s labor department.
2. File for unemployment benefits
You may be eligible to collect unemployment benefits while out of work. Eligibility, the amount of unemployment compensation you will receive, and the length of time that benefits are available are determined by state law. Each state has an unemployment agency dedicated to overseeing employment and unemployment-based matters.12
3. Assess your finances
It’s important to assess any payments you receive from your employer and understand your tax burden. Even if you don’t get a severance package from your employer, you may get paid out for accumulated vacation or sick pay, depending on the terms of your employment contract. Vacation or sick pay, like severance pay, is considered a supplemental wage for employees and is therefore taxable.13
Next, you should update your household budget to understand current spending and how that could be adjusted without your paycheck. You may decide to tap into your assets, end subscriptions, and/or cut back on discretionary spending.
4. Fill in coverage gaps
If your insurance and benefits are tied to your employer, you might not be able to take them with you when you leave. Health insurance, life insurance, and disability insurance are just a few of the benefits that work together to help protect you and your family.
The good news is that you don’t need a full-time job in order to access these important protections. You can get a free quote by clicking here.
Getting insurance outside of an employer means that you have the power to keep your coverage even if you change jobs. It doesn’t hurt to look into it – your own plan may be cheaper than you think.
5. Explore opportunities
Have you always had a business idea in the back of your mind? Do you dream of being your own boss? If so – now may be the perfect opportunity to try something new. You can start freelancing by offering your expertise as services for different customers or try exploring a new opportunity in these high-demand fields.
6. Leverage your network
Studies show that more than 70% of people enter new jobs because of networking and connections.14
That means that your odds of finding a new job will likely be higher if you leverage your network than if you only submit your resume to jobs offered online. Your connections may lead you to a job or career that is drastically different than the one you just left. Keep an open mind!
7. Improve your skillset
You can also take this time to improve your skillset and make your resume more desirable to prospective employers. There are a lot of free resources for online courses and certifications. For example, Grow with Google offers flexible online training programs for cybersecurity, data analytics, digital marketing and e-commerce, IT support, project management, and more.
8. Take care of yourself
Getting laid off can completely upend your routine – but don’t let it! Get out of bed each morning like you did when you were working and go for a walk. Eat healthy, exercise, and give meditation to try. Lean on your support system, whether that be a spouse, partner, friends, or family.
Don’t forget, you are not alone!
Layoffs are something many people experience during their lifetime. In fact, 40% of Americans have been laid off or terminated from a job at least once.15 The important thing to remember is that you are not alone. Take a deep breath – and get ready for your next adventure!
Sources:
- https://www.zippia.com/advice/layoff-statistics/
- https://www.forbes.com/sites/brianbushard/2023/05/30/spring-2023-layoff-tracker-goldman-sachs-reportedly-cutting-more-jobs/?sh=22c3cc5b67ac
- https://www.investopedia.com/terms/l/layoff.asp
- https://www.adp.com/resources/articles-and-insights/articles/f/furlough-vs-laid-off.aspx
- https://money.usnews.com/money/blogs/outside-voices-careers/articles/fired-vs-laid-off-vs-furloughed-whats-the-difference
- https://www.shrm.org/resourcesandtools/tools-and-samples/hr-qa/pages/furloughlayoffreductioninforce.aspx
- https://www.investopedia.com/terms/l/layoff.asp
- https://candor.co/guides/layoff
- https://www.investopedia.com/terms/s/severence-package.asp
- https://www.hrblock.com/tax-center/income/wages/is-severance-taxable/
- https://www.lawyers.com/legal-info/labor-employment-law/human-resources-law/employers-must-follow-many-laws-during-layoffs.html
- https://www.thebalancemoney.com/guidelines-for-unemployment-eligibility-2064135
- https://www.patriotsoftware.com/blog/payroll/taxes-on-vacation-payout/
- https://www.businessinsider.com/at-least-70-of-jobs-are-not-even-listed-heres-how-to-up-your-chances-of-getting-a-great-new-gig-2017-4
- https://www.zippia.com/advice/layoff-statistics/