According to the Bureau of Labor Statistics, approximately 19.9 million workers were laid off or discharged in 2016. That number has fallen significantly since its peak of approximately 26.6 million in this Millennium, which occurred in 2009 during the recession, but it still means a high number of Americans continue to lose their jobs every year through no fault of their own.
If you have been laid off or worry that you might be in the near future, read on to find out what it means and what steps to take to get back on your feet.
A layoff is an involuntary separation between an employer and an employee that occurs through no fault of the employee. The employer is terminating the employment of the worker because it is eliminating the position and not because of any performance issues. Large companies that are going through changes such as restructuring may lay off large numbers of employees in stages or rounds.
It is important to note that layoffs do not occur because of performance issues on the part of the employee. Often, higher-paid employees may be laid off before lower-paid employees simply because they are more expensive to keep.
Layoffs occur in several different contexts and situations. Some of the most common scenarios include:
• Redundancies—multiple personnel are performing the same duties or tasks
• Mergers and acquisitions—when one company acquires another and there is a functional overlap in employers and duties
• Downsizing—a company determines it needs to reduce personnel, usually because of the cost
• Restructuring—a company is significantly changing the way it performs its operations, usually for the sake of efficiency or market demands, and no longer needs the job functions of the employee
• Company shuttering—the business closes and ceases operations
Being laid off and being fired are separate types of dismissals from a company. An employee may be fired for poor job performance, inappropriate conduct or behavior, a violation of company standards or rules, not meeting her contractual terms of employment, and other reasons. Essentially, a firing occurs because of something the employee did wrong.
On the other hand, layoffs usually aren’t related to the employee’s performance or conduct. Layoffs occur because the company is eliminating the employee’s position due to any one of a number of factors, such as restructuring, mergers, or the closure of the business.
Laid-off employees are generally entitled to a number of benefits that employees who are fired are not. For example, an employee who must leave because of a layoff is often entitled to severance pay. Furthermore, an employee who has been laid off is generally on better terms with her employer than one who has been fired and may be rehired in a different capacity, as well as face better reemployment prospects due to the nature of her termination.
While not all terminations are layoffs, layoffs are a form of termination.
A termination refers to any separation between an employee and employer. Terminations can be either voluntary or involuntary on the part of the employee. For example, a voluntary termination occurs when an employee resigns, while firings and layoffs are considered involuntary.
An employee may be terminated with or without prejudice. “With prejudice” means the employee may not return to the company in the future. This is the case in many firings. “Without prejudice” means the employee may work for the employer in the future should the opportunity arise. This is often true of layoffs.
If you have been laid off or terminated through no fault of your own, you can usually collect unemployment until you find work again or for up to 26 weeks, whichever comes first. (Note that the exact laws and extension rules vary by state.)
You’ll need to follow certain rules in order to collect unemployment. For example, every state requires you to be “able, available, and actively looking for work.” To learn more, read How to File for Unemployment.
Many employees receive severance pay, an amount of money your employer pays you upon your termination of employment. This may be given to you as a lump sum or paid to you over weeks or months consistent with the employer’s pay schedule.
Usually, the amount depends on your salary while you were working at the company and the length of time you worked on the organization. This pay is considered taxable income. Learn more about severance pay in How Does Severance Pay Work?.
Keep in mind that severance pay can affect your ability to collect unemployment even if the money is paid to you as a lump sum. For example, if your former employer pays you for the equivalent of two months of employment, you may not be eligible to collect unemployment until after those two months. However, these rules vary by the state. For example, severance pay does not affect your ability to collect unemployment pay in California, while it does in New York.
Small business owners whose businesses shutter may be able to collect unemployment under some circumstances. Again, these rules vary state-by-state, but in general, you must meet the following requirements:
• You paid yourself a regular salary and withheld taxes.
• You closed your business through no fault of your own.
• You paid unemployment insurance taxes on yourself as an employee.
After you’ve been laid off, you may have a difficult time coping with the setback, emotional toll, and loss of income this could mean for you and your family. As with many traumatic experiences, it’s fine to take a moment to simply feel your feelings and recognize that something happened that was beyond your control and has negatively impacted your life.
Then, of course, you need to regroup and move forward. You’re not going to be out of work forever, and you’ll need to take proactive steps toward the next stage of your career.
A layoff can take a significant toll on your income, but it’s important to understand exactly how much you need to live comfortably and how long you can support yourself. Take stock of your savings and determine how much severance pay you’ll be receiving. Remember to subtract taxes from your severance pay to figure out your net income.
Look into your state’s rules for unemployment. If you can’t collect unemployment and severance simultaneously, figure out when you’ll be eligible, how much you’ll be earning, and how long you’ll be able to collect.
This is also a good time to create a budget. If you haven’t worked under a budget in the past, start now. If you have, you may need to make some temporary revisions and restrictions until your income flow is back on track.
It’s often easier to find part-time, temporary, or freelance work than a full-time job, and these gigs can support you while you’re looking for a more permanent situation.
Check out Part-Time Jobs: How to Turn a Side Gig Into the Real Deal and 16 Ingenious Ways to Earn Money Online for tips on how to get started earning money through side hustles. Be sure to look into tools like Amazon MTurk and TaskRabbit to make extra cash.
Do remember that you will need to report any income you earn to your state’s Department of Labor if you’re collecting unemployment and that it will likely reduce the amount of unemployment pay you’re entitled to receive.
Use every job resource at your disposal. Attend networking events, tell friends, family members, former colleagues, and anyone else you can think of that you’re looking for work. Don’t be ashamed to admit that you were laid off—just explain the situation, and people will likely understand.
It can be emotionally challenging to go through a layoff, but you don’t need to do it alone. Rely on friends, family, and other people in your life for support. You may need to air your frustration about your job search or vent about your situation, and that’s fine and normal—even healthy. Identify who might be a good outlet for different scenarios. For example, former coworkers might be a good job resource, while your mom could be your go-to person to whom you can vent.
Want more information on layoffs, resources, and your state’s rules regarding unemployment? Visit your state’s Department of Labor website.