How to prepare for possible job loss in Canada

Let’s back up a bit to explain how we got here. When the COVID-19 lockdowns ended in 2022, financial experts warned that the economy would be due for a contraction. That’s partly because of years of massive spending and borrowing by the federal government and historically low interest rates set by the Bank of Canada (BoC), as well as rapid hiring when the world opened up. And there is good reason to ask about Canada’s employment—persistent inflation means that the BoC has been aggressively hiking interest rates since March 2022, and is willing to risk a recession to do so. Plus, Canadian and international companies have started to shed the jobs they created during the pandemic. Headline-making mass layoffs from X, Meta (Facebook and Instagram) and Alphabet (which owns Google) have shaken up the tech industry, stoking fears that other companies would follow. And several have—so far in 2023, Canadian communications giant Bell has laid off 1,300 workers, Qualcomm will lay off 1,258, Canopy Growth has lost 35% of its staff and Shopify reduced its workforce by 20%.

There’s good news, though. So far, the Canadian job market has proved to be more robust than anyone expected. In July, job vacancies decreased by 28.1% year-over-year to 701,300 (the most recent data available). Employment has increased recently, rising by 0.3% in September, Statistics Canada said in its labour force survey. 

Here are some strategies to help you prepare your finances so that you can cope with a job loss—just in case. (Read more on how to prepare for a recession.)

Signs your company may have upcoming layoffs

Often there are warning signs when a company is considering shrinking its workforce. A major one is obviously the economy—in a recession, companies may look for ways to cut costs. What about your place of employment? Have you noticed signs of cost-cutting? Other signs: It keeps missing its earnings targets, its share price is falling, or other companies in the same industry are starting layoffs.

Know your rights when it comes to layoffs

You do have rights if you are laid off. Each province and territory in Canada has its own employment laws governing notice for termination, pay in lieu and other termination processes. Generally speaking, if you are laid off in Canada, your employer must provide you with two weeks’ notice, or two weeks’ severance pay if it fails to give you notice. Some employers provide laid-off employees with a combination of advance notice and severance pay. There are some exceptions to this requirement, when the mandatory notice and pay in lieu of notice do not apply—such as being dismissed for just cause (which is usually serious misconduct), when the layoff is temporary or if the laid-off employee has been working for their employer for less than three months. 

This severance pay should cover a couple of weeks or months of living expenses until you can find another job or switch over to employment insurance (EI).

Fiona Martyn, an employment lawyer at Samfiru Tumarkin LLP, an employment and labour law firm in Toronto, recommends taking your severance package to a lawyer for review before signing anything. Even though you signed an employment contract upon being hired, sometimes the termination clauses are unenforceable, as the law may have changed during your tenure. “What [an employment lawyer] can do is help you negotiate a better severance package which reflects factors like your age, length of service and position. Severance packages help to bridge the [financial] gap until you find a new job,” she says.

That’s exactly what Michael did (last name withheld for privacy reasons). Michael, who lives in Toronto, lost his job at a large tech company in 2019. “I saw the writing on the wall from a mile away,” he says. “I started getting my ducks in a row.” He was disappointed with his settlement offer—the company let him go only weeks before his stock options would have vested, so his total compensation package was much lower than he expected. 

Michael immediately went to a lawyer. “By getting a strong letter from [my lawyer], I was able to get an extra month of severance,” he says. For the one-hour meeting and the letter, he paid $500, which was only a small percentage of the additional severance pay he subsequently received.

How to find an employment lawyer in Canada

You can contact the regulatory organization in your province or territory—like the Law Society of Ontario or the Law Society of British Columbia—for a referral to a qualified employment lawyer. These organizations oversee the practice of law and establish standards of competence for lawyers in each province and territory.   

When to apply for unemployment insurance

What is EI? EI used to refer to “unemployment insurance,” but the correct term is now “employment insurance.” EI provides income to Canadians who have lost their jobs through “no fault of their own” for up to 45 weeks, or just over 10 months. The maximum amount you can receive is 55% of your salary, up to $650 a week. 

EI begins when you are no longer receiving severance pay from your employer. To be eligible, you have to be out of work and receiving no pay for at least seven consecutive days, and you have to have been terminated without cause. You should apply for EI as soon as you get laid off, regardless of whether your employer offered a severance package, Martyn says. You can apply on the same day you get laid off—even if you don’t yet have the required documents. If you do have severance, simply inform Service Canada, which administers the EI program, and it will put your EI payments on hold until that period ends. And if you find another job before then, you won’t need EI.

3 ways to prepare for a possible job loss in Canada

Kurt Rosentreter, a senior financial advisor at Manulife, offers these tips to lessen the potential impact of a temporary job loss. 

1. Always stay marketable

To prepare for possible job loss, you’ll want to stay marketable—this can help you find another job quickly, says Rosentrer. And the best way to do that is to refresh your LinkedIn profile, get new certificates in your field and keep networking. Don’t be complacent about your skills. 

Michael did all that and was able to find a job as soon as his severance money ran out. “I started polishing up my resumé, making sure I had references I could call, and began reaching out to my old bosses and companies I had worked for to see if they were looking for anyone new,” he says.

His on-the-ball tactics helped him to find a job within two months, so he never needed to receive EI or tighten his family’s budget. 

2. Create an emergency fund or get a line of credit

Have an emergency fund to cover at least three months of expenses. Make sure it’s in cash and not investing, so it’s accessible, says Rosentreter. And consider also getting a line of credit from a bank for about $50,000 to $100,000, with the goal to never use it. “Let it sit at zero,” he says. “That safety net is so important if you [lose your job and are] unemployed for longer than you think.” 

Of course, use debt carefully. Rosentreter says, “It’s never a good idea to go into debt, but if it’s a crisis like a job loss, and if you are confident you can get employed again, it can be all the difference between covering your bills or not.” If you do incur debt while you’re between jobs, he adds, try to pay it off as soon as possible once you’re employed again. 

3. Reposition your debt

Look at your debt and consider what would happen should you lose your job. If you do become unemployed, your savings can get eaten up, so you may want to minimize your debt payments for a while, says Rosentreter. Also, avoid relying on your credit cards, because the interest rates are very high (typically 20% for purchases, and even higher for cash withdrawals). If that does happen, look into a balance-transfer credit card with a lower interest rate. Other options include consolidating debt with a line of credit or a loan for a lower interest rate. If you have a mortgage, you could try negotiating with your lender to stretch out payments, and temporarily reduce your payments on other debts to just the interest.

It’s always better to be safe than sorry when preparing for layoffs 

Job loss is not uncommon, even without the upheaval of a pandemic and a possible recession. Planning ahead will help you avoid a job loss turning into a financial disaster. If you keep your skills up to date and stay on top of your finances, you’ll have a better chance of coming out stronger on the other side, and hopefully with a better job.

Read more about work and salaries:

• How to negotiate a higher salary and come out winning
• Side hustles and self-employment in Canada: Taxes, business expenses and more
• How to become a digital nomad—and not go broke
• How to make more money in Canada: 6 side hustle ideas

About Danielle Kubes

Danielle Kubes is a freelance journalist living in Toronto. She has a master’s degree in journalism from Toronto Metropolitan University.

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