Business Law
Loss of employment is a regular occurrence in many economies, for various reasons such as a business’ internal or external factors.
For example, a company can lose a major contract or major market share due to market dynamics. Its business may be affected by technology, new laws and new entrants. There are too many risk factors.
Job loss
Loss of employment comes in different forms, such as the following:
Retrenchment
Mutual separation
Dismissal through actual or alleged misconduct.
Expiry of contract and its non-renewal
Retirement
Resignation by the employee.
Financial consideration after job loss
There are several financial considerations one needs to take into account. Some of them include the following:
How much one can get from an employer upon termination of employment.
Dealing with outstanding obligations such as loans, monthly commitments, etc.
Managing living expenses.
Legal fees in the event of a disputed termination.
Use of savings.
Dealing with assets such as investments, motor vehicles and immovable properties.
Securing another job.
Trying business.
Terminal benefits
What one gets upon termination of employment depends on the circumstances. Retrenchment leads to a package and at times, there may be room to negotiate more, especially at senior levels.
Mutual separation results in a negotiated package. Not much may be available upon retirement, resignation, dismissal or expiry of contract.
Where possible, the employer can be engaged and negotiation skills may make a difference. There is a golden rule that “good behaviour pays” as a focused employee may be listened to.
There is a need to balance between negotiating and demand, always watching the power dynamics. What may be negotiable includes cash payouts, write off of loans, purchase or free transfer of a motor vehicle, etc.
Dealing with outstanding obligations
This can easily be a source of bother and stress. For example, upon losing a job, one may have personal loans with the employer or his/her bank and there is the danger of being asked to settle in full. It is advisable to negotiate repayment of such loans if possible.
Initiate the negotiations. Other commitments may include accounts for furniture, medical aid, funeral cover, etc. Plan how best to retire those commitments, especially those that are interest-bearing.
Managing living expenses
It is said that appetite grows with eating! Assured salaries and benefits result in elevated standards of living or lifestyle.
Not a bad thing if that can be afforded and sustained. Some of the recurring expenditures to cut down on include the following:
Rented accommodation. Even own accommodation may be rented and moved to another smaller property.
Preferred schools for children.
Preferred food and drink.
Preferred clothing.
Expenditure for purposes of keeping up appearances.
Medical aid.
Entertainment.
When a job has been lost it is important to reconcile with the reality that a source of regular income has been lost. It is not fiction. Hope is not a strategy though it is important to have it.
Guided or cautious optimism
There is a need for what accountants call conservatism or financial prudence when spending. Some benefits will be lost when employment is lost and these may include use of a company car, fuel, medical aid, school fees, airtime and Wi-Fi.
I know several people who have been frustrated when their families are slow, failing or refusing to adjust their expenditures downwards, thinking the past still holds, in other words, refusing to lower their lifestyle.
If this is not addressed, it can lead to digging a hole and severe financial pressure in the future when resources are rapidly depleted.
Legal fees
It is advisable to manage legal fees where termination of employment is being contested.
Savings
If you are lucky enough to have savings, it is advisable to use them wisely. It is said that a foolish man and his money shall soon part ways! Those who play golf know that it is easier to make mistakes than to have a good score. In golf, a bogey is easier than a par or a birdie.
Dealing with assets
This is one difficult area. There can be a need to sell to pay off obligations such as loans.
However, selling to fund lifestyle needs careful consideration. It is better to sell assets such as cars or those that do not give a reasonable return and keep those that generate income and live off the income. Failure to lower expenditure during difficult times may interfere with the preservation of assets already acquired.
Securing another job
The job market is usually or can be unkind, especially for people past their prime. It gets worse as one goes up the corporate ladder due to the limited positions.
It is a pyramid. I know some people who have taken up lower-level positions to survive and have climbed up again.
Make a plan to move to another job and be practical about it.
Try business
This is another option. One is encouraged, but reminded that business needs capital. Business is a jungle. Its war. There are no guarantees. You eat what you kill.
Conclusion
I advise prudent financial management upon loss of a job.
I rest my case!
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), ACCA (Business Valuations), MBA(EBS, Heriot-Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, a chartered accountant, insolvency practitioner, commercial arbitrator, registered tax accountant and advises on deals and transactions. He has extensive experience from industry and commerce and is a former World Bank staffer in the Resource Management Unit. He was recently appointed to sit on the Council of Estate Administrators in Zimbabwe. He writes in his personal capacity. He can be contacted on +263 772 246 900 or ghofisi@ hofisilaw.com or gohofisi@ gmail.com. Visit www//:hofisilaw.com for more articles.-herald
