Find a new job as soon as you are retrenched

I FIND it both difficult and traumatic holding a meeting with someone who has been retrenched or is being forced into early retirement.

There are global tables that show how our lives are affected by tragic events and the magnitude of stress this causes. High up on the stress monitor is the loss of a job and consequent, probable, move from a well-known area with comfort from friends and family, to other alien environments.

Retrenchment could be a disguise for early retirement, both of which have devastating prospects for an increasing number of employees.

Often people in this situation underestimate what their living costs will be because many expenses will now be from their own account. These include medical aid, vehicle running costs and the life cover previously included under membership of the company retirement fund.

There might also have been entertainment that was paid for by the company, which was really for personal use. The use of a company car will now need to be replaced by the purchase of one's own vehicle and the maintenance thereof.

The biggest post retirement cost will be your medical aid as more costly claims occur as one gets older. Statistics reflect that 60% of one's total medical expenses are spent in the last three years of one's life.

Every firm offers different early retirement or retrenchment packages.

The minimum payment to which you are entitled on retrenchment is one week per year worked, but this is not only based on your salary.

"Remuneration" is defined in the Basic Conditions of Employment Act, as "any payment in money or in kind, or both in money and in kind, made or owing to any person in return for that person working for any other person, including the State".

Companies could be a little more generous when retrenching only a few staff members, but where it comes to mass retrenchment, the chances are they will stick to the letter of the law. They also have to be very careful not to discriminate and all employees should be treated equally.

The greatest benefit in either situation is likely to be your pension fund.

The majority of pension funds today are defined contribution funds whereby the employer and employee contributions are clear. However, the value of the fund is dependent on the actual investment performance.

Life expectancy has increased substantially through advancements in medical technology. Finishing work in your 50s means that you might well live an equal number of years to those you've already worked.

I don't for a moment believe that early retirement is an option and, if you are faced with this or retrenchment, you need to realise that the financial package is there to tide you over while you try and source alternative employment.

Realistically, it may not be exactly what you want and you may have to take a salary cut.

Some people believe that they've hit the jackpot when they get a lump sum payment under these conditions, but if they don't get another job, in five to seven years, their capital base will be eroded by inflation and the income earned on the investment will be buying half the goods and services of what it is buying today.

I've worked with many employees in these situations and after they've done their calculations, they fully understand it is imperative they immediately start looking for other job opportunities.

• Bryan Hirsch is a financial adviser. E-mail bryanh@bhca.co.za web. www.bhca.co.za