One of the negative fallout of the opening up of the Indian economy has been the possibility of a job loss in the private sector. Fortunately, the government and public sector jobs are relatively insulated from this right now but, in the years to come, they may well be affected by it to some extent too. As the job growth is almost entirely in the private sector, coping with job losses becomes an important consideration for many people.
Job losses can be there for many reasons. The first and the most probable reason is that the company decides to stop doing what it is doing or scale down operations significantly in India. The second can be the company decides to move it’s operations within India and some Employees may not want to relocate. The third can be due to reasons of misconduct, financial or otherwise. Finally, there can be an issue of individual performance or the job role in question can simply become redundant.
It is important to understand two aspects very clearly when we are talking of a job loss. Firstly, apart from a few higher end jobs and some MNC’s, there is virtually no safety net available when it comes to job loss. All that you may get paid is about 2-3 months of your salary and you have to deal with the rest of it yourself. Secondly, most people do not understand that a job loss is very much a possibility even if they are individually doing well in their respective jobs. A vast majority of job losses are because of economic and structural reasons, not because of misconduct and performance issues.
As they say, prevention is better than cure and there are a few preventive measures that you can take to minimize the possibility of a job loss. To begin with understand the overall business of your company and how is it doing. That will make you aware of the potential risks of a possible cut down in expenses, which normally lead to job losses. Next focus on your own performance and understand the importance of your job role’s relevance and importance to your company. Corporate organizations are largely selfish entities, if you are useful to them they are unlikely to let you go. Thirdly try to add value to yourself by learning new things, both formally and informally. This will not only help in getting better in your current job but also assist greatly in getting a new one when you need it.
No one can be truly prepared for a job loss as it will always come as a shock, no matter how and when it happens. However, if you have a reasonable value in the job market you will be able to find an appropriate job sooner or later. In terms of financial safety net, there are a few things that you need to be conscious about at all times.
- Minimize your loans and ideal situation is with no loans. If you are having to pay a high EMI then the anxiety you face will be high and you will be more likely to make wrong decisions.
- Have a Contingency fund of 6-8 months expenses that you can tap into easily. This needs to be separate from your general investment plans, so that you do not get a feeling you are depleting your future resources.
- Focus on necessary expenditure and avoid buying assets. You may get a fairly big sum of money as settlement but do not be tempted to spend it on an asset purchase or a vacation.
- You need to ensure that your family understands the situation but at the same time, take care that they are not overwhelmed by it.
- Continue your insurance payments and if you did not have a Health insurance of your own, then get one quickly.
- Continue your regular investments in MF etc if you can but stop it if it is proving to be a burden.
The ideal situation will be for you to find a job in the 2-3 month period that you have in your current job. However, if you are in an industry where jobs are relatively less or if you are on the wrong side of 40, this may be easier said than done. In such a situation you have to dig in for the medium haul if not the long one. I will try to cover the financial strategies to deal with such a situation in the next post.
Whether it is for the Employee or the Employer, a job loss is an undesirable situation. However, if you are able to cope with it well without reacting negatively or in panic you will come through it with flying colors. As a CEO, I have unfortunately had situations where I had to let people go. While some of the people had tough times, most of them emerged from the experience in a better manner and have had fairly successful careers.
Remember a job loss is only a road block that can only delay you from where you want to reach. Unless you let it affect you badly, it will not be able to stop you from reaching your destination.