If you're one of the 800 million employees who can expect to have their jobs taken over by robots by 2030, now might be a good time to look over those company policies regarding severance. There might be protections in place that will keep you from moving into the poor house even if you do find yourself out on the curb.
What Is Severance?
Severance is an employee benefit paid to workers who are laid off or terminated for matters unrelated to their job performance. Is your department being eliminated? You might get a severance package. Fired because you stole from the company? Or quitting to live your dream of #vanlife? Sorry, severance is likely not in the cards.
Who Gets It?
In general, companies aren't required to provide severance packages, and most employees do not have a legal right to a severance package when their employment ends. When companies do offer severance packages, it's not just to be nice. Severance agreements can help reduce an employer's legal liability, and as such, many companies will offer severance packages regardless of whether they are required to do so. Check your company's policy or the employee handbook to find out what's on offer.
When to Negotiate
There are two good opportunities to negotiate a severance package, Jaime Klein, founder, and president of Inspire HR, told Refinery29: At the beginning of the road, when you're hired, and at the end.
Bringing up severance during the hiring process is a little like asking someone to sign a prenup; it's a delicate subject at best. These days, though, with so many industries on shaky ground, Klein says it's usually okay to ask once an offer has been extended. After the layoff, remember to be polite and have a rationale for your negotiation request.
What Can You Expect in a Severance Package?
Severance packages usually include some form of payment based on length of employment, typically one to two weeks for each year you were with the company. It's given as a lump sum or paid over a number of weeks or months. Your severance agreement should also include any accrued but unpaid PTO or vacation pay.
Under the Consolidated Omnibus Budget Reconciliation Act of 1995 (COBRA), a terminated employee is entitled to continue medical/health coverage under the company's plans for up to 18 months after termination (or up to 29 months if the employee is disabled). These premium payments are your responsibility (Sound no bueno? See "What Else Can You Ask For?" below.).
You might be asked to sign a non-disclosure agreement (NDA) as a requirement to benefits like severance pay and COBRA. More on that below.
What Else Can You Ask For?
The agreement isn't cut and dry, notes Richard Harruch on Forbes, and there are a number of things you can ask for:
Can you get the severance in one all-cash lump sum upfront, instead of spreading it out over time?
Can the severance pay also include any partially or fully accrued but unpaid bonus?
If the severance pay is the continued salary for some period of time, does the continuation pay continue even if the employee gets a new job?
Can your employer cover the COBRA payments for anywhere from 6-18 months?
If your termination is a result of a "change in control" of the company (like a merger or other acquisition), you might successfully argue that the severance pay should be greater. But be aware that such change in control payments could rack up a 20% excise tax on the employee.
Go over any non-compete clauses of your severance or hiring package with special attention to geography, scope of the agreement, and duration. Many employers will be open to narrowing the scope of this after a layoff.
That NDA you had to sign? They might make it a two-way street, suggests Harruch. Language that some employers have approved is: "The Company shall not authorize and shall take reasonable measures to prevent its present or former officers or directors from making derogatory or disparaging statements regarding Employee to any third party."
You might go one step farther than including language that bars the company from speaking ill of you and require that a section of the severance agreement include language that requires your positive recommendation. For example, "company acknowledges and agrees that Employee has performed admirably in his/her work with the Company and Company will provide positive recommendations to any interested new employers of Employee." Or, you ask for glowing recommendation letters from supervisors and have the company provide those letters to any prospective new employer.
Know Your Rights
If your company has more than 100 employees and plans to lay off a lot of people, your employer is required to give you 60 days notice of a company closing or a large departmental closing. If they don't, you are legally entitled to severance pay, thanks to the W.A.R.N. Act (Worker Adjustment and Training Notification).
If you are over 40 years old and the company offers you a severance package, the company must give you at least 21 days to consider it and 7 days to revoke after you sign the package, thanks to age discrimination laws.
Some states, like California, have more protections in place for workers whose employment ends without cause. In other places, such as New York, employment is "at-will," and either employer or employee can end a working relationship for any reason. Wherever you live, research and familiarize yourself.
Look to the future
Getting laid off is like a breakup you didn't see coming. It's disorienting, can ruin your sense of self, and rock your most basic sense of security. It's also part of life and something you will survive.
"Getting reorganized, laid off, restructured happens to nearly everyone," Klein said, and it's rarely personal. "Unfortunately, companies have very little loyalty to employees anymore."
Once you've picked yourself up and dusted yourself off — and yeah, you might need to cry and sulk, just like your last broken heart — get back to work. Your job now is finding a new job, and often a former employer will offer outplacement services to help you spiff up your letters and resume. Even if they don't, work your network and keep your head high. You've gotten a job before, and you can do it again.
When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.