No one likes to think about retrenchment but it is a possiblity that one needs to be prepared for. Picture: iStock
Even though we have a new president and will likely have a new Cabinet, it will take South Africa a long time to recover from its economic woes, including problems related to unemployment. So the danger of retrenchment is still a realistic possibility for employees as companies try to cut costs, which often involves laying off staff.
It’s never a good idea to cling onto the belief that "It won’t happen to me", because there are many what are thought to be stable and reputable companies that have made retrenchments, including SABMiller and Anheuser-Busch InBev.
Even if you have planned for a possible retrenchment, when the news breaks it can still cause much upheaval and stress. But there are things you can do to make the process easier. Here are the dos and don’ts:
1. Get independent advice: Take home any paperwork and get an independent labour adviser and your financial adviser to look over the numbers and the package on offer. You could get peace of mind from your financial adviser as he or she takes a look at it and advises you on how best to stretch your finances as you look for other work or income streams. See if your company is willing to pay for the financial advice.
2. Work out a financial plan: Your current budget should be set aside to account for your change in circumstances. Now is the time to cut back on luxuries and unnecessary expenditure within the home. You may get another job quickly but if you’re not so lucky you need to rely on your savings and ensure that this money can last the distance as you look around for employment.
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3. Apply for Unemployment Insurance Fund (UIF) payouts: Unemployed workers can apply for benefits at their nearest labour centre within six months of the date that they have been retrenched. There may be other circumstances where you may not qualify, for instance if you have already received benefits from the Compensation Fund or quit your job.
4. Tell your creditors that you are struggling financially: If you are finding it hard to keep up with your credit obligations you should tell your lenders about this, even if you find it embarrasing. They may come up with a way to restructure your debt or a different payment plan. Burying your head in the sand will not help and it could make the problem worse. Consider debt counselling as an alternative as well.
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5. Claim on credit life insurance: If you have taken out a loan, chances are you have credit life insurance. It’s there to help you in the event that you get retrenched or if you pass on. The policy could pay up to six months to help you cover loan repayments if you’ve been retrenched. Speak to your credit life provider to find out how you can claim and how long the payouts will cover you.
1. Make any rash decisions: It can be depressing and overwhelming getting the retrenchment letter. Even if you anticipate it, it could still be a bit of a shock. Don’t let the stress of the event result in you making bad or quick decisions. Rather sign papers and accept payments after you’ve received advice from a professional. It’s never a good idea to make plans when you are emotional.
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2. Isolate yourself: Let close friends and family know that you have been made retrenched and if you are in financial difficulty – then say so. This could be enough to make them realise the gravity of your situation and result in your friends being more sympathetic and not extending invitations to dinners that they know you can’t afford to attend.
3. Be tempted to use all of your money to start a business: Starting a business to get revenue back into the home is a possibility but if you use up all your savings and payout that you get from a retrenchment package you may not have anything left to fall back on if it doesn’t work out. If you start a business get some advice from a professional. Get a business plan together and checked against experts in a similar field to ensure that it will work. If you get a business loan, make sure that you can afford the repayments.
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4. Go on a spending spree: If you’re lucky enough to get a decent package it’s best not to go on an expensive holiday or to buy that flashy car you’ve always wanted. If you’re not close to retirement and you need an income you should rather keep your retrenchment payouts and savings to keep you afloat while you find a job.
5. Keep the same bank account: It’s time to find ways of cutting back and one of the ways you can make savings is through opening up a cheaper bank account. Your current account was designed for the income you had before you got retrenched but it may not be suitable now. Speak to your bank to find out if you can downgrade to a more affordable account and one that doesn’t have major minimum balances.