Being laid off is never ideal, but it became a reality for thousands of Canadians during the Covid-19 pandemic. According to statistics, Canada saw a concerningly high national unemployment rate of 13.5% during the pandemic. The majority of those pandemic layoffs were employees who did not expect ever to be laid off, and their lack of preparedness made their situations even more strenuous. While many employers eventually brought their workforces back, that has not been the case across the board. Some Canadian business owners are continuing with their post-pandemic layoffs, mainly because they were unable to recover from their 2020 financial hit.
Assuming a layoff will never happen to you during your career is a reckless decision that may cost you and your family down the road. It is essential to build your benefits and financial portfolio in a way that would cushion the hit of becoming unexpectedly unemployed.
What Happens to My Benefits When I Am Laid Off?
There are many reasons why a company may decide to lay off an employee: cutting costs, company restructuring, or economic conditions. In March of 2020, the economic situation significantly changed when the Covid-19 global pandemic began. Millions of employees worldwide began working remotely from their homes, but a substantial number of employees were not offered a remote work option; instead, they were laid off. Some employees were laid off temporarily, many of which were eventually able to come back to work, but others were laid off permanently. However, regardless of whether your layoff is temporary or permanent, you can take steps to protect your insurance benefits, retirement plans, and investments.
Maintaining Your Insurance
Losing your job suddenly may cost your family their primary health insurance, leaving your family covered by their province’s health plan. While general territory insurance coverage is far better than nothing, it still leaves a lot of room for additional coverage to be needed, since those plans typically only cover doctor or hospital visits. A personal health insurance plan can cover the gap between the provincial health plan and what you pay out of pocket. Purchasing a personal insurance plan can cover dental visits, prescriptions, eye exams, chiropractors, dieticians, psychologists, and paramedic services.
Eligible Canada Life workplace insurance plans can add additional coverages, such as life insurance, AD&D, and critical illness coverage. These additions would remain in place, even after your workplace insurance plan gets terminated.
Maintaining Your Pension and Retirement Plans
Over 6.5 million Canadians are members of the workplace pension plan because they know what a beneficial tool it can be when planning for retirement. If your retirement plan is through Canada Life, transferring your benefits to NextStep is easy and quick. NextStep carries a vast range of insurance and savings products, such as a Tax-Free Savings Account (TFSA), a Registered Retirement Savings Plan (RRSP), as well as a Registered Retirement Income Fund (RRIF). Transferring your benefits can be as easy as making a few clicks online, and the change can make all the difference when you are suddenly laid off.
An additional option would be to transfer your retirement account to a Locked-In Retirement Account (LIRA). When choosing this option, know the money is transitioned from your workplace pension to a “locked” account you cannot access until you retire. This means you will not be able to pull money from your retirement account for home renovations or college tuition. However, it does mean you will have a secured amount of money to supplement your income with, once you retire. It is crucial to take advantage of your workplace benefits, retirement plans, and health insurance as soon as your employment begins. The longer you build up your retirement plan, the more you will have later in life when your career days are behind you.
If you find your layoff terminates your life insurance plan, you will want to purchase another as soon as possible. Therefore, you will stay covered post-lay off. If you have dependents or a spouse who relies on your income and support, your life insurance payout will help support them in your absence. Furthermore, look into adding Portable Benefits to your insurance plan.
Do I Need to Apply for Employment Insurance?
If you were laid off from work, you could apply for Employment Insurance (EI), which can help support you financially as you look for a new job. These benefits can start as soon as you are laid off if you apply for EI benefits immediately afterward.
In Canada, if you have worked for 12 consecutive months pre-layoff, then you have the right to collect severance pay. When your employer informs you, you are being laid off, ask them about your severance pay. Severance pay can be dealt out in a lump sum or as a continuation of your salary. Since severance pay is taxable, it may be in your best interest to transfer your severance into a Registered Retirement Savings Plan (RRSP). By doing this, you will still be taxed, but at a better rate. In addition, after you have been notified of your layoff, ask about details surrounding your final paycheck. Inquire when you can expect it and if it will have additional payouts added on, such as accrued sick leave, overtime, back pay, and vacation time.
If you have been laid off and are unsure what you are entitled to, check out the Government of Canada’s list of your province’s labor laws.
Final Thoughts
Being laid off is often unexpected and far from ideal. However, you can take steps to protect your benefits after being laid off, such as applying for EI, transferring your pension, and checking to see if all your labor rights are being met. Preparing your assets for easy transfer in the event of a layoff can make a huge difference. By being cautious of a potential layoff, you can make safe and beneficial investment choices that can help better secure your future in the event of unforeseen unemployment.
The professionals at Hometown Life Insurance can help you find the right policy for you and your family. Life insurance helps financially protect your family when the unexpected happens. If you would like to know more about acquiring life insurance, contact the licensed professionals at Hometown Life Insurance at 289-606-0103.
