A company cannot simply retrench you on a whim; they have to provide you with a clear case for their decision. The justification must be based on "operational requirements". In other words, they are allowed to retrench you for economic, technical or structural reasons.

A company has to individually engage in consultations with all employees that could be affected by the retrenchment. The employer has to discuss options with the purpose of avoiding retrenchment, so for example, they should see if a reduction in working hours, or offering early retirement, is a solution.

What kind of payout?

If the employee is offered alternative employment on similar terms and conditions of their current employment, the company will not have to pay a severance.

So what kind of payout can you expect if you are retrenched? Labour law requires a minimum severance pay of one week per year of service, but you can get more depending on the position of your employer.

Your typical retrenchment package has a number of elements, your notice salary (one to three months depending on your letter of employment); leave pay (for leave due but not taken); and a severance payment. If you have a company car or laptop, they may offer these items for sale for a favourable price.

One of the big downfalls of retrenchment is the loss of a medical aid as they are usually subsidised by your company. Some employers may allow you to stay on the fund for a few months after retrenchment until you find your feet.

Hang onto your medical aid

You should never allow your medical aid to lapse, so ask your existing fund if you can sign up for a basic cover until you can upgrade. A hospital plan is a must, because if you are involved in an accident, the costs can literally push you into insolvency.

When companies are downsized or restructured even the most competent staff lose their jobs. Many people experience self-doubt, a sense of failure and even depression after retrenchment. If you can maintain a positive attitude you will find another job and it may be better than your previous one. Griping and moaning to a prospective employer about the “insensitive animal that dismissed you” is not going to score any points. Focus on the experience you have gained and highlight your skills.

Expect the best and prepare for the worst

Obviously a sudden loss of income is a big worry, particularly if you have a family to support. In a perfect world, you would have saved up six months salary to accommodate such an event. It will enable you to pay your bills and keep stress levels down while seeking alternative employment.

This kind of long range planning is so easy to put off if you don’t feel threatened at the moment. Don’t be caught unprepared; keep your CV up to date and your savings plan on schedule. Network as much as possible so that you make connections with people who could be your potential employers in the future.

Keep a record of your achievements

You have to start planning when you’re on top of your game and adopt the attitude that you are being groomed for greater things. Even if you think your effort is not being noticed, go the extra mile anyway. When your superiors get around to looking at your performance, you will stand out from the crowd.

Make sure you keep a well documented portfolio of your achievements. If you receive praise from your boss for a project, get him to commit that to writing. The same applies if a client has been impressed with your services. Keep notes of when you introduced a cost saving measure or helped the company achieve a goal — everything counts. So even if you don’t hold onto your current job, you will have a lot to offer your next employer.

Finances

You are going to have to rein in the spending for a while. Tell your family what has happened and ask for their help in terms of keeping expenses at bay. If you have a lot of bills to pay, you should phone your creditors and explain the situation.

Try not to borrow more money. Trevor Manuel once said, "I have never met anyone who has borrowed his or her way out of debt." Most creditors are more likely to be lenient if you tell them about your problems up front. Frugality is the key to keeping your head above water, so stop all non-essential spending and pull in the reins for a while.

Early retirement

If you are in your fifties, the prospect of an early retirement package may initially look appealing. The sad truth is that most 50 years olds are seriously under funded for their retirement. Many individuals who have taken "packages" have found themselves back in the job market five years later.

The job prospects for a fifty five-year-old are not very promising and they often have to accept positions far below their skill levels. If you are offered early retirement, it is vital to use the services of an independent financial planner to ascertain if you can afford to retire. He or she will be able to tell you how much money you will need for the next twenty to thirty years.

Sometimes the choice is not yours and you are forced into early retirement without having saved enough money. This makes it essential to find another job and become extremely proactive about saving and investing. The days of exotic holidays and a new car every three years are over.

Preservation plan

The money you receive from your retirement package should be invested in a preservation plan. This would provide your spouse with an immediate monthly pension if you die. This kind of long range planning is so easy to put off because you feel you have a long life ahead of you.

By being prepared for an event such as a retrenchment, no one can pull the carpet out from under you as you walk down the numerous corridors of life.