Worried About Layoffs? Six Simple Ways to Prepare
The short answer: You can't control whether a layoff happens, but you can control how ready you are. Know what your household spends each month. Build cash from money you already have. Save your important documents. Know your health insurance backup. Keep your network warm. And don't let one company hold your paycheck and most of your savings at the same time.
Maybe it was a reorg email. Maybe a friend at another company just got let go. Maybe nothing happened at all, and you still lie awake some nights wondering, "What would we do if it were me?"
That worry is reasonable right now. Layoffs overall are down this year, but tech has announced more job cuts than any other industry, and employers are slow to hire.[1]
The good news is that most of what helps can be done today, on a calm afternoon, long before anyone schedules a meeting with HR. None of it requires you to expect the worst.
How can I prepare for a possible layoff?
1. Know your monthly number
Add up what your household needs each month: housing, food, insurance, childcare, debt payments. This one number tells you how long your savings would last and how much a gap in income would really hurt.
2. Build a cushion from money you already have
Count cash and investments you could reach without a penalty. Don't count bonuses you haven't received or company stock that hasn't vested yet. If your household runs mostly on your income, aim for a bigger cushion than you would otherwise.
3. Save your important documents
Download recent pay stubs, your benefits summary, retirement account statements, and any stock plan paperwork. Keep copies somewhere personal. It's much easier to get these while you still have access.[2]
4. Know your health insurance backup
Could you join a spouse's plan? What would COBRA cost to keep your current coverage? Ask HR now, so the number isn't a surprise later.
5. Keep your network warm
Update your resume and LinkedIn profile while you're not under pressure. Reach out to a few former colleagues just to catch up. It's easier to reconnect when you aren't asking for anything.
6. Don't let one company hold everything
If your paycheck, your bonus, and a big part of your savings all depend on the same employer, one bad quarter can hit all of them at once. Spreading your savings out lowers that risk.
What should I do if I get laid off?
First, don't sign anything the same day. Then work through these:
Read your severance agreement carefully. If you're 40 or older and the agreement asks you to waive age discrimination claims, which most do, you generally get at least 21 days to review it, or 45 days in a group layoff, plus 7 days to change your mind after signing.[4]
Decide on health coverage. You have 60 days to respond to a COBRA election notice.[3]
File for unemployment with your state as soon as you can.
Look at your monthly number from step 1 and adjust spending for now.
If you have company stock or stock options, check your plan for deadlines. Some come with a short window to act.
Frequently asked questions
How much should I have saved in case of a layoff?
CFP Board suggests three to six months of fixed expenses.[5] Where you land in that range depends on how steady your income is and how easy it would be to replace.[6] If your household runs on one income, or you work in an industry that's cutting jobs, the higher end may fit better. Start with your monthly number from step 1 and multiply.
Should I stop saving for retirement if I'm worried about a layoff?
Not automatically. If your cash cushion is thin, building it up first may make sense. But cutting contributions can also mean giving up an employer match, so it's worth weighing both with a planner.
Can I negotiate my severance?
You can ask, especially about your end date, health insurance help, or timing of payments. Having your documents and numbers ready makes those conversations easier.
You don't have to figure this out alone
A plan won't stop a layoff. It does mean that if one comes, you're making decisions instead of scrambling.
If you'd like help putting your plan together, let's find 30 minutes and walk through it.
Your tax situation, financial goals, and company stock plan details are specific to you and should be reviewed with a qualified professional before you act. This article is for educational purposes and is not tax or legal advice. For questions about a severance agreement, consider an employment attorney.