Redundancy in a 2008-style GFC

[dungoofed]

In the crash of 2008 a lot of my peers were made redundant. Anecdotally, the standard redundancy package at the time was three months salary plus one month per year of service (the "...one month per year of service" was pretty standard, but the base "x months" varied a lot depending on the company you were working for).

There was a lot of fear around at the time, and so understandably very few of these guys took that lump sum and ploughed it into the market at or around the bottom.

Looking back, if I had received that lump sum and just invested it at the bottom then I probably wouldn't have been able to retire. Even if it happened today I wouldn't be able to retire.

However...

With a few assumptions, including the assumption that everything plays out similarly to last time I'm a *lot* closer this time around. Like, within spitting distance. And I think that's amazing.

In fact, since my expenses have come down so much that if I just got a part time job at Macdonalds for a couple of years, to make sure I didn't touch my capital, then I could probably scrape by and FI.

(incidentally a lot of my peers made redundant in 2008 refused to consider a job that wasn't in their field, fearful that they would never be able to get back in if there was a blemish on their CV).

So on the one hand we have crashes providing a large number of people with a very real chance to retire. But on the other hand we have fearful humans who lose their job during a downturn and naturally want to remain in cash or worse still cash out of the market.

What is the solution? It seems like an Investment Policy Statement is one tool, but there is still going to be massive fear that you have to overcome, even if on paper you have proven the best course of action. We've seen that even people who have an IPS start to doubt themselves when the crash finally does come, despite having talked the talk during the preceding boom. And it's such a shame because it's a real opportunity for normal people to bring FI much closer, if not get them completely over the line. Any pro tips from people who have actually knowingly taken a massive risk like this and managed to retire?

[dungoofed]

Just off the top of my head are:

1) Hold gold

2) Make sure you're able to survive indefinitely on the unemployment benefits you expect to receive

3) Don't have a home loan.

Yeah, thinking about it, it was the home loan that fucked a lot of my peers in 2008.

[jmusic]

(incidentally a lot of my peers made redundant in 2008 refused to consider a job that wasn't in their field, fearful that they would never be able to get back in if there was a blemish on their CV).

While you're collecting unemployment, that's probably prudent, but if that should run out, it's insane to keep saying that.  Just get a job at Home Depot or something and when you're applying for jobs, don't put it on the resume!

Regarding the rest of your comments, I don't have any solutions to you, but I've heard that on average, retail investors are very good at buying at the top and selling at the bottom...

[skyrefuge]

heh...from the title I thought this thread was going to be about setting up redundant systems to help you survive in a 2008-style GFC (I dunno, two houses, funds at multiple banks?)

But no, it's about being fired let go laid off downsized RIFed made redundant. Stupid Euphemism Treadmill!

(though Wikipedia tells me "redundancy" is the British English term, so maybe it's stayed on that treadmill for a long time)

I don't have anything of substance to offer, though I'll note that the year I was "laid off" for four months (in 2010) is still by far my year with the highest income, due to severance and unemployment income.

[deborah]

I

In the crash of 2008 a lot of my peers were made redundant. Anecdotally, the standard redundancy package at the time was three months salary plus one month per year of service (the "...one month per year of service" was pretty standard, but the base "x months" varied a lot depending on the company you were working for).

I have NEVER heard of an agreement that good! Two weeks per year of service with a minimum of one month and a maximum of 48 weeks is pretty good where I live (and is about as good as I have heard over the years), and Fair work Australia has 2 weeks to 12 weeks pay plus 1 to 5 weeks notice as the minimum (depending on age and years of service).

I am pretty sure that when I was retrenched many moons ago it was 1 week per year, and that was it. I invested that money, and it did a lot to set me up.

[dungoofed]

Deborah thanks, this is the kind of information I need to know. I only know the Japan case, which I had an idea was generous but it sounds like it is more generous than I thought.

Unemployment insurance is a joke though, capped out at about $1200/month, and you get about one month for each year you have been paying into the system. This of course can't be compared to the case in Australia where it's not really insurance.

[MayDay]

My H and I were both laid off a combined 4 or 5 times between 2007 and 2012. At some point you lose track. 

We got the following:

1.  Absolutely nothing
2.  Absolutely nothing, including no vacation owed
3.  Absolutely nothing
4. 6 weeks pay

This was all engineering in the US.  The 6 weeks pay was a large corporation and the rest were small companies that completely folded in the recession, so there was no money to pay anything.  I believe in huge 6 week pay situation it was something like 2 weeks pay per year of service, although it's now been long enough that I don't remember the details. 

[bacchi]

heh...from the title I thought this thread was going to be about setting up redundant systems to help you survive in a 2008-style GFC (I dunno, two houses, funds at multiple banks?)

I thought this thread was going to be about Ground Fault Circuits from 2008 and how to use two of them to ensure that power continues flowing.

[deborah]

Deborah thanks, this is the kind of information I need to know. I only know the Japan case, which I had an idea was generous but it sounds like it is more generous than I thought.

Unemployment insurance is a joke though, capped out at about $1200/month, and you get about one month for each year you have been paying into the system. This of course can't be compared to the case in Australia where it's not really insurance.

The one I quoted was an existing Australian Public Service certified agreement (they're all out of date because Tony is insisting on no pay increase, increased hours and removal of any perks, so none has even been voted on). I think the finance industry has a better deal in general, but the Public Service one is usually a bit above mid-range. So given what I think you do, probably what I quoted is a bit under what you would be looking at.

[skyrefuge]

I thought this thread was going to be about Ground Fault Circuits from 2008 and how to use two of them to ensure that power continues flowing.

haha, your confusion was better.

And to again add something slightly on-topic, I didn't even notice the crazy 1 mo/year severance in the OP! When I was laid off from a US engineering company in 2010, I got:

- 1 week pay per year of service (including grandfathered years from previous companies, so 10 for me)
- Unused vacation
- An amount to pay for two years of COBRA coverage (which I didn't use for that purpose)

This was part of a corporate merger (our unit was not retained when our company was bought by another one), so they may have been relatively generous (for the US) just because shit-tons of money was flying around and who cares?

[dungoofed]

Yeah sounds like it is definitely a combination of local laws and industry - sorry about that, wasn't bragging or anything. I guess it explains why people continue to hang around at a company despite unbearable conditions here.

And is "GFC" an Australianism?

[deborah]

Yeah sounds like it is definitely a combination of local laws and industry - sorry about that, wasn't bragging or anything. I guess it explains why people continue to hang around at a company despite unbearable conditions here.

And is "GFC" an Australianism?

No probs - didn't take it that way, just wanted to let you know you might have some unrealistic expectations.

I'm sure everyone uses

GFC = global financial crisis.

However, none of the US people seem to understand the term

Redundancy = the money/perks you get when your employer sacks you because they are downsizing - even if it is only your job that is being removed - can include financial advice, courses on how to handle redundancy, psychological counseling to reduce the stress of losing your job as well as the actual monetary handout. When I was made redundant a number of years ago, they gave us a few courses on the above, but didn't include the counseling. Sometimes organizations give people redundancies when they just want to get rid of them, or a person has been around for a long time, and they want to give them a bit extra (I think there is some sort of tax incentive for companies as well). However, there are laws about redundancy, and there must be one less job in the company as a result, and someone cannot be doing exactly the same work.

The money you get can be fantastic, because a lot of it is not subject to tax (money you were going to get anyway is taxed, so you may have problems with that part of the lump sum). However, I think that there are also some implications for unemployment benefits, in that you can't start them for a while because of receiving a redundancy. Also, some places (for instance the whole public service) can't re-employ you for some time (2 years) if you have been made redundant from the place (any part of the public service).

[marty998]

Yeah sounds like it is definitely a combination of local laws and industry - sorry about that, wasn't bragging or anything. I guess it explains why people continue to hang around at a company despite unbearable conditions here.

And is "GFC" an Australianism?

No probs - didn't take it that way, just wanted to let you know you might have some unrealistic expectations.

I'm sure everyone uses

GFC = global financial crisis.

However, none of the US people seem to understand the term

They call it the Great Recession because it wasn't only a financial crisis for them.

For us, we just saw carnage on stockmarkets. For them, they saw carnage in job markets.

[Sunnymo]

Aussie here...was made redundant from banking in 2012 (3 weeks before my wedding, yes the timing was awful). My payout was based on 4 weeks of pay for year one of service then 3 weeks for each completed subsequent year and pro rated for additional months. Accrued annual leave and long service leave (available after 7 years of service) plus pay in lieu of notice.

 After almost 11 & 1/2 years I walked away with almost a year of pay. The sucky bit was watching the 80 or so days of accrued sick leave just disappear in to thin air. Not paid out, couldn't cash it out.  In comparison my husband would get his sick days paid out and while still working can cash it out once a year as long as he maintains a minimum balance after the cash out, this becomes almost a second bonus each year if he stays healthy.

Edit - post #50 - mustache level upgrade!
Sunny