One of the hardest practical things to deal with about a layoff is that it is unexpected for the person laid off. That means they don’t have time to take some steps that can benefit them post-layoff. Without having thought any of these issues through ahead of time, a layoff can catch anyone off guard and lead to the employee making poor decisions for themselves or simply being unable to optimize their options.
Broadly speaking, these actions can be broken down into four categories: Compensation, benefits, logistics, and looking forward.
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Compensation
Compensation is both straightforward and also complicated because it consists of several kinds of compensation, even for the simplest layoff.
Your last paycheck
The most important and simplest is your pay. Your employer is required to pay you for the time you have already worked and for your notice period, whatever that might be.
For most corporate jobs, the notice period is two weeks, but any individual case may have a different notice period. The employer may or may not ask you to work during the notice period, but typically they do not want you to work.
Some states require that the final paycheck be delivered the same day as a layoff notice.
Severance pay
Severance pay is an interesting and complicated topic. For people in large corporate and startup industries, it can seem like a given, but for most other workers, it is a pretty rare occurrence.
Employers may seem to be paying severance to compensate people who were doing a perfectly good job for losing that job anyway. But there is no legal requirement to pay severance.
Most employers pay severance in return for two things. One is their reputation with the rest of their workers and with the larger business community and potential future employees. The other is to protect themselves against lawsuits.
When a company performs a layoff, it is doing it because aspects of its business are less good than it would like, so it needs to cut costs.
Sometimes a company does that by cutting a particular team or division that is not doing as well as it would like. Other times it is a broad layoff across the company where a certain percentage of employees are let go. Sometimes they double up and let go of people they see as low performing. Other times they actually pick people almost at random and provide evidence that those let go were not targeted by any identifiable category.
The goal for the company is to cut costs without being sued or causing any blowback later. So severance pay is contingent on signing a severance agreement that pays the employee in return for them waiving rights to sue.
Severance can range from two weeks pay up to months or even years in very extreme cases. Some companies pay it out based on time working at the company (a month’s pay per year worked, for example). Others just pay a set amount.
One important point. If you are laid off and not offered severance or offered a tiny amount, simply ask for more. There is no downside to doing so.
Stock and Options when you leave
Just like severance, there is no legal requirement for a company to deliver more of its stock or option benefits than have already been paid out. However, some companies do choose to prorate an option grant to the actual date of the layoff or even beyond.
The factors that are important for employees to remember are that the clock immediately starts ticking on stock option purchases. You’ll have a preset period of time to purchase your options or just abandon them.
Again, if the company does not provide any stock or option payouts in severance, feel free to ask. It can’t hurt.
One important point – once you leave a company, you will have 60 days to exercise any stock options (pay for the options), or you will be abandoning them.
