Ten Ways to Handle Losing a Job
Losing a job can be difficult. There are several steps to take to ensure that bills are paid, healthcare coverage continues, expenses are reduced, and income continues to come in during unemployment. In conjunction with the tips below, download FindLaw's Guide to Job Loss [pdf].
1. Collect Final Compensation from Your Employer
An employee is entitled to a final paycheck and may be entitled to severance pay. State laws require an employer to give an employee a final paycheck within a certain time. State laws vary, but an employer typically must issue a final paycheck immediately, the next business day, the next payday, or within a certain amount of days. In some states, the employee may be entitled to compensation for unused vacation time.
An employee may also receive additional compensation in a severance package. Under state law, an employer is not required to offer severance pay. An employee has a right to severance pay if the terms of a written contract provided for it, if an employee handbook documented the employer's policy for severance pay, or if the employer made an oral promise. In most cases, an employer offers a severance package in exchange for the employee's agreement to release the employer from legal liability for the termination.
2. File for Unemployment Compensation
Continue receiving income after losing a job by filing a claim for unemployment benefits. In general, state law allows an unemployed worker to collect unemployment compensation if the termination was not for misconduct that was deliberate and repeated, the employment was for a certain amount of time, the individual earned a certain amount in wages, the individual can work immediately, and the individual is physically capable of working. Check with the unemployment agency in your state to determine specific eligibility requirements.
3. Continue Healthcare Coverage
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986, former employees have the right to continue healthcare coverage for up to 18 months (sometimes longer if a plan participant has a disability) under the employer's plan. The former employee must pay the full premium, but this cost is usually less than obtaining coverage on your own. Within 45 days after losing a job, the former employee will receive an "election notice" and will have 60 days to elect coverage. If elected, the initial premium must be paid within 45 days.
4. Prepare Your Resume
If employed for a long time, it may be necessary to create a new resume that reflects current skills and experience. A resume should be truthful, accurate, error free, and should highlight relevant skills. If you have trouble creating a resume, consider hiring a professional resume service.
5. Look for a Part-time Job
Consider obtaining a part-time job or working odd jobs to bring in income temporarily. Obtaining part-time work or earning income from odd jobs like house sitting or doing handy work will only require a short-term commitment while searching for permanent work. Note that with some part-time employment, you may have to forgo receiving unemployment compensation. Your state's unemployment agency can detail the rules of eligibility.
6. Eliminate Unnecessary Expenses
While unemployed, eliminating unnecessary expenses will make it easier to live on less income. For instance, get rid of inessential services like gardening, pest control, and housecleaning, and reduce costs even further by limiting clothing purchases and reducing cable programming.
7. Consider Starting Your Own Business
Do you have a marketable skill that can translate into a profitable business? Sometimes losing a job comes at just the right time. If you have ever thought about starting your own business, this is a good time to give it serious consideration.
8. Don't Create New Debt
Unless necessary, do not incur new debt. When unemployed, it is important to maintain a strict budget in order to avoid unmanageable debt. The incurrence of new debt can easily lead to bigger financial problems than just unemployment.
9. Contact Creditors
Contact creditors to request a temporary payment arrangement or a suspension of payments after losing a job. For example, in times with high unemployment some credit card companies are willing to arrange temporary payment plans with no interest. Many creditors would rather grant this type of request than risk a default on payments by the debtor.
10. Deduct Job Hunting Expenses from Your Taxes
The IRS allows job hunters to deduct certain expenses from their taxes if the taxpayer is seeking employment in the same line of work and the expenses exceed 2 percent of the taxpayer's adjusted gross income. Allowable expenses include travel and transportation costs, resume printing and mailing, fees from employment and outplacement agencies, and phone calls to prospective employers.