A massive wave of layoffs has hit tech workers, leaving many tech employees concerned about a potential layoff. This can be a very stressful time financially, but there are immediate actions you can take to mitigate the stress and start planning for the future. We’re here to help.
First things first. Regardless of your equity compensation, you need to understand your monthly cash flow, expenses, and budget.
- How much do you spend a month?
- How long can you cover those expenses between your cash savings and cash payouts?
- When will you receive your last paycheck?
- Will you receive a severance lump sum payout?
- Will you be paid for any unused PTO?
- How long will RSUs/options continue to vest?
- When are you no longer subject to company blackout rules?
Take some time to break down your expenses. This will give you a clear picture of what you’re spending, what are necessary and potential areas to cut back.
- What are your fixed expenses? Mortgage/rent, education, required monthly bills.
- What are your discretionary expenses? Dining out, gym membership, shopping, nice to have but not required.
Once you have your personal finances sorted, you’ll need to revisit employment agreements, consider your taxes and stock options, and start digging into the finances from work.
- Know your company’s rules for the treatment of stock compensation and job termination. Examine your stock grant agreement, any offer letter or employment agreement, and other company materials about your stock plan. Ask questions about these things to company stock plan administrators.
- Post-termination rules are essential for vested stock options, particularly incentive stock options (ISOs), which likely expire if they are not exercised within a certain brief timeframe after the end of employment.
- Some employers may accelerate vesting or extend your exercise period. If the employer doesn’t offer this, employees may try to obtain it on their own.
- For incentive stock options (ISOs), an extension of their exercise period after your termination date will likely turn them into nonqualified stock options (NSOs) and disqualify their ISO tax benefits. Be aware of the planning and tax implications.
- If you plan to leave and have restricted stock and/or RSUs, you may want to stay long enough to receive any shares that will vest soon.
- Some plans give vesting credit for an authorized unpaid leave of absence, such as a sabbatical or maternity leave, while others do not.
- Even for terminated employees, most companies may withhold taxes upon exercises of nonqualified stock options and stock appreciation rights.
- Suppose you have RSUs that continue to vest post-termination. In that case, your former employer may continue to withhold taxes throughout the vest.
- When you lose your job, you have a legal right to your former employer’s health insurance plan through COBRA. You have 60 days to enroll in COBRA once your employer-sponsored benefits end. Mark your calendar.
Reach out to our team for more financial strategies and support.