If you’re facing retrenchment, or have recently been retrenched, there are several steps you should take to ensure the best outcomes for your financial and personal future – and it starts with staying calm, understanding the process and knowing your rights, says employee benefits firm NMG.

By law, your employer must provide you with two key things: a notice of retrenchment, including the reason for the retrenchment, the alternatives your employer considered, and any proposed assistance; and a consultation, where you have the opportunity to discuss the retrenchments with the employer.

“People often underestimate the massive shock of retrenchment. Take a few days to process it. Don’t make any financial decisions when you are in an emotional frame of mind. After a few days, contact your financial adviser and discuss your options to make sure you don’t make rash decisions which will affect you down the line,” says NMG financial adviser Dieter Schmikl.

Know what to expect

You can expect to get the following from your employer on retrenchment:

• Your final salary (notice pay), including any outstanding leave.
• Severance pay, comprising one week’s remuneration for every year of service you have completed. Some companies may give more than this.
• Pro-rata bonus, depending on your contract.
• All the retirement savings you have in your company’s retirement fund.

“It is critical to speak to a qualified financial advisor. Your retrenchment package may be the last money you receive for a while. You need to make sure you manage it in the most effective way possible,” says Schmikl.

Know your options with your retirement savings

When you get retrenched you have four options with your retirement savings. You can:

• Transfer to another pension or provident fund
• Preserve your savings in a preservation fund or a retirement annuity
• Withdraw some of your money in cash and preserve the remaining amount, or
• Withdraw your money in cash.

“Think carefully about what you are going to do with your retirement savings. If you can, your best option is to keep your money invested for your retirement. If this is not possible, consider taking only a portion of your money as cash so that you can keep some money aside for retirement,” says Schmikl. “Taking all your money in cash should be your last consideration.”

Watch your spending

When people get retrenched, they often make bad spending decisions because they are emotional and not thinking clearly. This is the time to get ruthless with your budget, and cut back to the bare basics until you’re in a position where you’re earning again, says Schmikl.

Talk to a qualified financial advisor

Many people are nervous to speak to a financial advisor at this time because of the costs. The truth is that getting the advice of a professional advisor could save you a lot more money than any fees you would pay.

“One of the most important pieces of advice you can get is to try to stay positive. See the retrenchment as a new beginning and not a dead end. This is hard to do but a negative mindset will make anything you try to do difficult. Give yourself a set ‘mourning period’ where you allow yourself to feel all the negative emotions. But once that period is over, you need to move on, and move on with hope and renewed energy,” says Schmikl.

T&Cs apply. The NMG SA Group of Companies are authorised financial services providers t/a NMG Benefits.