Double Or Triple Your Income By Engineering Your Layoff

Islas Mujeres, MexicoOne of the reasons why I am so enthusiastic about teaching people how to engineer their layoffs is due to the potential doubling or tripling of their incomes!  You can essentially earn more than you’ve ever earned before.

I know some of you are scratching your heads wondering what on earth I’m talking about since being laid off means no job income, unless we count unemployment benefits.  Don’t worry, we’re not talking about unemployment benefits as I argue why being laid off could be one of the best financial and mental decisions ever.

If you’re one of the hundreds that have read my book, How To Engineer Your Layoff, you’re now prepared to take the leap of faith and negotiate a severance from your employer.  You’re no longer afraid of your manager, human resources lady, or the legal and compliance department that watches your every move to protect the firm.  You’ve essentially leveled the playing field and equipped yourself with knowledge and a framework to succeed.  You also understand that you could very well be doing your firm a big favor.

I want to provide you a very common example of how I worked with one of my clients to successfully engineer her layoff and double her income.  I’ll then highlight how another client managed to triple his income.  Read on.

HOW TO DOUBLE YOUR INCOME BY QUITTING YOUR JOB

Marie worked at one of the major department stores as a clothing buyer for five years.  She made about $70,000 a year, but wanted to do something different with her life now that she was 30 years old.  She spent every year in her 20’s studying, following, and participating in fashion.  Unfortunately, she got tired of the industry while her colleagues began to get on her nerves.

Marie and I worked on a six month game plan to engineer her layoff.  Part of the plan was to discover new companies she’d like to work for.  Marie made a list of five companies in the internet space, three companies in retail, and one company that was a direct competitor.  The idea was to get her talking to people at her target firms over the next six months so that when she finally got laid off, she’d have already established relationships and won’t come across as desperate when she asks for a reference.

About six and a half months after we launched our plan, Marie got laid off with the following severance package:

* Two months of base pay as part of the California Warn Act: $11,667

* 10 weeks of severance: $13,461

* Six months of COBRA (Health Insurance): $2,100

* 15 days of unused vacation: $2,876

* Eligibility for unemployment benefits: $1,800 a month

Total Severance Excluding Unemployment Benefits: $30,104

The reason why we’re excluding unemployment benefits is because Marie got a new job two weeks later at a startup for the same salary!  Her severance of $13,461 was paid in a lump sum a week after separation.  Meanwhile, I recommended Marie negotiate a start date 1.5 months from the offer so she could have a 1.5 month vacation fully paid for by her old employer thanks to the WARN Act!

Marie took my advice and essentially doubled her income for three months once she started thanks to her severance package.

HOW TO TRIPLE YOUR INCOME BY QUITTING YOUR JOB

Joe is an investment banker who has worked for his same firm for eight years.  He’s sick of the industry due to the long hours, declining pay, and lack of fun.  Things were a blast in the late 1990’s.  Now, his industry is under the microscope of regulators, politicians, and the public.

Joe’s compensation structure is made up of a base salary of $200,000, a discretionary bonus that ranges from $0-$350,000, which is ultimately split 50% cash, and 50% stock.  The stock component vests by 33% a year for three years.  As you can tell, after three years, Joe’s stock portion can equal as much as his entire average year end bonus!

I also work with Joe to set up a plan to engineer his layoff based off the framework in my book which he’s read.  Since Joe already got paid his bonus this past February, he was anxious to make his exit as quick as possible.  Hence, we worked on a two month plan to get him the hell out.

In late April, Joe successfully engineered his layoff with the following severance package:

* Two months of base pay as part of the California Warn Act: $33,333

* 24 weeks of severance: $92,307

* Six months of COBRA (Health Insurance): $3,600

* 25 days of unused vacation: $13,698

* Eligibility for unemployment benefits: $1,800 a month

Total Severance Excluding Unemployment Benefits: $139,338

$139,338, excluding $1,800 a month in unemployment benefits is a pretty penny.  Joe would be a fool to quit, not only because he wouldn’t get the severance package, but also because he’d miss out on his three years of deferred compensation in the form of stock!

Joe has roughly $220,000 in company stock which gets vested in roughly $73,333 increments a year over the next three years.  Each spring, Joe’s Scottrade account will receive net proceeds after tax of roughly $51,000.

By engineering his layoff, Joe is now triple dipping his income because earlier this month, Joe joined one of his long time clients  on the corporate side!  Joe earned $92,307 in a lump sum severance, is now earning an undisclosed amount at his new job, and he’s got three years of deferred income coming in at $73,333 gross a month no matter what!

PLAN AND PLAN SOME MORE

As you can see from the two real life examples above, engineering your layoff can double or even triple your income for a period of time.  I talk to so many people who are afraid of getting laid off because they don’t know how to negotiate, nor do they know their powerful rights as employees.

My book encourages you to plan, build relationships, and execute strategies I’ve used for my own six-year separation package, and the strategies used with many other clients.  The playing field is completely unfair if you plan to quit your job.  I know because I was a manager for the last five years of my career.  I went through an intensive amount of managerial training and have my HR department and Legal department on my side.  Employees, on the other hand, have nobody but themselves.

Knowledge is power.  It’s the only way you’ll be able to negotiate your worth upon departure.  You must devise a plan and work on it over the normal course of three to six months.  Some of you might take longer, like me who took two years to engineer my own layoff.  There’s no magic bullet to leaving your job with a nice goodbye gift.  You’ve got to work for it.

Again, please never quit your job if you’ve been there for longer than even just a year.  You will leave real money on the table to your employer’s delight.  One friend quit his job because he was so confident he could find another job for similar pay within six months.  Well, it’s been nine months now and he’s still jobless, with no unemployment benefits, and a completely spent emergency fund.

Another friend quit her job because she wanted to leave on “good” terms just in case her freelancing failed and she wanted to come back.  Her freelancing efforts did fail and she’s also burned through all her savings.  To add insult to injury, her old employer has a hiring freeze and won’t let her come back.

I don’t know what will become of my two friends, but I will certainly try and help them out.  Don’t be so cavalier with your career or life by not researching all your rights and arming your brain with knowledge before quitting your job.  You are worth more than you think!

Readers, what would you do with an extra $13,000-$100,000 dollars in severance money if you had another similar paying job lined up?  

Do you think people are unaware of their rights as employees, and therefore are unaware of how large severance packages can be?  

Why don’t more people try and engineer their layoffs? 

Note: If you’ve barely worked at your job for a year and are miserable, suck it up!  You’ve got to pay your dues, because nobody will care that you want it, and you want it now.  The good thing is you now have the opportunity to empower yourself with knowledge and devise a plan.  There is no magic Genie who is going to save you.  You’ve got to put in the effort once you’ve armed yourself with knowledge.  Nothing good comes easy, but it’s worth it in the end!

Photo: Islas Mujeres Sunset, 2011, SD.

Regards,

Sam

How To Make Money Quitting Your Job

 

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

You can sign up to receive his articles via email or by RSS. Sam also sends out a private quarterly newsletter with information on where he's investing his money and more sensitive information.

Subscribe To Private Newsletter

Comments

  1. says

    I never thought of all the possible options I may have if I get layed off. I’ve been with my company for 6 years and just assumed I would get roughly three months pay if I were let to. 2 weeks for every year worked. You’re California Warn Act is a bonus. I don’t know if we have something like that her in Ontario, but it’s worth looking into.

    • says

      Definitely look into it. Six years is a perfect amount of time at one company to engineer your layoff if you want to do something else. A respectable amount of time where your managers and HR will work with you. Good luck!

  2. says

    Wow! I didn’t know that you could get that much to be laid off in the USA! Unfortunately, it doesn’t work like this in Canada (we get 4% of our income + a package (depending on the job) but not 2 months as California law states!). It’s almost an incentive to get laid off and pick a similar job elsewhere ;-)

    Quick question; why the vacation pay is smaller than the regular pay?
    ex: 10 weeks of severance at $13,461 makes $1,341 per week
    but 15 days of vacation at $2,876 makes only $958/week (assuming you work 5 days a week, right?)

    it’s the same thing for the second example. is there something you don’t calculate in the vacation week?

    • says

      The beauty is, the 2 months WARN payment isn’t even the severance! I suggest researching more on Canadian labor laws. You’ll be pleasantly surprised.

      As for your second question, it depends on how many weeks you think is in a year, and how many days are in a week.

      In America, there are 52 weeks a year, 7 days a week, and 365 days a year when we amortize pay. Hence, take SALARY / 52, and SALARY / 365, multiply by the number of weeks or days to get your package.

      It is mandatory by law that an employer must pay for unused vacation, even if one quits. However, it’s not always the case of you quit, and the company is falling on hard times. You might have to fight to get the vacay pay, but you should get it unless the company goes bankrupt.

      • says

        You are getting paid for weekends? We are usually getting per hour worked. Even when you are not paid per hour, there is a “normal workweek” of 35, 37.50 or 40 hours in a week to calculate an hourly wages. If you get 2 weeks of pay it will equal to 10 days of work. if you get 15 days of vacations, it’s 3 workweek.

        I’m surprised there are so many difference between the two countries! Note: we don’t get severance package for regular jobs. Trust me, unions would make sure their guys get the biggest part ;-)

        Speaking of which, do you have unions? they are pretty strong in Quebec unfortunatetly :-(

        • says

          I guess you can say these two examples get paid weekends, but that’s just semantics. There is no “normal workweek” considered by their company, nor was there one for mine. It was annual pay, and bonuses for a salaried employee. For hourly waged employees (generally lower level), then calculating per hour works.

          Vacation days is vacation days is workdays off. So, 15 days of vacation days is 15 days. You can say “three weeks off”, but then that’s misleading. What if one week has two public holidays, and another week another holiday? Is that not three and a half weeks off then if you take those weeks off?

          Everybody should check with HR or their employer handbook to see how they are compensated. The point is to empower people with knowledge.

          There are unions in the US, but their strength is slowly weakening and are a minority now I believe.

  3. says

    Congrats on your book helping others make so much money! I am curious what the California WARN act is and if other states have similar programs… but I take it you detail this information in your ebook?

  4. says

    I see today, Yahoo’s Levensohn is “moving on”! He apparently negotiated a great deal. I think many of us overlook negotiating in certain situations. Everything is negotiable! Unfortunately, I cannot take advantage of this in teaching.

    • says

      Yep! Senior folks engineer their layoffs ALL THE TIME. They can afford lawyers to negotiate great terms for them. The common person, cannot.

      The best is when pro sports players like baseball get their full contracts paid out and get cut. They then find another team and really double up their income!

  5. says

    I, too, wonder what the WARN act is and will probably take a look. Never heard of anything remotely like that here in Michigan, so I’m guessing that if you’re not in California or a state like that, you can take that off the top.

    I also come back to the question of why employers would agree to lay you off and pay you weeks and weeks of income when they get nothing to show for it. If they keep you on, they at least get the productivity out of you? If you’re performing that poorly, they will fire you and you won’t be eligible for the severance.

    This also seems to assume that the companies are in the process of wanting to reduce headcount. I can’t see a growing company saying, OK, instead of using our resources to hire more people we’ll pay someone not to be here (and likely have to replace them anyways, essentially doubling their cost). You have to be ‘lucky’ to be with a company or department willing to downsize. In which case, yes, I could see this strategy working.

    • says

      Your response is one of the main reasons why I wrote the book. So many people do not know their rights! I don’t know whether it’s because people forgot to read their employer handbook, aren’t willing to do research online, but it baffles me that not more people do research when it comes to making such a big life change.

      Here is the Michigan WARN Act info on Michigan’s Department of Tech, Labor, Management, & Budget: http://www.milmi.org/?PAGEID=67&SUBID=189

      Companies lay people off every year, especially in the past three years.

  6. says

    Sam, Although this wouldn’t work for me, as I am a principal in my company, it is an intriguing strategy. I think the examples add to the picture, as on the surface it’s a tough concept to grasp. I’m sure your book lays things out with more detail. Good luck in your new endeavors.

    • says

      Hi Barbara, how do you know it wouldn’t work for you? What is a Principal? The higher up you go and the longer you are at the firm, I’ve found the easier it is to engineer your layoff.

      • James Brian says

        Principal is usually a more professional way of saying Owner. I use it myself as being President of a 1 person company sounds pompous.

        – you fixed the spammer checkbox message

  7. says

    California is a great place to live because of the weather and diversity, but not so much if you’re running a business. But the state is committed to helping employees through it’s extra layers in the WARN act and all the other hoops it makes businesses jump through.

    That’s so neat you’ve been able to help so many people Sam!

    • says

      Thanks Sydney! It does feel so great to open people’s eyes and allow them to recognize their rights! It’s as if workers have been zombies for all these years, doing what their told, and not thinking for themselves.

      I want to empower the millions of people out there who work at a traditional 9-to-5 job for a living who want to do something else.

      CA is very employee friendly, but so is New York, New Jersey, Michigan, Colorado, and a whole host of other States.

      Then we go to the Socialist countries like France, Belgium, Netherlands, Canada, and Australia, and the benefits are even more amazing! South Korea is pretty darn good too, where employers almost cannot fire you without serious documentation for the past two years!

      • James Brian says

        That all sounds great but the harder it is to fire someone, the less likely a borderline talented person gets hired in the first place.

        • says

          That’s why many employees are doing their managers and HR a favor by engineering their layoffs. It is becoming harder and harder to fire people, and not b/c it’s just personally hard to do.

  8. says

    wow, this is a great strategy. But I’m curious, how does this relate to public workers? For instance, with teaching, each year thousands of teachers get “laid off” I believe without a severance package. I’m not entirely clear on this since as a sub I don’t have the same benefits as RIF’d teachers. Does this plan transfer over to government employees?

    • says

      The best advice I can give you is to actually ask a teacher what her experience and package was like when she got laid off. Reverse engineer the process and use my book’s framework. The plan of planning, ascertaining important information which your superiors will hope you dont know, and developing relationships with the right people will transfer over to the public works for sure. Things may be just more structured.

  9. JimL says

    At my level, severance would be 12 month salary and bonus, plus pro-rated bonus for that year, 12 months benefits, acceleration of pro-rated LTI, and job search assistance. If they decided to let me go, I would have a job lined up in days. Unfortunately, it is rare for them to let people go at my level.

    • says

      That’s great package!

      You can either wait and hope to get laid off when the time comes. Or you can prepare and read and put your destiny in your own hands when you really want to make a move.

  10. says

    So here’s the deal…..I’m a bedside, emergency room nurse, and I’m “per diem” at that, meaning I don’t get benefits (my husband provides health insurance for me) and I don’t have an office Job. I don’t think that it would even be possible for me if I wanted to. Have you heard of any nurses doing this?

    • says

      I haven’t specifically heard of nurses and pier firm cases. What are the other employment options you can have as a nurse?

      My fundamental principle is that you do have more rights than you realize. Start with the hospital HR or administrator.

  11. says

    That is quite impressive. I am going to do some research to see if the warn act applies in my state and if I get closer to switching career paths, I may ask your advice.

  12. says

    I love that hundreds of people have read your book! It’s really inspiring — and I bet it’s a great read. It wouldn’t work for me, since I’m an hourly employee who does not receive benefits, but I do love the idea of engineering a layoff rather than quitting.

    • says

      It definitely warms my heart to see people empower themselves with knowledge that could change their lives. I like seeing people do something about their situations.

      With no benefits, what do you do for tax deferred retirement savings, dental, health care?

    • says

      Unless you plan to work forever for your same company, there will always be a point of exit.

      Engineering your layoff is not easy. It’s a delicate process that takes some time, hence why I wrote the book.

  13. says

    I wonder if the packages are so generous because California is a liberal state. It’s policies are against businesses and pro labor. But, if you come to South, it’s all together a different ball game. Have you given any thoughts to different state laws, and how applicable your strategy is for other states? I’d love to hear your thoughts.

    • says

      My strategy is based on developing the right relationships to make the layoff happen. Hence, it applies across all States. Furthermore, each State has their own labor laws, all of which will reveal more rights than an employee knows if they take the time to learn the laws as all the HR and legal people have learned.

  14. says

    You are doing everyone a valuable service! In the middle of 2009, I saw the writing on the wall. Another department was getting laid off with a month of pay for every year of service. I had four years (4 months pay) and some unused vacation days. In the meantime, I was lining up my next gig with a slight pay increase. Sadly I didn’t know about WARN. It was scary at the time, but it was the best move at the time. What also pushed me was there was suspicion that one of my team members was on the chopping block. I took the bullet, moved on to green pastures, and he’s still happy there. Everyone won!

  15. Connor says

    Odd that you list that both of these people are “eligible for unemployment benefits”. For that to be true in CA, they must “Be unemployed through no fault of his/her own”, which certainly isn’t true if they’ve engineered their layoff.

    I recommend researching these issues at http://www.edd.ca.gov/unemployment/Eligibility.htm Knowledge is power, and a careful research of eligibility requirements would preempt confusion that some people may have that your program is little more than another way to usurp extra money through dishonesty.

Leave a Reply

Your email address will not be published. Required fields are marked *