I’m still in a bit of a shock.
Company X (I’m using anonymity for confidentiality reasons), who has been providing fulfilment service (I manage an e-commerce startup and outsourcing fulfilling orders is an integral part of our business model) to us for the past 18 months has decided to shut its doors. We now have 3 months to find a backup supplier (thankfully I run a dual-fulfilment operation so there’s plenty of redundancy in the system).
Why did it shut its doors?
Well Company X is essentially a massive warehouse that sits on several acres of land at a prime location in a northern British industrial hub. Its shareholders were approached by a real estate developer who was willing to fork out tens of millions of £ to buy it off them and turn it into a luxury residential site. Each shareholder was in line for a multi-million £ payout and obviously they agreed to sell up and shut the company.
This led to around 120 jobs being lost.
1. Being an employee does not offer much security
The one thing that’s always puzzled me is why does the society place so much emphasis on finding a “job” and become an “employee”.
My mother is a strong advocate of finding a good employer, stay loyal and let it provide the “iron rice bowl” of long-term employment security.
Our society no longer works that way as shareholder value maximisation is firmly ingrained in the decision making of most companies..
The unfortunate truth is that employees are simply a cost factor to most businesses that must be minimised without upsetting the existing status quo, just like other raw materials.
Ian, who was a supervisor at Company X, aged 55, had devoted the past 20 years to that company, often working late shifts under freezing conditions. However in this case, such loyalty was not reciprocated as shareholder interest prevailed (as it always does).
Most people believe that being an employee offers a steady pay check and stability. I believe that it does the exact opposite:
- A low alpha low beta situation: this means your income level remains consistent month-on-month (beta) yet you never achieve any outstanding earnings (alpha). This consistency lures people onto a false sense of security and makes them complacent, thereby increasing their vulnerability to shocks (e.g. sudden job loss)
- Your security is only as long as your notice period: the hard truth is that the majority of us has less than $1,000 in saving at any given point, which is less than 2-week worth of living expenditure. This is almost negligible. This means that by definition the cast majority are living pay check by pay check. Henceforth the financial security will only last as long as the number of months of guaranteed pay check, which in most cases is the notice period. This is usually 1-2 months in the U.K. and “at-will” in most situations in the US (which is effectively nothing).
Consequently I think being an employee is one of the most dangerous and precarious way of making money, simply because you are relying on a single revenue generator who does not have your best interest at core and that it may be switched off at any given moment.
2. You should be constantly upskilling yourself
People with more relevant skills are far more resilient to job losses than ones with more elementary skills.
The managing director of Company X found his next job even before completing his notice period whereas a significant number of the warehouse staff (who are less skilled) are still unemployed 3 months after being laid off.
This means instead of watching your favourite soap drama on the TV after work, you should consider learning a new trade that you could leverage off in the future.
One of the supervisors in the warehouse was also an amateur musician who always practised after work. She rapidly landed a gig at a local theatre which eased the financial pressure to enable her to pay her bills whilst searching for her permanent gig.
3. Have an insurance against income loss
Starting WealthyBy40 has made me question the state of my financial health regularly. One question that I have contemplated a lot since then is “what would happen if I were to lose my job tomorrow?”.
Well not a lot would change immediately or in the medium term.
Firstly my notice period is 2 months, therefore unless I’ve committed gross negligence or misconduct, I’m guaranteed to be able to pay my bills and continue saving like business as usual. All the meanwhile I would be able to look for my next adventure.
Secondly if I was unable to secure or start something I liked during that period then my income protection insurance. This is a policy which I pay monthly to be activated if I were to lose my job. It will not replace my salary entirely however it will be sufficient to cover my mortgage and living costs therefore ensuring my bases are protected.
Thirdly I side hustle extensively and they now provide a steady stream of monthly income for me to draw on and ensure that our lifestyle is not seriously degraded.
Lastly if I was really desperate, I could always dip into my emergency savings, which has sufficient firepower to last us another 6 months at least. But I doubt we would need to activate this option as #1-3 should be more than sufficient protection.
By having these broad “insurance strategies” in place, they provide me with the freedom to make the most appropriate life choices. It means that instead of taking the next available job because I’m worried about defaulting on my mortgage, I could take my time and make the optimal move for my career.
It was a truly sad day for the 120 people at Company X. Some of them would have had some protection in place but the vast majority would have been simply waiting for their next pay check, therefore left vulnerable to the shock.
Please do not leave yourself exposed. By changing your mentality to view employment simply as a form of revenues generation like any other business and having the necessary insurances in place (through upskilling and/or income diversification), you can protect yourself and your family well to withstand these shocks and emerge stronger.
Your future self will thank you for the work you put in today.
Have you been laid off? Did you protect yourself? What would you have done differently? I’d love to hear your stories. Please comment away.