Put money away before the axe falls

You’re surrounded by empty desks where your colleagues used to be, wondering if or when a pink slip will find its way toward you next.

CALGARY — You’re surrounded by empty desks where your colleagues used to be, wondering if or when a pink slip will find its way toward you next.

It’s easy to feel helpless in this uncertain job market. But it’s a lot easier to cope if you’ve got a game plan ready in the event you do get sacked.

“You’ve got to take charge by being proactive and not reactive,” says Adrian Mastracci, president of Vancouver-based KCM Wealth Management Inc.

It’s a good idea to establish an emergency cash fund to tide you over for three to six months should your steady paycheque disappear suddenly.

“You have more options, you have more flexibility, for yourself if you do think of these things when the good times are here,” Mastracci said.

It could also be a good time to take a good hard look at your household budget.

“Try and put your credit cards away and perhaps conserve cash by stopping as much as possible the non-essential spending,” Mastracci says.

Often employers will offer a severance package to workers they’ve laid off to hold them over until they can find another job. Sometimes it is given in one lump sum, but other times it will come in like an ordinary paycheque for a finite period of time.

Either way, the tax man treats severance pay the same way it would an ordinary paycheque.

So after topping up a rainy day fund, it’s a good idea to sock as much severance as allowable into an RRSP.

Those in the workforce before 1996 get an added tax benefit. For every year worked prior to that year, Canadians are entitled to put $2,000 of severance pay into an RRSP.

If you find yourself suddenly out of work, you might also be eligible for employment insurance. Usually you will have needed to work between 420 and 700 hours for your employer before filing a claim, though in some cases more is required.

EI can be received for up to 50 weeks, depending on a number of factors.

The basic rate is 55 per cent of average earnings up to $42,300 yearly. You can receive a maximum payment of $447 per week.

Like severance pay, EI is treated as taxable income.

If you’ve received a severance package from your employer, it could delay or reduce your EI payments. So you shouldn’t count on reaping the benefits of both simultaneously.

In addition to getting your financial house in order, it’s also important to be proactive in the workplace while you’re still there. Keeping your head down in the hopes of evading the axe is not the way to go, career counsellors say. They recommend having a frank talk with your boss about where you fit in the company and learning new skills that could be useful to it in the future.

“If the company does have to reduce costs, then they’re going to have to look to where the reduction of costs hurt the least to the company,” said Ralph Shedletsky, chief operating officer at Knightsbridge Human Capital Solutions.

“The more you demonstrate value to the company, the more likely you are to be retained.”

When bad news starts to circulate, the instinct could be to flee elsewhere.

“However, jumping ship may not always be the best thing. First in is always first out within an organization,” said Gary Agnew, a partner with Calgary-based human resources firm Cenera.

But it could be a good time to reach out to other contacts in the industry, said Shannon Bowen-Smed, chief executive officer of Bowen, another employment agency based in Calgary.

“Who else knows about me? If I was let go tomorrow, what are the first few phone calls I could make?” she said.

When joining the ranks of the unemployed, it’s important to focus on what little silver lining there is, said Bowen-Smed.

The sudden jolt might be the push you need to find a job that’s a better fit.

“We hear continuously from people that have been walked out this year that they actually were in a job they never really liked or they were in a job because they fell into it,” she said.