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Being laid off by a huge company won’t necessarily guarantee you a severance package. Read on to learn more.
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In recent weeks, many consumers have been bemoaning the loss of their neighborhood Bed Bath & Beyond store. The company has been shuttering locations and laying off workers in light of its financial woes.
But recently laid-off workers were shocked to learn that they weren’t entitled to severance from Bed Bath & Beyond — even though workers who lost their jobs in earlier rounds of layoffs were eligible for a package. And that should serve as an unfortunate wakeup call to anyone who works for a large employer.
Severance isn’t always a given
Some states have laws in place stating that companies of a certain size must issue a warning to workers about mass layoffs prior to going through with them. In New Jersey, the rule is that businesses with more than 100 workers must give at least 90 days of notice for mass layoffs. Additionally, businesses of that size must offer severance equal to one week of pay per year of employment for workers who lose a job as part of a mass layoff.
But the laws regarding layoff notices and severance requirements vary by state. And they generally apply to mass layoff situations, which is different from a scenario where employees are let go on a one-off basis.
What this means is that working for a large company does not guarantee that you’ll be entitled to severance pay if you’re terminated through no fault of your own. And it’s important to save for that sort of situation so you aren’t left scrambling if your job is yanked away.
Make sure your emergency fund is solid
When you lose a job through no fault of your own, you’re generally entitled to unemployment benefits, even if you’re not eligible for severance. But those benefits will generally just replace a portion of your paycheck — and it may be a small one, depending on what your state’s maximum weekly unemployment benefit looks like.
That’s why it’s so important to maintain a solid emergency fund. Ideally, you should have enough money in your savings account to cover at least three full months of essential bills. That way, if you were to lose your job and not get severance, you’d have a way of covering your expenses while you look for work.
In a scenario where you’re laid off but not entitled to severance, a robust emergency fund could spell the difference between having to rack up costly credit card debt or remaining debt-free. So if you don’t have enough cash in the bank to pay for three months of bills, do what you can to build up some reserves as quickly as you can. This is an especially important thing to do if you’ve been hearing rumblings about potential layoffs at your company.
Unfortunately, severance pay is not always a given when you lose your job — even if you didn’t do anything to cause your termination. Rather than let yourself get caught off-guard, do what you can to build savings so you’re protected in that situation.
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