In a dismissal, how to manage your liquidation?

A layoff represents the loss of our main income, although the liquidation we receive can give us a little margin. You have to know how to handle it.

A layoff represents, for many, the loss of their main (or only) source of income. It can happen for many reasons: from financial problems of the company, changes in its needs, to poor performance on our part, among others.

Receiving that news is like a bucket of ice water because the dismissal also happens suddenly and unexpectedly. It’s true: some companies plan and give notice in advance, but the tendency of many companies is to do it at the moment, to prevent someone, angry, from seeking to take confidential information.

What to do in case of a dismissal?

If we are in a serious species, which recognizes our contribution as employees, we will usually leave with a severance check, in addition to the severance pay that corresponds to us. Together, both concepts are known as liquidation.

That is why the first thing we must do is always behave as professionals and even thank the company for the good treatment they are giving us at all times, including during the departure.

Now, each country has its laws, which is why I will talk about the Mexican case here. For readers from other countries, you can skip this section as your case will be a little different, but continue reading below where I talk about how to handle liquidation because that does apply to you and is very important.

How is the worker compensated in case of dismissal?

There are two scenarios:

Justified Dismissal

Justified dismissal can occur for certain reasons established in the Federal Labor Law that refer to the misconduct of a worker, for example:

  • Cause damage to facilities.
  • Manifest violent behavior, verbal or physical offenses.
  • Behaviors that compromise the safety of the company and other workers.
  • Reveal confidential information to the detriment of the company.
  • Unexcused absences, among others.

In that case, only the settlement and the seniority premium apply. The company is NOT obligated to compensate us. If we really committed the act, we must be mature enough to bear the consequences.

What does the settlement include?

The next:

  • Pending salary (corresponding to days worked but not yet paid to us).
  • Proportional part of Christmas bonus.
  • Proportional part of vacation premium.
  • Vacation days to which we are entitled, but which we had not yet enjoyed.
  • If the company had the savings fund benefit, the accumulated balance to date.
  • If the company had a defined contribution retirement plan, we are entitled to the total of the contributions that we made, together with the returns generated.

However, it is possible that we are entitled to all or part of the contributions made by the company, according to the rules of the plan (usually it depends on our seniority in the company, however it should be noted that in the event of justified dismissal, the majority of plans eliminates such possibility).

How is the seniority premium calculated?

At the rate of 12 days of salary (capped) for each year of service. The limit in this case is only 2 minimum wages. For example, if the daily minimum wage is 73.04 pesos, double it is 146.08, for which the seniority premium will correspond, at most, to 1,752.96 pesos per year worked.

Unfortunately, many people take it badly and decide to fight in court seeking compensation. I don’t recommend it, because it’s like rain on wet. In addition, we will surely come out of it with a lot of mud on our shoes. As I said before: a professional attitude is always the best, even if we were wrong and it hurts us.

Unfair dismissal

In this case, we are responsible for the severance pay and the seniority premium, plus an indemnity that is 90 days of integrated salary. Some companies also integrate, in certain cases, 20 days of integrated salary per year worked.

Why not all? It is a controversial subject and of interpretation. According to the Federal Labor Law, when a worker is subject to unjustified dismissal, he can choose to demand payment of severance pay (90 days of integrated salary), or he can request to be reinstated.

If the worker chooses reinstatement and the company refuses, then he would have to pay in addition, the famous 20 days per year. Of course: all this can be done before the labor authority who usually offers a conciliation (reach a middle ground).

That is why many companies usually offer only compensation, thinking that the worker will not demand their reinstatement. Much depends on their labor policies and legal strategies.

In order to deliver the liquidation (compensation and settlement), the company will ask us to sign several documents, in which we acknowledge that they have paid us everything that corresponds to us by law and therefore, we will not make any claim against them before the labor authority, releasing them from all liability.

If we are given a full settlement, as it should be, there is no reason not to do it: let’s sign and leave a relationship alone. Moreover, let’s take the opportunity to request a letter of recommendation that can be very useful later.

Otherwise, let’s look for a good legal adviser (and take care of their fees, lest the broth cost us more than the meatballs). It is important to take into account that in such a case, the employer must pay the lost wages: that is, from the date of dismissal until the worker is reinstated or compensation is paid, depending on the choice made by the worker when suing.

How to handle your dismissal and liquidation?

The first thing after termination is to stay calm and as I mentioned, to act in the most professional manner that we can. This will open doors for us and will make it easier for us to obtain certificates, letters of recommendation, and good references to be able to find another job.

But we must also accept our new reality and get down to business. This means talking to the family so that they understand the situation, starting with a couple of courses. Also begin to make use of the personal relationships that we have built over time, in intelligent ways, to explore potential options. Design a search strategy.

A lot of people make the mistake of updating their resume and handing it out like a flier. Or start sending emails and making calls to contacts to ask “as a favor” if there is an opportunity in your company. That is a big mistake because it indicates that we do not have a strategy and shows desperation. That is also why the results, in general, of doing this are poor.

Rethink our priorities: liquidation

Obviously, faced with the reality of the dismissal, our priorities change. If we were thinking of going on vacation, it may be time to postpone the plans. Today more than ever we must focus on the most important thing (for many it is the well-being of their family).

Let’s try to minimize non-essential expenses. Also for now we will have to suspend our savings for retirement and contribution to other goals.

Meet our commitments: liquidation

But we do need to continue to honor all of our financial commitments. Many people stop paying their debts and this is practically digging a bigger hole: between ordinary interest and late charges, we will make a much bigger problem.

Here I must make a parenthesis to insist: a dismissal is something that happens. It has happened to me. That is why it is not good to have consumer debt (credit cards or personal / payroll loans). Although one can afford them. Not even “months without interest.” Because they involve a commitment and they affect – as I always say – future cash flow. Which we won’t have if we lose our job.

If we have a mortgage loan, they usually include unemployment insurance. You have to use it: start the procedure as soon as possible so that you do not have to make payments until we find another job (or the insurance coverage ends). What we must do is separate the money from the payments as if we were making them. In this way, if we have not found a job when the benefit ends, we will have money saved to continue with these payments for a few more months.

Think about the opportunities that open up

Many times one focuses on the negative aspects of a layoff because they imply the loss of our income. But it is also true that perhaps we were in a company or position that no longer had growth. I have personally seen people who lost their job and found an even better ones in a short time. They were people who generated a lot of value for their organization and it was noticeable: when they were available, other companies began to look for them.

I have also seen cases in which people took time to find work. They prepared themselves to become high performers. When they entered their new organization, they quickly rose to prominence and their careers took off. They already knew: they didn’t like their job, but they were also afraid of losing it, for the security of receiving a fixed income.

What we should not do in a dismissal: liquidation

It’s unusual but I’ve seen it, in very close circles. There are people who use their clearance to buy a late-model car. Or that they take the kids on vacation to Disneyland. Or they invest it all in a business that they don’t know will work. As if it were a bonus and not a liquidation. This is the worst mistake one can make and it is also a way of avoiding our own reality.

However, it takes time and requires, as I mentioned, a proper strategy. Part of it is carefully managing our liquidation.


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