Recently, most of the employment news has been grim – specifically about layoffs and downsizing. The question that many of us have been asking is, “Is there a silver lining to being fired?” I am here to tell you yes.
In 1993, when I entered the financial planning industry I got hold of a list of the IT department at a new long-distance phone company. Two years later, I was working with over 50 IT professionals; things seemed great. However, this company was losing $1 million a day. In January 1995, when most brokers and financial planners where in high gear for RRSP season, I was introduced to corporate layoffs and severance packages. The company had decided as a cost savings measure to cut most of its IT people.
What was surprising, many believed afterwards “being fired was the best thing that their previous employer could have done for their IT careers.” Some felt they were stagnating at work and they needed that push of being laid off to take control of their careers and make positive changes in their lives. Others shared with me that they were worried if they had not been let go, they might have received vastly different severance payouts from one round of layoffs to the next.
When all might have looked bleak for these IT professionals, two new words began entering into our cultural lexicon, the “Internet” and “Y2K.” Not being tied to a company turned being fired into the biggest career opportunity for these IT professionals ever. No one could have anticipated that both the Internet and Y2K would cause such high demand for these types of professionals. But they did.
Soon after, IT professionals were able to set their price. Companies that had cut staff found that they needed to hire back many of the same people they had fired, but at higher salaries. I know one IT staffer who was let go from a Fortune 500 Company on a Friday. On the Tuesday its largest client demanded that it re-hire this guy. His story goes like this – he left full-time employment making $90,000 to billing over $200,000 in his first year as an independent consultant.
After being laid off, some take their severance packages and enter the world of consulting. There are several motivating reasons behind this.
According to a KPMG, study 41 per cent of a company’s gross annual payroll are associated with employee benefits. So companies can afford to pay consultants up to 41 per cent more then their full-timers without increasing the cost to their bottom line.
As an employee, the equation of earning goes as follows: you earn, you’re taxed, and then you spend what is left over. When you’re self-employed the government allows you to adopt a much more favourable equation: you earn, you spend, you income split, you defer bonuses and then you are taxed on what is left over.
If you decide that you’ve had it with working for someone else and choose self-employment, it is important to create your own benefit package. As an independent consultant your clients can afford to pay you more because they don’t have to take care of your taxes, EI, CPP, medical and dental benefits, long-term disability insurance, life insurance or pension plan. It is highly recommended that independent consultants seek the expertise of someone who will help them design their own benefit program.
Being fired raises the proverbial question, “Is the glass half full or half empty?” I have learned through working with individuals going through career transitions that time might be short but our opportunities are boundless.
Merrick is a certified financial planner and can be found at www.petermerrick.ca or contacted at pmerrick@gpcapital.com or at (416) 677-6611.
