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Published August 16, 2022

Laid Off? 6 Ways to Financially Deal With Job Loss

Explore your rights, apply for federal financial support programs, spruce up your resume and get back on the market after being laid off unexpectedly.

Electing to quit your job is a choice. An unexpected layoff — whether temporary or permanent — can leave you feeling upended.

Whether you’ve recently been laid off or simply want to prepare for unexpected job loss, here are some steps you can take to empower yourself, shore up your finances and find a new job as quickly as possible.

1. Know your rights

The decision to lay off or terminate an employee is a legal decision. You could be entitled to termination pay or a severance package, depending on the nature of your employment and the type of layoff — either temporary or permanent.  The first thing you’ll want to do after being laid off is to determine whether your employer has followed the law.

Is it lawful for my employer to temporarily lay me off?

“Generally, employees can only be lawfully temporarily laid off if there is a term in their employment contract which allows for temporary layoff,” says Samantha Lucifora, partner at Monkhouse Law Employment Lawyers in Toronto, Ontario.

Another way in which it could be lawful for your employer to lay you off temporarily? If you’ve been laid off in the past and returned to work.

“If that employee in question has been laid off previously, and they didn’t refuse it, and they returned to work when they were called back to work, then that layoff becomes a term and condition of that employee’s employment moving forward,” explains Samara Belitzky, senior associate at Samfiru Tumarkin LLP in Ottawa, Ontario. “So, in other words, it creates a precedent, and then the employer is allowed to lay off that employee again in the future.”

Review your employment contract

If affected by a temporary layoff, review your employment contract as soon as possible. Look for language that mentions your employer’s right to lay you off. If you’ve agreed to it in writing, there may not be much you can do. If you haven’t agreed to it in writing, you may be able to assert something known as constructive dismissal.

An employee can claim constructive dismissal when there has been a significant change to the terms and conditions of their employment, according to Anthony Folan, managing director at Integral HR Solutions in Brampton, Ontario. You may be entitled to severance pay if you’ve been constructively dismissed.

How much notice does an employer need to give for permanent layoffs?

A permanent layoff — also known as being dismissed, terminated, fired or let go — occurs when a company formally ends a worker’s employment.

By law, employers must give at least two weeks’ written notice to any employee they intend to terminate. The only exceptions to this rule are if the employee is terminated for misconduct or has been with the company for less than three months. Instead of this written notice, employers can offer termination pay, which typically amounts to two weeks of wages.

2. Apply for Employment Insurance

The federally-regulated Employment Insurance program, or EI, pays money to Canadians who lose their job through no fault of their own. EI typically pays 55% of your earnings up to a maximum of $638 weekly. You may receive EI for a maximum of 45 weeks.

Apply for Employment Insurance (EI) benefits as soon as possible, even if you’ve yet to receive a record of employment from your employer. Waiting more than four weeks to file your EI claim could mean you lose out on the benefit entirely.

There’s one caveat here: if you receive a severance package from your employer, it may temporarily delay your eligibility for Employment Insurance.

“A severance package is an income replacement benefit,” says Lucifora. “And employment insurance is also an income replacement benefit. Generally speaking, you can’t get both at the same time.”

3. Look into provincial social assistance programs

If unexpected job loss makes it difficult to cover basic expenses, social assistance in your province or territory of residence may be able to help you bridge the gap.

The Ontario Works program provides financial assistance to those in need that can’t cover their basic living expenses, like food, shelter and clothing. A single adult with no dependents may receive up to $343 for basic needs and $390 for shelter monthly. Basic needs and shelter allowances vary by family size.

Similar financial support programs are available in other provinces and territories. To learn more about these social assistance programs, conduct an online search or visit your local city or town hall to inquire.

Employment Insurance and social assistance

Most social assistance programs require you to demonstrate that you can’t cover basic living expenses, like shelter, food and clothing.

Generally speaking, you can’t receive social assistance and Employment Insurance at the same time. That said, you may be able to receive social assistance while you wait for EI benefits to kick in.

There’s also a chance you may be eligible to receive social assistance to top up your EI if you receive less through the Employment Insurance program than you would on social assistance.

4. Investigate your insurance coverage

Review your insurance policies for any language that mentions coverage in the event of job loss.

These can include mortgage protection insurance, balance protection insurance, job loss insurance or loan protection insurance policies. In each case, the primary purpose is to ensure your bills are paid if you’ve lost your regular income.

If you carry any of these types of insurance, reach out to your provider to alert them to the change in your employment status.

Nerd tip: Mortgage protection insurance covers your bills under eligible circumstances — like job loss. Mortgage default insurance is required if you put down less than 20% when buying a house. These two types of insurance sound the same but operate differently. The former protects borrowers and the latter protects lenders.

5. Follow up on employer-sponsored retirement plans

Did you contribute to an employer-sponsored retirement plan, like an RRSP, prior to being laid off? You’ll want to contact your former employer’s plan administrator to discuss your options.

You can cash out your group plan contributions, but you’ll shrink your retirement fund, and you’ll be required to pay tax on what you withdraw. The alternative is rolling your contributions into a personal plan. Funds moved into a personal plan will retain their tax-deferred status, and your contribution room will stay the same.

6. Revisit your resume

Last but not least, dust off your resume and prepare to re-enter the job market. Update your resume as needed by adding relevant work experience you acquired with your former employer. Search for buzz words specific to your industry that may catch a recruiter’s eye. Set email alerts for online job forums. Explore freelance opportunities.

Being unexpectedly laid off can be disorienting, but it doesn’t need to defeat you. With the right tools and resources, you can proactively protect your finances and find work elsewhere.

About the Author

Shannon Terrell

Shannon Terrell is NerdWallet Canada's authority on investing. Her work has been featured in Black Enterprise, Finder, and Yahoo! Finance, among others.

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