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I thought of a few things listening to this cast.

First, the HBS club of NY calculates that professionals in transition search for about one month for every $10,000 in salary. So if you make 95,000 a year, expect your search to take 10 months. Your cash cushion should cover your expected time to search.

Second, the unexpected can set you back. Last time I was in transition, I took 8 weeks to get some family situation stuff in order (long story) and then went back into the job search in earnest. My first interview was in Manhattan on the morning of Sept 11, 2001. It was many months before positions re-opened and I could really get back into my search.

And if you do want a home equity line of credit to fall back on, remember that they won't give you one if you're not working. So you have to have that lined up before you need it.

John

rwwh's picture

My first reaction: This cast is very much based on USA situations. I often need to translate into European/Dutch situations, but this cast is impossible to translate.

In The Netherlands, in a layoff situation, the company will in general need to pay 1 month of salary per year of your experience at the company. And many people will be eligible to 70% of your last salary as unemployment benefit for a while.

The laws around layoffs are currently under heavy discussions in the Netherlands.

stephenbooth_uk's picture

[quote="rwwh"]In The Netherlands, in a layoff situation, the company will in general need to pay 1 month of salary per year of your experience at the company. And many people will be eligible to 70% of your last salary as unemployment benefit for a while.[/quote]

Similar in the UK, except the legal minimum is one week for every year of service (although in almost every case it's possible to improve on that unless the company is really circling the drain) a portion of which is paid out of central government funds.

Another requirement here is that, because a portion of redundancy payments are government funded, if the company has or creates a vacancy that is similar to the post they made redundant (posts are made redundant, not people, the post just happens to contain a person), 80% match on skills required is the usual rule of thumb, within 6 months of the redundancy then they have to offer it to the person/people they made redundant before they can look for external candidates and take them on if they're interested (unless there's more former employees in scope than vacancies, in which case they can go through a selection process but ring fenced to those people and they have to select from that pool). if they don't then the redundancy is an automatic unfair dismissal so they can be made to pay a settlement to the unfairly dismissed employees and a fine to the government. In theory (although I'm not aware of it ever happening) the directors could even face criminal prosecution for fraud (governments really don't like other people taking their money and tend to come down hard on those who break the rules to do so).

Stephen

suedavis's picture

[quote="jhack"]First, the HBS club of NY calculates that professionals in transition search for about one month for every $10,000 in salary. So if you make 95,000 a year, expect your search to take 10 months.[/quote]

Wow, that's wildly out of line for what I've seen in technology... or at least for individual contributors in technology; I'm new enough to technology management that things may be different here. But even then, the job searches that got me my two most recent technology management jobs lasted five weeks and (a fraction of) one day, respectively.

I guess I should plan for longer searches as I advance....

ccleveland's picture

Rob and Stephen:

BLUF: I still think you should keep 6 months of liquid assets...even in the Netherlands.

I think the point of the podcast is that you need to have enough "guaranteed," liquid funds for at least 6 months. If your government has a legislated severance/redundancy payment, then you could account for that by deducting from your 6 month requirement.

From Rob's e-mail, it sounds like in the Netherlands, if you've worked for a company for 6 years, you are "guaranteed" to get at least 6 months severance + additional unemployment.

Of course, I wonder, what happens if the company doesn't have any money? Or what if there's a dispute about fired for cause vs. fired because of "redundancy"?

Frankly, it's probably the safest bet just to keep 6 months of money in some kind of accessible account...even with government "guarantees."

CC

stephenbooth_uk's picture

[quote="ccleveland"]I think the point of the podcast is that you need to have enough "guaranteed," liquid funds for at least 6 months. If your government has a legislated severance/redundancy payment, then you could account for that by deducting from your 6 month requirement.

...

Of course, I wonder, what happens if the company doesn't have any money? Or what if there's a dispute about fired for cause vs. fired because of "redundancy"?[/quote]

Here in the UK the government underwrites the 'one week per year' so if the company doesn't have any money the government pays the lot.

To fire someone for cause takes a specific process and, frankly, unless you're guilty of a criminal offense (assault, theft or fraud), or are ignorant of your rights and let management get away with it, is difficult for an employer to do. The process is very different from a redundancy. Fired for cause they have to produce proof that you have commited an act of gross misconduct or have a documented history of failure to perform and their attempts to address it, redundancy they have to prove that the post you are in is redundant and that they couldn't restructure to redistribute tasks to keep you in work.

Also bear in mind that if you're unemployed inthe UK then, so long as you can show that you are making reasonable efforts to find work, you're eligable for unemployment benefits (about $200 a week I believe, not a lot but a darn sight more then nothing) plus help with rent and there are various programmes you can access to get back into work. On top of that you have the same rights to medical care &c that an employed person has (so no worries about losing medical insurance).

Stephen

ccleveland's picture

Stephen,

Maybe that's all part of the reason my sister-in-law now lives in the UK! :)

I see that it's an individual choice based on that person's situation. It sounds like in your case, to follow the recommendation, you would need 6 months minus one week of your salary per year worked minus unemployment benefits.

CC

jhack's picture

The HBS number was not specific to technology - it was for senior managers and executives across all functions.

The basic rule is: the more senior you are, the longer your search.

John

rwwh's picture

[quote="ccleveland"]From Rob's e-mail, it sounds like in the Netherlands, if you've worked for a company for 6 years, you are "guaranteed" to get at least 6 months severance + additional unemployment.

Of course, I wonder, what happens if the company doesn't have any money? Or what if there's a dispute about fired for cause vs. fired because of "redundancy"? [/quote]

There is no guarantee: it will normally be a judge ruling, but his rule of thumb is what I indicated. There is a correction factor that can be applied. Under normal circumstances, the factor is 1.0. If the company can show that it does not have enough money, the correction factor can go down. If the company can show that it is the employees own fault, the factor could be 0. In some cases, the factor can be above 1.0.

Firing someone "on the spot" (literal translation of the Dutch term: on standing foot), is regulated very strictly in the Netherlands. This can be done only in case of severe misconduct. I am assuming that nobody here will ever be in that situation.

stephenbooth_uk's picture

[quote="rwwh"]Firing someone "on the spot" (literal translation of the Dutch term: on standing foot), is regulated very strictly in the Netherlands. This can be done only in case of severe misconduct. I am assuming that nobody here will ever be in that situation.[/quote]

Here in the UK you can't even fire someone on the spot for gross misconduct. You can suspend them on full pay whilst an investigation is done then call them into a disciplinary hearing at which they are entitled to present a defense and have representation, only after that can they be dismissed.

I have represented (in my union role) 3 people at such hearings in the past 18 months, and won (i.e. prevented the person from being sacked) each time. I'd estimate the cost of each hearing (including the person's salary whilst on suspension, salary costs of the people at the hearing, salary costs of the investigating manager, salary costs of wittnesses &c) was well in excess of £100,000. In two cases if the manager who had brought the charges had applied Manager Tools processes (O3s, coaching, feedback &c) the case would never have reached the suspension and disciplinary stage, the third case should never have got to that stage anyhow. So that's at least £200,000 that applying the most basic of the Manager Tools behaviours/processes could have saved.

Stephen

garyslinger's picture

[quote="stephenbooth_uk"]So that's at least £200,000 that applying the most basic of the Manager Tools behaviours/processes could have saved.

Stephen[/quote]
While I fully support the MT methods, I'm obliged to point out that not having those onerous requirements and union involvement, and allowing the business to hire and fire as it sees fit, bar discrimination, would also have saved that money.

One of the reasons I like "right to work" legislation here.

stephenbooth_uk's picture

[quote="garyslinger"]One of the reasons I like "right to work" legislation here.[/quote]

I think it's a question of perspective, I prefer the freedom from being fired for capricious reasons.

Stephen

garyslinger's picture

[quote="stephenbooth_uk"]I think it's a question of perspective, I prefer the freedom from being fired for capricious reasons.

Stephen[/quote]
And yet, in my experience, I find that really doesn't happen all that often, at least not in "professional circles". It can lead to some interesting contracts too - at my last employer, I was on a one-day notice period, from both sides. That was a personal first. Didn't concern me in the slightest.

I'm a manager. I have a responsibility to my company. I don't plan on firing anyone capriciously, but if I have to deal with gross misconduct, I'm not paying that person a salary while I hold a multi-week investigation and a hearing. That's not being responsible to the company.

If I was a junior employee, looking out for all I could get with one eye on the clock and the other on a Facebook page? (Yes, I'm casting stereotypes. Dramatic license). Then I'd have a different view of things.

stephenbooth_uk's picture

[quote="garyslinger"]but if I have to deal with gross misconduct, I'm not paying that person a salary while I hold a multi-week investigation and a hearing.[/quote]

In the vast majority of cases, if the employee is actually guilty of gross misconduct, a multiweek investigation whilst they're on suspension with pay isn't necessary. If you've got enough evidence to suspend them then you've usually got enough evidence to fire them. In my experience (cases I've dealt with myself, cases I've assisted other reps on and cases that just happened to be going on around me) the length of the investigation period is usually inversely proportional to the strength of management's case. Where the case has been strong the investigation has lasted days, maybe a week, but where the investigation has been long the case has been weak. It seems that if the investigating manager can't find evidence to justify a sacking they keep on looking until they find something or enough minor somethings (largely what M&M describe as 'Potato chips') that it looks like they were justified in suspending the person. They seem incapable of just saying "Oops, our mistake, they're clean. Oh well, no harm done."

Stephen

karaikudy's picture

In Indian scenario, if you are laid off, its 15 days salary (all components) for every year of service completed for 10 years. After 10 years its one month salary for every additional year of service rendered.

There are some tax concessions too for this money.

This layoff money is exclusive of your 401(k) and Gratuity plans which is on similar lines as mentioned. Some companies (Mostly MNCs) offer Pension plan too.

Karthik.

adragnes's picture

Adding to the list of scenarios of how redundancies are handled around the world, here is how it is done in Norway.

We do not have any redundancy pay as such, but the company does have to give notice. How much depends on the contract. The usual is three months. The notice period is symmetric, you have to give the company the same period of notice when it is you who want to terminate the employment.

There are few restrictions on making people redundant as opposed to actually firing someone (which is hard, but not impossible) you cannot hire anyone into the same position or a similar position to the one you made redundant in the next year. Because of this some companies use golden “hand shakes” to get people to quit voluntarily instead.

After the notice period, in which you usually have to work, there is up to one year of unemployment insurance from the government. It gives you a certain percentage of your income the year before up to a certain amount. That amount is probably to low for comfort for most professionals and managers. After the year is over there is nothing until you have exhausted your savings at which time welfare kicks in and gives you just enough to avoid living in absolute poverty.

It seems our model is a little more flexible than the European one, but not considerably less so than the US one. Generous flexibility is one of the hall-marks of the “Nordic model”. There is considerable differences between the Nordic countries and Denmark probably has the best-functioning labour market, but the amount the government spends on training and getting people back to work would probably be ruinous in a country with high unemployment.

--
Aleksander

bflynn's picture

[quote="stephenbooth_uk"]I think it's a question of perspective, I prefer the freedom from being fired for capricious reasons.[/quote]

I don't believe I know anyone this has happened to.

If you are a positive contributor to the company, you are a value to the company and a manager would have to be an idiot to get rid of you. If you cost more than you make or you do something wrong, I hope everyone would agree that it is right and proper to be dismissed.

I include personality conflicts in "cost more than you make", where a subordinate and a manager just don't get along. One of them has to leave and although the manager is most culpable in the situation, it is the employee who will leave.

Brian

karaikudy's picture

Brian,
Very true. Happened to me once in conflict (was it War!!) with my Manager. I decided to leave and make a better fortune.

In other sense, the cost was too much even for me for the mental peace and stress brought in to home from work, health issues etc etc.

Karthik.

stephenbooth_uk's picture

[quote="bflynn"][quote="stephenbooth_uk"]I think it's a question of perspective, I prefer the freedom from being fired for capricious reasons.[/quote]

I don't believe I know anyone this has happened to. [/quote]

I do (know people it has happened to).

[quote="bflynn"]If you are a positive contributor to the company, you are a value to the company and a manager would have to be an idiot to get rid of you.[/quote]

The cases that I am aware of have typically turned out to be one of three situations:

* Manager needs to make a redundancy but doesn't want to pay a redundancy payment so finds a 'reason' to sack someone.
* Discrimination, manager has known predjudices (on the basis of race, gender, disability, sexuality &c) and so finds a 'reason' to sack anyone in that group or who exhibited reasonable behaviours associated with that group. For example a certain senior manager in my previous organisation felt, presumably because she had not had children herself, that any woman who took maternity leave was disloyal (she expressed this view a number of times in public). Whilst she never actually dismissed an employee for being pregnant (which would be illegal) it was widely known that any woman who worked for her or one of her directs who became pregnant or expressed a desire to become pregnant would be dismissed as soon as a 'reason' could be found.
* Promoting a favourite. Basically the manager has a favourite they want to promote and that favourite wants your job but there's no capacity to move you upwards or sideways, they find a 'reason' to sack you. Promoting favourites is rife in the public sector and I've known several managers (and known of many more) who are not above sacking or relegating non-favoured employees to make room for their favourites.

These seem to be particularly prevalent in large organisations with long reporting lines, inparticular where reporting lines are sometimes unclear and senior management aren't visable to and don't have visibility of the lower echelons.

[quote="bflynn"] If you cost more than you make or you do something wrong, I hope everyone would agree that it is right and proper to be dismissed.[/quote]

I hope that everyone would agree that dismissal should be a last resort, after other options (coaching, feedback, training, lateral move, relegation &c) have been tried and failed or shown to be inpractical, and evenly applied to everyone who is costing more than they make (although in some roles it's hard to precisely judge value generated but you need them anyway, e.g. you only really know the value generated by a security guard when you get robbed because you didn't have one).

In the case of doing something wrong, sure, so long as it's proportionate (no sacking for a 'potato chip'), is reasonably within that person's control (no sacking a scapegoat to cover for a favourite) and evenly applied.

[quote="bflynn"]I include personality conflicts in "cost more than you make", where a subordinate and a manager just don't get along. One of them has to leave and although the manager is most culpable in the situation, it is the employee who will leave.[/quote]

I think I see where you're coming from but in that case I still think that sacking should be the last resort. In that situation, I believe the most effective resolution is for a more senior manager (ideally the bosses boss) to step in, look at the situation (they don't have to take weeks over it, by the time it gets to the stage where getting rid of the employee is being considered you'd hope they would have picked up at least the bare bones) and if they don't believe that it can be resolved amicably through coaching or similar look at a lateral move for one of the parties or even just offer one an incentive and a good reference to look for another job elsewhere. I also believe that in that situation some sort of debrief/post-mortum should be done to determine what it was that brought those people together and if it could have been reasonably avoided. e.g. If it was a new hire (either the employee or the manager) situation then maybe the recruitment procedures need to be looked at and the "Will they fit into the current team?" question strengthened.

That said, I have worked for managers I have had personality clashes with (my current manager and I don't get on) and had directs I've had personality clashes with. I've also had directs I've had to take through a disciplinary process and we've still got on fine afterwards. I've been fortunate, I suppose, that in each case I've managed to work around it by just being coldly professional. It probably helped that in each case the situation was for a set period of time after which one of us would be moving on (in a couple of weeks I'll be moving onto a different project and my contact with my current manager will be reduced to a few times a year plus occasionally passing in the corridor).

Stephen

rwwh's picture

[quote="garyslinger"]One of the reasons I like "right to work" legislation here.[/quote]

Indeed this is an important part of the discussion in the Netherlands. If the employment rules are very strict, this can backfire on people that are looking for a job: A company will think twice before hiring if they will not be able to lay off when the economical tide turns. This indecisiveness could slow down the economy relative to the USA.

The political discussion has been tabled this week. It may come back in 6 months.

Mark's picture

Rob - THANK YOU for posting the differences in the Netherlands.

Folks - Layoffs are part of managerial economics. The world economy - a reltively modern occurence, frankly, is coming to a company near you. Regardless of where you are in Europe, the safety net WILL ERODE to a situation somewhere within shouting distance (translation: close to) the US. This is not nationalistic pride on my part, it is inevitable. Competition demands it.

Ask yourself what Mr. Sarkozy is trying to do right now with the pensions of transit workers in France. They are already backing down (having called a suspension of their strike, to name one behavior).

Six months.

If you don't need it, use it for University for your children, or dump some of it into retirement.

Six months. It's worth it.

Mark

ssf_sara's picture

Is the recommendation six months salary or six months expenses? Hopefully, some of us are spending less then we are earning.

PierG's picture

Also in Italy it sounds a bit differently for a couple of reasons:
1. because here is really unusual to be laid off (not to mention to be fired, that's almost impossible) even if things are changing in the last few years with different contract models. And this is one of the reasons why our competitiveness could be better.
2. because the 'saving' culture in Italy is strong: we are taught to save some money (if we can) for the hard times from the beginning.
PierG

Mark's picture

SALARY.

Mark

tanstaafl32's picture

As independent confirmation that the advice is sound, financial counselor Dave Ramsey recommends nearly the same thing as this podcast. And I think this illuminates the difference between the salary and expenses question. Without any debt, six months of expenses is enough. If one is living paycheck-to-paycheck loaded up with debt service, then six months of salary is needed.

Ramsey believes that entering into any kind of debt is at least poor judgement and at worst borderline immoral :) ("Millionaire Next Door" style). In his methodology, the "Emergency Fund" is both baby steps one and three.

He therefore teaches to:

1. Baby Emergency Fund ($1000.00 liquid and cut up the cards)
2. Debt Snowball (pay off all debts except mortgage smallest to largest)
3. Fully-Funded Emergency Fund (3-6 months EXPENSES in bank)
4. Plan for Retirement
5. etc.. etc...www.daveramsey.com

Anyway, I was struck by the similiar advice and driven to post. As Einstein supposedly said, "The most powerful force in the Universe is Compound Interest."

terrih's picture

I got my husband on board with Dave Ramsey's methods earlier this year... we got our baby emergency fund together just in time. I've had 2 deaths in my family this fall. And I had the cash to travel both times. That's the kind of priceless that MasterCard can't touch.

eagerApprentice's picture

This might sound a bit silly, but I when I was listening to this cast, I thought that it applied to new college graduates as well.

I knew the rule about saving 6 months salary when you were working, and was thankful to have followed it after the dot.com bubble burst left looking for a new job.

But I was a bit surprised to find that it can also apply to new college graduates. This surprise came, unfortunately, after I graduated with MBA recently. :)

A minor part of the problem was that the method of getting a job in Asia after graduating is a bit different than in the US and can sometimes depend almost exclusively on your network with faculty or friends.

However, a major part of the problem lies with wanting to move into a city that is far from home and get a job that fits your skills and aspirations.

Therefore, I would recommend that anyone who is graduating and plans to go out on their own to find a job have 6 months of living expenses as well - you might need it... especially if you want to make something of your career far from home.