How to Prepare for a Layoff: 10 Tips to Stay Ahead in a Tough Job Market

Though no job is immune to layoffs, some industries are more vulnerable than others.

Tharon Green/CNET

Though the official unemployment rate is holding steady at 4.2%, many workers feel it’s just a matter of time before there’s a major shake-up. At least one in three US employees says they’re experiencing layoff anxiety. 

Last week, the number of people filing for jobless benefits rose to the highest level in months. The Trump administration’s cuts across federal agencies, health organizations and nonprofits have led to some 300,000 layoffs. As employers reduce personnel and freeze plans to hire new workers, there have been mass cuts across the tech industry, entertainment and education. 

ZipRecruiter’s Career Expert Sam DeMase said that preparing for a job loss while you’re actively employed helps you avoid having to scramble during a crisis. 

“Being proactive can really help give you some peace of mind if a layoff does happen,” said DeMase. 

Think you’re about to be laid off? Signs to look for

Companies and households are getting ready for a recession, said Lisa Countryman-Quiroz, CEO of JVS Bay Area, a career training nonprofit in California. “We are living in a time of pretty radical uncertainty,” she said. 

Experts warn that a global economic slowdown could uproot the US labor market as businesses adjust profit expectations and trim budgets. 

While there aren’t always clear indicators of pending layoffs, there are some clues to look out for, according to DeMase. 

👀 Does your position generate revenue? Non-revenue-generating roles within an organization might be crucial for overall functioning, yet these positions (HR, IT, legal and administration) tend to be more vulnerable since they don’t directly produce business income. 

👀 Has there been organizational restructuring? Leadership changes and reorganizations often signal an effort to improve performance or address financial difficulties. Merging, streamlining or employee buyouts could indicate a company is cutting costs or downsizing. 

👀 Is your manager communicating regularly? If your supervisor has suddenly gone quiet or is canceling meetings, it might not be a scheduling conflict. They could be trying to minimize contact or deprioritize communication before a company-wide announcement. 

👀 Have projects been scrapped or budgets frozen? If upcoming expenses or travels aren’t being approved, or if hiring and promotions are suddenly frozen, that could be a warning sign that the company is focusing on financial cutbacks. 

Zooming out to the broader job market, DeMase says to look out for competitor layoffs within your industry or fewer job listings in your line of work, which could indicate economic pressures. If you’re noticing a decline in entry-level jobs, that may mean those roles have been eliminated or replaced by automation. 

How to prepare for a layoff 

Amid overall economic uncertainty, employers are pulling back on open postings, and there’s a high level of competition among eligible applicants. On average, DeMase said to expect a layoff to potentially leave you unemployed for three to 10 months. 

Though layoffs are financially motivated, they’re likely to hit your confidence hard. “It feels horrible, like your value is gone. But that’s not the case,” DeMase said. “It’s really important to remember that a layoff is a business decision.”

In a turbulent job market, preparation is everything. Here’s how to make sure you’re not caught off guard. 

“It’s really important to remember that a layoff is a business decision.”

Sam DeMase, career expert at ZipRecruiter

1. Collect your paperwork in advance

Though some employers still give advanced notice when there’s a reduction in force, workers are increasingly being dismissed with little to no notice. You’re likely to be locked out of company devices and communications, including email and payroll software, rather immediately. 

DeMase said to gather your personal information on your work computer and to make sure you have proof of employment and tax documentation. You’ll need pay stubs and verification to apply for financial assistance or state unemployment benefits. Though you should never take confidential company information, you can save copies of your performance reviews and work samples for future reference. 

2. Refresh your resume and network now

While you’re still employed, take a moment to update your resume and LinkedIn profile. DeMase recommends compiling a list of your achievements, notable projects and positive feedback from colleagues or clients. 

It’s also a good idea to “warm up your network,” said DeMase. If you’ve been employed for a long time at a company, check in with former colleagues and clients now. “That way, when you do reach out after you’ve been laid off, it’s not a 911,” she said.

3. Understand your severance payment

When their position is eliminated, laid-off workers might be offered a severance package as compensation. The amount varies by employer, but a common formula is one or two weeks’ pay for each year of employment. Any payment is taxable as ordinary income.

Companies aren’t required to offer severance payments. If you accept a severance package, you’ll likely be required to sign an agreement stating that you won’t sue your ex-employer.

If you’re 40 or older, your employer must give you at least 21 days to decide whether to accept a severance agreement under the Older Workers Benefit Protection Act. If it’s a group termination (meaning multiple employees lost their jobs), you’ll have at least 45 days to accept the agreement under the same law.

4. Research health insurance coverage

Some employers will let you keep your employer-based medical, dental and vision coverage for a specified period at no additional cost. You might also consider seeking out coverage under a family member or spouse. 

If neither is an option, make sure you know about the federal law called the Consolidated Omnibus Budget Reconciliation Act. COBRA allows workers who leave their jobs to continue their health insurance if their company has 20 or more employees, usually for 18 to 36 months. You’ll usually pay the entire premium, plus a 2% surcharge, which can get expensive when you’ve just lost your job.

Another option is to shop on the Health Insurance Marketplace for a plan. If you’ve lost employer-based coverage, you might qualify for a special enrollment period if you sign up within 60 days of losing coverage.

5. Confirm other company benefits 

Payout for unused time off, including vacation and sick time. Some states require employers to pay workers for unused PTO if they leave their jobs for any reason. 

Company stock or retirement plan: Since accounts like 401(k) or 403(b) are employer-sponsored, find out if you can leave it where it is or roll it over to another investment account.

Company equipment. If you have a company laptop or cellphone, you may be allowed to keep the equipment or buy it at a reduced price.

Additional benefits. Some companies help laid-off workers find their next job by offering career counseling or resume assistance.

6. Look into unemployment eligibility

If you get laid off and lose your job through no fault of your own, you’ll typically qualify for unemployment benefits, although the rules vary by state. You’ll usually file for benefits in the state where you worked. 

Contact your state’s unemployment office immediately after you learn that your job has been cut. You can expect to wait about two to three weeks from the time you file until you receive your first unemployment check. 

Read more: How to File for Unemployment Benefits

7. Build your emergency fund ASAP

If you’re able to find areas of savings in your budget, make building your emergency fund a top priority. A high-yield savings account is a smart place to stash your emergency fund because you can earn interest and also access your money without penalty. 

Experts generally recommend an emergency fund that can cover at least six months of living expenses, though that’s unattainable for most households living paycheck to paycheck. 

“Anything that you can put together, even a month’s worth of rent, is going to be helpful.”

Lisa Countryman-Quiroz, CEO of JVS Bay Area

“Anything that you can put together, even a month’s worth of rent, is going to be helpful,” said Countryman-Quiroz. Having even some emergency reserves will not only protect you but also give you peace of mind. “Come from a position of power and choice, rather than from one of scarcity and desperation and necessity,” she said. 

8. Don’t liquidate your retirement accounts

If you’re suspicious that a layoff is coming, don’t cash out your 401(k) or any other retirement account in a panic. You may owe a 10% early withdrawal penalty in addition to income taxes.

However, if you’re currently contributing extra to your retirement account, DeMase recommends rerouting some of that spending to your emergency savings so it can be liquid if you lose your job. 

9. Review your spending and debts

Creating a no-frills budget that only covers the necessities will give you a clear action plan in case you lose your job. Or if your savings are lacking, you could implement a bare-bones budget now so that you’ll have a safety cushion if your income takes a hit. 

If you have any debt, try to pay off what you can now so you won’t be stuck in a growing interest cycle when you’re without a paycheck.

DeMase said it’s a good idea to start scaling back on any nonessential spending now. Take a close look at your budget to see what’s necessary (housing, groceries, debt, utilities, etc.) versus what’s optional (subscriptions, dining out, vacations, etc.). Use a budgeting app to help find expenses you can cut. 

10. Find additional work and training

If you’re concerned that a job loss is on the horizon, you might be able to seek out alternative sources of income. DeMase said to consider taking on a side hustle, like freelance work or a part-time gig, while you’re still employed. Having extra income streams now can help you save money and pay off debt faster. 

It’s also a good opportunity to look into leveling up your expertise and qualifications. Countryman-Quiroz says that “future-proofing” your employability means building up interpersonal communication and collaboration as well as tech skills, specifically in the realm of AI. 

Local nonprofits and workforce development organizations often provide free resources to build skills in new sectors. 

Free and low-cost resources for job seekers

• Cal JOBS: Cal JOBS offers a complete set of employment tools for job seekers in California. 

• American Job Center Finder: Thousands of job centers nationwide help people search for work, find training and answer other employment-related questions.

• LinkedIn Learning: LinkedIn offers video courses taught by industry experts in Business, Creative, Technology and Certifications.

• Goodwill Industries: Goodwill Career Centers provide job training and placement services.