If you’ve been let go from a big company with 100 or more employees, you’re entitled to something called Federal WARN Act pay. This means your employer has to give you a heads up 60 days before they close down or lay off a bunch of people. So, the WARN Act pay is basically two months’ worth of your salary. WARN stands for Worker Adjustment and Retraining Notification Act, and this 60-day notice gives you and your family some time to adjust and look for another job if needed.
Now, don’t mix up WARN Act pay with a severance package. The WARN Act pay is a must, it’s the law. A severance package, on the other hand, is optional and comes on top of the WARN Act pay. So, when companies say they’re giving two months of severance pay to those who’ve been laid off, they’re not doing it out of the kindness of their hearts. They’re doing it because they have to, or they’ll face legal consequences.
If you’re laid off from a company with 100 or more employees, you’re eligible for WARN Act pay, a severance package, and unemployment benefits. But if you quit your job, you won’t get any of these benefits. So, it’s better to get laid off than to quit.
During tough economic times, the Federal government sometimes offers extended unemployment benefits beyond the usual 24-26 weeks. For instance, during the global financial crisis, they offered a record 99 weeks of unemployment benefits.
When the economy is down, a severance package becomes even more valuable. Quitting your job without anything in return is a bad move because you end up with nothing. Some people are too proud to try and get laid off with a severance package. But remember, a part of your paycheck goes towards unemployment insurance.
After being laid off with WARN Act pay, you might wonder when to file for unemployment benefits. Once you’re laid off with WARN Act pay, you’re usually not allowed back in the office. You’ll still get your regular paycheck for the next 60 days. Some people are hesitant to file for unemployment benefits while still receiving their regular salary for the next 60 days. They wonder if it’s legal and considered "double dipping." But don’t wait until your WARN Act pay is exhausted before applying for unemployment benefits. As soon as you’re notified that you’re no longer needed, apply for unemployment benefits right away.
Why should you apply for unemployment benefits while still receiving WARN Act pay? First, you’re unemployed and no longer working for the company despite getting WARN Act pay. Second, WARN Act pay only lasts for 60 days. It’s meant to give you time to find another job if needed. The sooner you find another job, the better for you, your family, and the economy. Third, it may take weeks to set up an account and receive your first unemployment benefit. So, you want to protect yourself and prevent avoidable income gaps, especially if you’re low on funds and have a family to support. Lastly, unemployment benefits are partially paid by you. Part of your salary goes towards paying for unemployment insurance.
If you’ve been laid off without trying to get a severance package, it can be a very unsettling experience. This is the time to think about your financial well-being until you can get another job. File for unemployment benefits ASAP, despite getting WARN Act pay. The worst-case scenario is that you’re denied unemployment benefits until your WARN Act pay is over.
You can also receive unemployment benefits if you have investment income. Unemployment benefits are tied to your employment, not to your investments or outside interests.
Don’t worry about getting penalized by the local government or your employer for applying for unemployment benefits while receiving WARN Act pay. The local government won’t fine you, nor will your old employer write negative remarks on your employment record. You were laid off. The government or your old employer does not want to kick you when you’re down.
The best-case scenario is you want to retire, go back to school, be a stay-at-home parent, or simply take a break before getting laid off. If you plan ahead, you may be able to negotiate a severance package, receive WARN Act pay, and receive the maximum unemployment benefits. A triple win!
Another best-case scenario is if you find another similar-paying job soon after receiving a severance package and WARN Act pay. Let’s say you got a severance package equal to 24 weeks of pay plus 9 weeks of WARN Act pay for a total of 33 weeks. You also start getting unemployment benefits three weeks after you apply. On the seventh week, you find a new job with the same pay. Therefore, for 26 weeks, you will essentially DOUBLE your income!
If you find another job a day after getting laid off, you don’t need to give back your severance package and tell your old employer to stop paying you your WARN Act pay. The severance package and WARN Act pay are yours to keep. You deserve them because your employer laid you off. The last thing an employer wants is conflict with a disgruntled employee.
The only financial income you will stop receiving is unemployment benefits because you must notify the unemployment department during your bi-weekly check-ins online that you have found a job. Hence, if you want to maximize your unemployment benefits and take more time off, negotiate with your new employer a later start date.
The more you plan for a layoff, the better you will be financially and mentally if and when it happens. Even if you got laid off unintentionally, there are a lot of upsides to being forced into a new situation.
Deep down, many employees are just not into their jobs. They wonder whether this is what they want to do for the rest of their one-and-only lives. Getting laid off could be the perfect catalyst to change your life for the better!
The thing is, you never want to just quit your job to do something else. If you do, you will get zero financial compensation. Instead, you want to be highly strategic with your departure by planning as far ahead as possible.
I engineered my layoff in 2012 because I was no longer interested in working in finance after 13 years. The job got mundane and I was no longer being paid commensurately with my performance. So I found a way to negotiate a severance package and break free from the work grind.
Getting laid off with a severance package was a blessing. It gave me the financial runway to travel, pursue my entrepreneurial interests, and start a family.
I hope all of you will one day get laid off with a severance package as well.
Why do you think some employees are so fearful or prideful of applying for unemployment benefits? Is it similar to Stockholm syndrome, where the captive creates a bond with their captor? Please forward this post to friends or loved ones who have been laid off and find themselves in this dilemma.
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