Laid off. Reorg’ed. Streamlined. Rationalized. There are a bunch of expressions companies like to use to describe job cuts. And as we enter 2016, startups are looking carefully at their growth plans, many with a more conservative eye than perhaps the past few years. Already, within the first few days of the year, we’ve seen several technology companies make reductions of 5-15% in their team sizes. When reading the coverage of these decisions, it’s important to remember that real people are behind the numbers.
Top performers may find their jobs eliminated for many reasons (cheaper labor, revenue doesn’t support the headcount, etc.). Although this feels personal, you have to remind yourself this is a business decision that is out of your control. But once you’ve processed your emotions, there is a checklist of ‘next steps’ you should know about.
Make sure you have the following items in order before you exit the company. Your HR contact should be able to help with the following.
Health Insurance: Find out when your coverage ends. You can set yourself up with a temporary continuation of group health coverage through COBRA until you either find other employment or figure out another long term insurance plan. Find out what the process is for signing up for COBRA and what it will likely cost you.
Termination letter: You will need an official letter terminating your employment if you are going to be applying for unemployment. Your HR contact should be able to provide this.
Paycheck: The last thing you want to be doing is trying to track down your final paycheck after you leave the company. You are entitled to your last paycheck including vacation days and unpaid bonuses before you leave.
Severance: If you are given severance, you will either be given a check on the spot or a letter with information regarding the details (timing and payout amount) of the severance package. Make sure you have something in writing if you are not getting the severance check on your last day of employment. A verbal “we will get back to you regarding severance” is not good enough. If you find yourself in this position, get a referral for a lawyer who specializes in employment law.
401K: If you have a 401K/retirement account, figure out what to do with this money. This doesn’t need to be taken care of on your last day, but rather something you should get squared away shortly after your employment terminates. You have 3 options:
- Do nothing. Just Keep your assets where they are. This is convenient and requires no effort on your part. The downside is that it limits your investment options.
- Roll this money into an IRA/Individual Retirement Account. You will have control of your money with numerous investment choices.
- Roll this money into your new employer’s 401K plan. The logical thing to do once you find a new job. You will be limited in investment choices but many companies have an employer matching program in which all or some portion of your contribution to the 401k is matched by the company.
Stock Options: Make sure you know the post-termination exercise rules and deadlines. Your HR or Benefits contact can provide you with this information. You have the right to exercise the stock options that you’ve vested. Vesting schedules vary from company to company but monthly vesting over 4 years with a one year cliff (nothing vests for your first year at the company but 25% of your options vest at the one year anniversary of your vesting starting date) is a typical vesting schedule. Whether you exercise or not will be based on your assessment of the future value of the stock (or the market value if the company is public).
- What does exercising mean? Exercising a stock option means purchasing your employer’s common stock at the price of the option, known as the grant price. The typical timeframe for exercising options is 90 days after termination. However, your period for exercise will be dictated by your employer’s plan design and the reason for your termination. If the options are not exercised by the specified date, they expire and are canceled. That means you will no longer have the right to purchase common stock. While some companies send registered letters to outgoing employees with the number of shares they can buy and the cost, and how many days they have to exercise the options, no law requires this. It is your obligation to know your personal grant information and the terms of your stock plan.
- What does it cost to exercise? Make sure you understand all of the financial and tax implications associated with exercising your options. The cost to exercise will be determined by the number of options you have and the grant price for those options. When you exercise, you will have to pay the company an amount equal to the number of options times the grant price. Once you own the shares, you may incur a tax obligation depending on the fair market value of the stock at that time and whether the company is public. For more information visit out Investopedia.
- What about my unvested options? You don’t “own” these options because they are not vested. Therefore, they go back to the company. You are only entitled to exercise the options that are vested. Again, make sure you understand your option vesting schedule.
Recommendations: Be prepared to ask for recommendations as soon as possible from your manager, peers and direct reports, if appropriate. Make a point of getting letters of recommendation on LinkedIn and asking colleagues to be a reference while your accomplishments are fresh in their minds. If you have access to your performance reviews, print them out and take them with you. Ask your HR contact for this information if you don’t have direct access. This information is crucial when you are ready to start networking to find your next role.
Return your things: If you have a company issued badge, laptop or phone, best to return them on your last day rather than wait for a call from someone in HR or security to ask you to come back and return the company owned items. If you have any personal data on the laptop or phone, make a copy of it and then delete it before returning your devices. Another option is to offer to buy the equipment directly from the employer. If you have an older model of a laptop or phone, the company may be open to this.
Stay calm: Although getting laid off can be traumatic and feel very personal, you will be okay. Remind yourself that this was a business decision and NOT a reflection of your work. If you can get organized and armed with the information above, you’ll be in a much better position to move on with a confident and successful job search.
No matter how angry, upset, or blindsided you may feel during this process, do NOT blast your former company, manager, HR Manager, or peer(s) on social media. It may feel good in the short term, but you don’t want to make any negative comments that you can’t take back.
Let Homebrew help. If you’ve been laid off or are thinking about a change, we’d love to hear from you. Warm introductions are best, but we are open to helping anyone who contacts us. Our portfolio companies are hiring and we may have some great ideas for you outside of our portfolio as well. Beth Scheer, Homebrew’s Head of Talent, would love to connect at firstname.lastname@example.org.