I just got made redundant. Where is my money?
Hong Kong’s recession has hit employers hard. First the months of protests and now the spread of the coronavirus have made this once thriving city come to a standstill. Food and beverage, retail, aviation and hospitality sectors have been hit the hardest, and the financial services and professional services sectors are not far behind. I predict that in just a few short months (or maybe even weeks!), HK banks, law firms, accountancy and consulting firms will start wielding the axe to trim their costs and stabilize their business.
But how much money will you get if you are the unfortunate victim of a redundancy? How long can you survive without another job? It all comes down to the local requirements where you are based, and the cultural norms of your company and industry.
Redundancy packages are an endless source of gossip and speculation. Which company offers the best ones, how are they calculated, why did you get one benefit but not another? Your HR will not give you a straight answer to any of these questions. You can cobble something together by speaking with your colleagues who also got the axe, but it’s difficult to get an accurate picture of how and why you got the package you did. This is primarily because each employee has a different tenure and salary, and (most of the time) your company has no obligation to share the details with you.
Your HR will not give you a straight answer to any of these questions.
Below is a list of some of the key components that often appear in a redundancy package. If it seems like a lot, download this free checklist and bring it with you into your redundancy meeting.
Your employer is legally required to pay you any statutory payments as set out in the local employment law—no more and no less. In some countries, this is a paltry sum and could be substantially less than the norms of your industry or company. For example, financial services firms have a reputation for providing generous redundancy packages that go above and beyond the statutory requirements. However, SME’s may simply abide by their legal requirements and leave it at that. My advice is to expect the worst and hope for the best. That way, you won’t be disappointed! Here are a few of the common categories:
Outstanding wages Payment for days you’ve already worked. Generally paid to you in your next regular payroll.
Accrued but unused annual leave Annual leave that you have accrued but didn’t get a chance to take. This will be calculated into a cash payment.
Payment in lieu of notice Your company may choose to put you on gardening leave or make a payment in lieu of notice.
Statutory severance payment Based on a standard calculation set by the government though not all countries offer statutory redundancy payments. In Hong Kong, this is 2/3 of the last full month’s wage or HK$22,500/US$2,885 (whatever is lower) x yrs of service. This is capped at HK$390,000/US$50,000. (USD/HKD: 1:7.8)
Remember that discretionary bonuses are just that: discretionary! Your company has no obligation to pay you one and just because you’ve received one in the past doesn’t entitle you to receive one in the future. This holds true during a redundancy exercise too. Entirely at the company’s discretion, you may be offered an additional payment (ex-gratia) to compensate you for any earned but “lost” bonus. This would be pro-rated based on the length of time you worked within that performance year but you likely won’t be given any detail on how it is calculated. If there are multiple rounds of downsizing, ex-gratia payments are typically offered in the first or second round. Thereafter, as costs start to skyrocket, they may cease.
Generally speaking, if your prior bonus payments included deferred components, you will be entitled to keep these and they will vest on schedule. For high earners, this is a critical component of the redundancy package and one that can be worth a substantial amount of money. On the flip side, if you were to resign rather than be made redundant, you would forfeit the deferred awards. That is a key reason why many senior employees wait for a redundancy rather than leave on their own. It simply doesn’t make financial sense to leave that money on the table.
If you moved to take up your current role, you might be eligible for repatriation to your home location. Repatriation means that your employer will foot the bill for you and your family to move back home. This typically includes things like flights and shipping, but can include a myriad of benefits such as temporary housing, storage of goods, and home sale assistance. It is very costly to move a family overseas, so repatriation benefits can be extremely valuable. The option to use your company’s pre-approved vendors can also save you the hassle of coordinating the move. This type of benefit is uncommon these days, unless you are on a full expatriate package with repatriation explicitly included in your employment contract, but it doesn’t hurt to ask.
Your employer may offer outplacement services to help smooth your transition out of the company. Outplacement services are usually offered free-of-charge by a third-party vendor and include things like CV review, interview preparation, coaching, and job search techniques. An outplacement service can be one of many resources that you’ll utilize as you search for your next job. Some outplacement service providers are better than others, but if your company offers this option, I suggest you take it up as soon as possible. There is often a time limit on how long you are eligible to use the services, so it makes sense to do it right away.
In addition to the above, there are several other questions you should ask such as what will happen to your medical benefits and how your pension scheme is treated. Please keep in mind that some of the items that I mention are more common in the financial services industry and at larger, international organizations.
Overwhelmed? Download this free checklist and bring it with you into your redundancy meeting. Then you’ll have a surefire way to make sure you get the information you need, and it will help you to take control of the meeting.
It’s critical to be aware of your rights and do research on the norms in your industry and company. These tips and this checklist will make you more prepared if the worst happens.
Renee Conklin is an HR Leader who writes about talent attraction, employee engagement and the future of work. She is the founder of RC HR Consulting.
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