- Many South Africans are facing an uncertain future as companies start to retrench amid the coronavirus crisis.
- If you fear that you may lose your job, there are a couple of things you can do to soften the blow - especially over the long term.
- Start with taking stock of your finances and drawing up a survival budget.
- For more articles, go to www.BusinessInsider.co.za.
The coronavirus has upended the lives of millions of South Africans, catapulting many into financial crisis as companies start mass retrenchments.
If you think the writing is on the wall for your own job, here are some of your options to protect your finances:
Talk to your employer
Approach your company pre-emptively with an arrangement that could help save your position – including offering to take a pay cut and work shorter hours. If that doesn’t work, try to secure a deal to continue delivering services to the company as a freelancer.
If the retrenchment process is already underway, ask the HR practitioner who is handling the process for a list of the roles that are possibly available and that interest you, says Colleen Taljaard, HR manager at Glacier by Sanlam.
"Be open to the possibility of taking a pay cut or that the new role may not be exactly in line with your current or previous roles. Having a lower paying job is better than no job at all. Also, new responsibilities will add to your experience when looking into the job market."
South Africa has strict labour laws, and if your company did not follow a fair retrenchment procedure, you may be entitled to compensation of up to 12 months. Speak to a union representative or labour lawyer to ensure that the company is complying with the required processes. Also, make sure you understand what is due to you – particularly payments for unused annual leave and overtime that may be owed to you. Ensure you get all commitments in writing before you leave the company.
Take stock of your financial position
This is key, says Gregg Sneddon, a certified financial planner at The Financial Coach in Cape Town. "You have to know exactly what you have in terms of a buffer to withstand the financial shock of losing your job."
If you built up an emergency fund that can cover your income for a couple of months, you are in a good position. If not, you need to find money to survive until you get a new income. (Remember that you will be able to draw an limited income from the Unemployment Insurance Fund.)
For example, some older life and dread disease insurance policies may have a cash value, that you could access. But before you cancel any policy, make sure that you have another one in place, says Sneddon. For example, you could take a cheaper policy with a lower payout value.
Resist the urge to cash out your pension
When you lose your job, you have a choice of withdrawing your retirement savings (and paying a steep amount of it in tax) – or preserving the bulk of your savings by leaving it in your employer’s pension, transferring it to preservation fund or to a retirement annuity.
Cashing in 100% of your pension fund can be the most financially damaging decision you can make, says Sherwin Govender, business development manager at Glacier by Sanlam.
"It may be tempting to cash it all in and treat your pension fund like you’ve just won the Lotto, but don’t forget why you have this money saved up in the first place. If you cash in the entire pot, you’re robbing yourself at age 60 – it’s that simple. Before you cash in even a portion of the fund, find out how much tax you’ll have to pay on that money. That should be reason enough for you to keep your pension fund invested."
Take a look at this example of two people, both aged 45, who were retrenched. Each built up a pension fund of R1.5 million at the time of retrenchment. Thando cashed out R100,000, but kept the rest in a preservation fund. James cashed out the full R1.5 million.
Both found new jobs and contributed towards a new retirement fund.
Thando had more than R6 million at retirement, while James had less than R730,000.
Draw up a survival budget
This is no time for denial, Sneddon adds. You need to face up to a new reality, and cut out all excess spending. Immediately stop all nice-to-have debit orders, including for entertainment.
Importantly, you need to include the whole household in this budgeting process to get buy-in, he adds.
Move to a cheaper bank account. Temporarily stop payments for investments and retirement annuities. Don’t cancel your short-term insurance, medical aid or life assurance unless you do not have any other choice. Currently, short-term insurers are offering premium repayment breaks to clients.
Check your credit insurance
You may have insurance on your home loan, credit card, or short-term loan that could cover your repayments if you lost your income – without even knowing about it.
Credit insurance would traditionally pay your outstanding debts if you die or are permanently disabled.
But in 2017, new legislation was adopted in South Africa which means that credit insurance must also cover your repayments – for up to 12 months – if you are unemployed or unable to earn an income, and not necessarily due to illness. You can take out credit insurance on most debt products including card accounts, home loans, your overdraft, and vehicle finance. But it is not always mandatory, so you need to check whether you have credit insurance in place. Also, the self-employed are usually not covered by credit insurance.
Negotiate with your creditors
Whatever you do, don’t ignore your debt obligations. "If you are struggling to keep up your debt payments, a conversation with the credit manager at your bank or a debt counsellor will go a long way in preventing judgements and blacklisting," says Govender. Remember, your credit record is taken into account when you apply for a job, so you want to keep that as clean as possible.
Credit insurance should cover your home loan. For other credit products, be proactive in contacting the provider to ask for an extended term or repayment holiday.
Remember: you are not alone. Since the start of April, FNB and WesBank have approved payment breaks for more than 150 000 customers. Absa gave 376 000 account holders a three-month payment relief option. All the creditors are offered to them by the bank.
"Recruiters scour the internet for online profiles that fit the roles they are trying to fill and LinkedIn is one of the key social media platforms that they use. Write a strong profile that highlights your experience and talents," says Glacier’s Taljaard. "Be confident about your skills. You have them, now you need to sell them. A good, professional head and shoulders profile photograph is essential."
Also make sure that your CV is be polished and aligned with the jobs you are applying for.
Think about your skills in a new way
When considering different future career options, first think more deeply about which skills you have, and then list them.
Your skills may be useful in a completely different industry - and by thinking about what you have to offer in a new way, you can open up more opportunities for yourself.
"For a long time we have thought in terms of degrees, certificates, MBAs, assessments, and so on. All of which are important, but we have forgotten the idea of skills or rather, knowledge applied. And the wonderful thing about reprograming yourself to think in terms of skill sets is that more opportunity exists for you," says Jessica Matthysen of the online learning company Alexander Forbes Empower.
Some years ago, Matthysen’s husband was looking for a new career after working in the entertainment industry as a DJ and MC.
"Those are technical skills, but when we drilled down, we realised what that really gave him was an ability to connect with others, to entertain, and the confidence to speak to strangers, among many others."
He found that these skills were valuable when he became a "ground handler" for a tourism company. He drove tourists from the airport to the Kruger National Park and back. "To do that, he called on the skills he had as an MC, and also had to reskill himself. He had to learn how to drive a minibus, perform basic first aid in the case of emergency and improve his South African general knowledge. But it did provide him a way to leapfrog from one industry to another, without much effort," Matthysen recounts.
She recommends that you take the list of things you can do, and spend some time researching which of those could have a longer shelf life after the crisis.
"Of these skills, which of them could you possibly spend time honing and refining? Can you take it from completing routine technical tasks requiring basic skills with general supervision or guidance to mastering the skill from broad to complex and specialised?"
Then think about what industries would you like to work in.
"Where do you see yourself and what do you see yourself doing? Now, what do you need to do to get yourself there from a skill and knowledge perspective? What is one small step you can take today to move you closer to achieving that goal," asks Matthysen.
Don’t buy or start a business without very, very careful consideration
"If you are thinking of starting a new business venture, be realistic about the projects and business ideas that you get tempted into. A new business – or even buying an existing one that looks profitable on paper – can drain you financially," says Glacier’s Govender.
"Develop a coherent business plan and get a reputable business consultancy or your business banker to vet the details. Now is not the time to take uncalculated risks."
Start with small steps
You are not alone in this – a lot of people are in the same situation, says Matthysen.
"There is no need to feel ashamed – the pandemic is beyond anyone’s control. Reach out, search for knowledge, ask for help, take small steps, and before you know it, things will be different.
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