Commentary: What retrenched workers can do to survive financially, and even thrive without a job someday

Driven by business restructuring, retrenchments in Singapore more than doubled to 2,990 in the fourth quarter last year from the preceding quarter (1,300).

And the job cuts have continued into this year. In total, there were 6,440 retrenchments in 2022.

This is also seen worldwide.

Besides Facebook parent Meta, which retrenched 11,000 employees worldwide, other big tech firms — such as Twitter, Microsoft, Google, Lenovo, Sea and Carousell — have done the same.

Retrenchment is a form of dismissal from your job but likely through no fault of yours. It happens when firms need to reduce headcount due to reorganisation, redundancy, cost reduction, or industry changes.

While most people are often caught off guard when they are retrenched, more people are realising that it is a possibility that can happen to anyone, and not just to mature workers above a certain age.

Being financially and mentally resilient will enable you to be better prepared for such curveballs that threaten to derail your financial plan and life goals.

For instance, having sufficient emergency cash of at least three to six months of expenses will come in handy during rainy days and help one avoid the undesirable scenario of having to sell off insurance policies or investments at the wrong price and time, just to raise cash.

Here are seven tips to help you cope with retrenchment.

1. Understand your retrenchment benefits and other payments

If you're facing retrenchment, clarify the amounts that you will be paid to help in your planning. Remember to get everything in writing before you leave the firm.

The Ministry of Manpower advises companies that carry out retrenchment to pay all salaries, including unused annual leave and notice pay to their employees on their last day of work.

The payments should also include benefits such as overtime, commissions, and reimbursements for expenses agreed during employment.

Under the law, employees who have served the firm for at least two years are eligible for retrenchment benefits. Those with less than two years’ service could be granted an ex-gratia payment out of goodwill.

The prevailing norm is to pay a retrenchment benefit of between two weeks and one month salary per year of service, depending on the firm’s financial position and the industry.

In addition, firms are encouraged to help affected employees look for alternative jobs in associate companies, other companies or through outplacement assistance programmes, such as job fairs, career fairs, and career advice.

2. Review your budget with family

Review your budget, especially your spend categories, and consider how you can reduce unnecessary expenses.

Discuss your financial situation with your family members so they are aware of the need to make some sacrifices till you land another job.

For example, they may need to cut down certain wants like fine dining and holidays, and have a tighter rein on their own spending.

3. Consolidate your debt

Review your liabilities such as outstanding credit card debts, personal loans and mortgage.

You can contact your creditors to inform them of your financial situation and if the need arises, to restructure your debt repayments before they spiral out of control.

One way to do this is via a debt management programme. For instance, the Debt Consolidation Plan — offered by banks in Singapore — helps to combine your unsecured debts into one and at a reduced monthly payment.

It may be less stressful to deal with one main lender instead of having multiple debts with multiple financial institutions.

If you really need to take a loan, consider the duration and costs, including the effective interest rate and penalty for late payment and/or early redemption.

Avoid high interest loans like credit cards unless you are confident of paying the balance in full and before the due date.

4. Review your goals

Being retrenched can be highly emotional and frustrating. Tell yourself that it is not your fault.

The sooner you can get over the emotional distress, the sooner you can pivot towards the new possibilities that await you.

There are two organisations — Workforce Singapore (WSG) and e2i (Employment and Employability Institute) — that offer retrenchment counselling services as well as programmes for skills upgrading and job-matching.

Take this period of unemployment as a time to reflect on your career and life goals.

Stay positive on what is to come and evaluate what you would like to achieve in your work life and identify the skills required. Doing so will provide more clarity on your next steps.

5. Check if you have retrenchment or unemployment insurance

Check if you might have a life insurance plan that comes with an unemployment benefit that can kick in when you are unemployed.

For example, such a benefit may provide a fixed cash payout for every month of unemployment. You may receive this payout for up to three months to tide you over the crucial job-search period without tapping into your savings.

Even if you do not have such a plan and are facing problems with insurance payments due to tight cash flows, you can discuss with your insurers on how to defer premiums through “premium holidays”, which means delaying your premiums till a later date.

Other avenues include taking a loan from your insurance plan to raise cash or reducing your plan’s sum assured to cut down on premiums.

6. Look out for new opportunities

Update your CV with any new skills, courses attended, and experiences. And reach out to recruiters and relevant social platforms.

Remember to update your LinkedIn profile too, as it is a good vehicle for job searches and link ups to potential employers.

This may be a good time to venture into a different industry. Make a list of your qualifications and skills and check on the courses you need to make the switch.

Besides looking for a full-time job, explore opportunities in the gig economy. Doing so can help to generate some income to tide things over while giving rise to other opportunities.

7. Be financially prepared

The more sustainable solution for any unforeseen circumstances, like retrenchment, is to be financially prepared at all times.

Besides ensuring adequate emergency cash and insurance, invest your surplus cash to make it work harder for you.

Time is money, so adopt a long-term investing approach to reap the benefits of compounding.

Start growing your nest egg early and build passive income streams so you can be better prepared to retire, semi-retire, or take your time to look for the next opportunity, should you lose your job.

If you know you are at risk of being retrenched, bump up your emergency cash to at least 12 months of expenses, to tide over the rainy day.

When it comes to big-ticket item purchases, like a home, consider your affordability carefully.

It is also prudent especially during a high interest rate environment to set aside a buffer of Central Provident Fund savings that can fund one to two years of mortgage instalments, in the event of retrenchment.

ABOUT THE AUTHOR:

Lorna Tan is head of financial planning literacy at DBS bank.