jumping over hurdles and running through challenges

How to rebound after job loss

Whether you saw it coming or were blindsided, losing your job is traumatic. It’s not just about losing your source of income, it’s also about a loss of status, daily routine and sense of purpose.

But job loss doesn’t have to mean losing everything. Here are some tips to help you bridge the gap – emotionally and financially – while you look for new employment.

1. Allow yourself time to adjust.

Although you may be tempted to immediately get back out there and start looking for a new role, it’s important to take time to grieve the loss of your job. Think of it as a temporary setback that will lead to better things and take advantage of this time to focus on your physical and mental wellbeing.

2. Evaluate your severance package.

If you’ve been offered a severance package, don’t feel pressured to sign it immediately. Make sure you review and understand the terms offered and get legal advice from an employment lawyer to avoid making decisions that could impact your financial future. Some employers put arbitrary deadlines on severance offers, but by law in Canada, you have two years from the moment your job is terminated to file a claim and pursue a full severance package.

3. Understand the tax impact.

You must pay tax on the income you receive as part of a severance package, but how you pay that tax depends on the type of package offered. Here are some examples.

If you receive a salary continuance, your pay and benefits will continue for a set period of time. You’ll be taxed as usual, and the usual deductions like Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), and Employment Insurance (EI) premiums will continue to apply.

If you receive a lump-sum payment, your employer will deduct income tax but not Canada Pension Plan (CPP) contributions, Quebec Pension Plan (QPP) contributions or EI premiums. You can also request that they transfer this amount in full to your RRSP or Registered Pension Plan (RPP). In this scenario, you’ll only pay tax on the money when you take it out of the account.

In some cases, an employer could allow you to spread your severance over two or more years. Doing this may lower the amount of income tax you’ll owe each year.

4. Look into health plan benefit options.

Your former employer may have provided a health benefits plan that you participated in. This plan could include coverage for things like prescription medications, dental and vision care, as well as additional services like chiropractic, physiotherapy or massage. While many employers allow access to health benefits for a few months after you’ve lost your job, if you anticipate being out of work for a length of time, you may want to consider a personal health plan that can provide many of the services you feel you need. This could be more cost-effective than having to pay out-of-pocket for these expenses.

5. Review your insurance options.

If your condition is covered, a critical illness policy can provide some financial relief so you don’t have to draw on any savings. And while you’re unemployed and your household is experiencing a loss of income (even if it’s temporary), double check whether your existing life insurance coverage is adequate.

6. Review your budget and expenses.

Take a look at your expenses, think about where you may be able to cut back during this transition period and find ways to stretch your savings. Analyze your complete financial situation – including savings, investments and debts – to understand your baseline. This will help you develop a path forward as you consider the next stage of your career.

Consider these famously successful people who lost their jobs – and subsequently thrived.  

7. Explore income sources.

Looking for a new job is likely your top priority but be patient. It generally takes about 5 or 6 months to secure new employment depending on your experience, field of expertise and demand for your industry. In the meantime, look for ways to fill in the income gap.

While it won’t replace your salary, EI can provide up 55% of your salary up to a maximum of $668 per week, for up to 45 weeks after job loss for individuals who meet the eligibility requirements.1 Be sure to apply as soon as possible. Receiving a severance package means you won’t receive EI payments until your severance period has expired. But at that point, if you haven’t yet secured a new job, your EI payments can begin without a pause.

1 EI Sickness Benefit – How much you could receive – Canada.ca

If you have whole life insurance (a type of permanent life insurance that provides your beneficiaries with a tax-free payment after you die), your policy may include a savings portion called the cash value. A portion of the premiums you pay go towards building this cash value, which grows tax deferred. However, you may have the option to borrow against it or withdraw the amount which could help provide a buffer if you need cash flow while you are unemployed. There may be tax implications, so it’s important to speak with your accountant or advisor before deciding to take this approach.

If you have an emergency fund, this is the situation in which to use it. Once you’ve found new employment, be sure to build up your funds once again.

Consider other sources of income including your TFSA, lines of credit or other borrowing options, stock incentives or selling taxable investments. Your Richardson Wealth Advisor can help you understand the various tax implications and trade-offs of these options.

8. Update your resume and tap into your network.

Begin refreshing your resume to reflect your most recent experiences and achievements, and then leverage your professional network for help. Reach out to former colleagues, mentors and industry connections. Your network is your biggest source of job leads, and most people genuinely want to help. You may also want to consider researching professional resources and attending networking events in your field.

We can help.

It’s understandable to feel anxious about your financial situation after job loss.

Talk to a Richardson Wealth Advisor

An advisor can review your financial options, and help you stay on track until you’re on your feet again.

Have questions?

Leave a short message explaining what you’re looking for, and we’ll reach out to you soon.

    Related articles

    Estate planning

    Preparing the next generation for wealth

    How do you know when (and how) to introduce the next generation to the family wealth picture? Creating a plan to navigate these complex wealth…

    9 minute read

    Business owners

    The value of financial advice

    Why working with a financial advisor makes sense – now more than ever.

    9 minute read

    Estate planning

    2023 year-end tax planning checklist

    Take some key steps before the end of the year and early in the new year from a tax planning perspective to make a positive…

    9 minute read