If you’ve recently been retrenched, your first instinct may be to panic. However, there are steps you can actively take to protect your financial position and chart a way forward. Let’s have a closer look at the important Dos and Don’ts in the event of retrenchment:
Seek independent legal advice
As soon as your employer starts retrenchment consultations, be sure to obtain independent legal advice. The retrenchment process is governed by the Labour Relations Act and Basic Conditions of Employment Act, and it is important that the correct procedure is adhered to. A labour relations expert will be in a position to advise you on the retrenchment benefits due to you in terms of your contract of employment and legislation. While you are entitled to at least one week’s pay for every year of service, bear in mind that your employment contract could make provision for larger severance pay. In addition to your severance pay, you are also entitled to leave and notice pay, a pro-rata share of any bonuses, commission or incentives, and your retirement fund benefits. Your employer must also provide you with all necessary documentation that may be required to facilitate your UIF claim, so be sure to obtain these before leaving the company.
Develop a survival strategy
The next step is to ensure that you can survive financially while you seek alternative employment. Ideally, seek the advice of an independent financial advisor who can help you develop a short-term financial strategy which takes into account your available emergency funding, severance pay, retrenchment benefits, living expenses and debt levels. You will likely need to undertake a ruthless cost-cutting exercise. Depending on your financial position you may need to consider alternatives such as moving in with a friend, renting smaller accommodation, or renting out a room in your home for extra income.
Determine whether you have a continuation option on your group life cover
Remaining insured while you are unemployed and looking for alternative job prospects is important, so ask your employer whether your group life cover includes a continuation option. A continuation option allows you to convert your group life cover into personal cover when you leave the employ of a company, with the benefit that you won’t need to be medically underwritten – bearing in mind that the premiums are generally cheaper. You normally have 60 days after leaving a company to exercise your continuation option, so don’t procrastinate.
Get independent financial advice on your severance and retirement benefits
The retirement funding industry is enormously complex, so find a trusted financial advisor to help you decide what to do with your severance package and your retirement benefits, bearing in mind that there may be tax consequences should you elect to withdraw your money. Although capital preservation is always first prize, your financial circumstances may require that you access some of the money.
Consider downgrading your medical aid plan option
If you are worried about your medical aid premiums, consider downgrading your medical aid plan until your financial circumstances improve. Ideally, chat with an independent health advisor who can assess the best option for your location, health status and level of affordability.
Speak to your bank and creditors
Banks and creditors are generally sympathetic in cases of retrenchment, especially where customers take steps to proactively communicate with them regarding their changed financial circumstances. Be sure to let your bank and creditors know about your retrenchment before any debit orders or instalment payments bounce. If you have a home loan, talk to your bank about restructuring the loan or reducing your repayments for a period of time. Check your whether you have any credit life insurance in place as many of these policies make provision in respect of retrenchment.
Register your UIF claims
Register your UIF claim as soon as possible, keeping in mind that there may be delays. Ensure that you have your Section 189 letter from your employer, certificate of service and settlement agreement, and remember that you can lodge your claim online at www.ufiling.co.za.
Start marketing yourself
Before leaving the organisation, ask your employer for a letter of reference to add to your CV. You may also want to consider obtaining testimonials from colleagues, superiors and clients. Bolster your CV by including certificates of any training or courses you attended while employed. Get expert advice on how to prepare a professional CV that will catch the eye of prospective employers.
Take your retrenchment personally
Most companies have taken a hit as a result of the coronavirus pandemic and national lockdown. Retrenchments are on the rise and unemployment is endemic. While your retrenchment may be upsetting, avoid taking it personally. It is most likely that your employer feels dreadful about having to let employees go. Make a concerted effort to maintain good relations with your employer and former colleagues, and let them know you are available for contract or locum work if required.
Sign anything until have sought advice
Do not sign any settlement agreement before you have taken legal advice. While most employers are ethical, there are unscrupulous employers out there who may try to short-pay you when it comes to your retrenchment pay-out.
View your retrenchment benefits as a ‘windfall’
Take a long-term view of your severance pay and retrenchment benefits, and don’t think of them as a ‘windfall’. Turbulent economic times it could take several months before you find new employment, so get independent advice on these funds and use them wisely.
Cancel your medical aid or gap cover
Whatever you do, keep your medical aid and gap cover in place. Covid-19 infections remain on an upward trajectory and our public healthcare facilities are swamped. Now, more than ever, it is important to ensure you have access to good private healthcare.
Take uncalculated risks
While entrepreneurship is to be encouraged, avoid taking uncalculated risks with your retrenchment benefits and severance pay. If you have plans to start a business of your own, ensure that you have a documented business plan in place that is realistic and workable. Be careful of buying into a business or start-up in a field that you have no expertise in.
Fall for investment scams
People in financial distress are more likely to fall for investment scams. If you’ve chosen to withdraw some of your retrenchment benefits, you may be tempted to invest in a scheme that promises some ‘quick wins’. Fraudulent schemes are rampant at the moment, so err on the side of caution and keep your hard-earned money safe from fraudsters.