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What to do if you're laid off

The global economic downturn will bring more layoffs as jobs are eliminated. Predictions are that Canada’s unemployment rate may jump to higher than 8% this year.

If you’re laid off, the first thing you’ll have to deal with is the shock of losing your job. Even if you’re told to expect it, it’s difficult to be prepared.

EI a mere shadow of its former self

Even though you’ve been paying into Employment Insurance for years, it may come as a shock to learn about the changes the federal government made to EI in the 1990s. Now, less than half of Canada’s unemployed workers are eligible for benefits. Those who do qualify are receiving far less than poverty-level incomes and discover that the benefits dry up quickly.

Before the changes, workers only needed to work between 180 and 300 hours in the previous year to qualify for benefits and they received 75% of their earnings for up to 50 weeks.

Unions, businesses and economists are calling on the government to end EI entrance requirements based on regional employment rates that vary between 420 and 700 hours of work. New workers or those returning after a two-year absence need between 840 and 910 hours. Those on maternity leave or receiving sick benefits require 600 hours.

They want EI to provide at least 60% of earnings based on the best 12 weeks of pay in the previous 26 weeks. Currently, benefits are 55% up to $447 per week.

During the last recession, an unemployed worker received the equivalent of up to $600 a week—$153 more than today.

Currently, benefits are provided for between 36 and 45 weeks. Unions want to see the duration returned to 50 weeks with benefits to be extended for a year if the national unemployment rate goes higher than 6.5%.

The welfare non-option

Workers who have seen their EI run out are now facing the possibility of going on welfare, but those provincial programs have also been stripped bare. If you apply for this support, you’ll likely have to give up all your assets in order to qualify. This would include your car, even if it’s essential to helping you find a new job.

If you’re offered a severance package

You should think carefully about how you’re going to handle a lump-sum payment offered by your employer. Are there tax-limiting strategies you can use and what impact will it have on your pension? You should talk to a financial adviser at your local bank or credit union before making big decisions.
The government automatically imposes a 30% withholding tax on your severance. So, you might want to look into putting some funds into a registered retirement savings plan.

Some investment advisors suggest not giving in to the natural inclination to pay off as many bills as possible. Using the whole severance amount for this purpose will leave you with no cushion to cover your expenses while you look for other work.

You could ask for your severance to be paid out gradually over a period of months. If you’re laid off late in the year, you can ask your employer to provide the final payment in January.
You’ll also face consequences if you take too much time to find work or, conversely, jump into the first job you see even when it pays less.

If you’re on a Teamsters defined benefit plan pension, you’ll probably want to leave it alone.

However, the majority of Canadians who have defined contribution plans, where they and the company pay into a group RSP, will have to arrange to have the funds transferred into their own RSP.