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Bouncing Back from Tech Layoffs

The tech world has seen an avalanche of layoffs in recent months as rising interest rates and a slowing economy take their toll on the capital-intensive high-growth industry.  

Many tech companies became bloated during the era of easy money and sky-high valuations over the past decade. Yet, with the pandemic tech boom behind us, Silicon Valley is in for some serious belt-tightening to get through the tough times, and the industry is now clearing a lot of excess glut from its guts. 

Tech’s seemingly never-ending gravy train of cushy jobs has come grinding to a halt, and many are being left stranded by the tracks.

Starting in the fourth quarter of 2022, with huge axings from Meta and others, the bloodbath continues to wash over the industry. Almost every day, there’s a new headline announcing more cuts, with LinkedIn, Twitter, and Zoom among the latest to trim staff count. Already in 2023, tech companies have shown the door to around 120,000 employees, more than half the total staff cut in 2022, according to Layoffs.fyi, a site tracking the industry trend. 

“Now tech is looking less like a promise land and more like a wasteland,” said Krystal Ball of Breaking Points, who views the job culling as part of a long overdue correction of the broader American economy. “Those who offer the industry as a panacea for the woes of the American worker have now been thoroughly repudiated.”

Redundant tech workers will have to navigate a shaky economy, pivot fast to a new position and figure out their new income status in the middle of tax season. This article will look at the specifics of tech worker compensation, including equity, severance, and retirement contributions, and consider some career advice on how tech workers can bounce back after being retrenched.

Your Fair Share 

Many tech workers not only enjoy high salaries but – provided their startup is successful – get to share in the vast wealth created by their enterprise. Employees who join the company in its early days are best positioned to negotiate proportional equity with the founders, which is granted through restricted stock units (RSUs). These are named as such because RSU holders are “restricted” in when they can liquidate (or “vest”) their stock, incentivizing workers to stay on through the startups’ first phase of growth. That means the IRS will only collect a capital gains tax when the shares are actually sold. Note: should tech workers hold their equity for more than a year, they’ll enjoy the lower long-term capital gains rate discount when selling their stock.

Tech workers should also insist on severance pay if they are entitled to it. Though not guaranteed by the Fair Labor Standards Act (FLSA), employees who have a severance clause in the contract must pay the stipulated among to employees when they are let go. 

The Long Game

Few want to think about their careers’ end when they’ve just lost their job, but it’s important to ensure they prepare for retirement when out of work. Before walking out the door, techies should check their company’s vesting policy to ensure they get what they are owed for their 401(k)

This determines how much company contributions the worker can hold onto in their 401(k). Many use graded vesting, which increases company contribution access incrementally, usually unlocking access to full-match once they hit their fifth or sixth year on the payroll. Others may offer immediate vesting, which means workers keep their employer’s contributions as soon as they are paid in. 

Regardless, workers are always guaranteed full access to their own contributions. Although, they will need at least $5,000 in their plans if they want to leave their plan account open after leaving. Otherwise, they must roll the balance into another plan. 

Alarmingly, employees may find themselves temporarily blocked from accessing their plans if there are any unresolved legal disputes related to their termination. For instance, their fund may be frozen if they have outstanding payments on a loan taken out from the plan. The untimeliness of an abrupt layoff can cause disruption to retirement savings. This makes a clear exit strategy all the more important, lest tech workers leave hard-earned money on the table.

There are also several backdoor Roth IRA strategies to optimize your nest egg. For example, providing your traditional IRA is funded with after-tax dollars, you can convert it to a Roth account, and it can grow tax-free and never be taxed even when withdrawn in retirement.

Where to Next  

Losing one’s job is never easy, but it pays to stay active and move ahead.

Blaine Thiederman, a financial advisor and founder of Progress Wealth Management, knows tech clients are concerned and recommends tapping their professional network to find new opportunities. He also suggests those who’ve lost their job mend their safety net by beefing up emergency savings and considering buying a private insurance plan until new employment is found. 

This may also be a good time to pivot to other industries, many of which are still experiencing acute labor shortages. Back in November,  Morgan Stanley predicted tech layoffs n tech would not wash over the rest of the economy. In January, the US labor market remained robust, posting one of the lowest unemployment rates in decades.  

Software skills are highly valued among recruiters in many industries, especially those adjacent to tech, including finance, media, retail, and others. For those looking to pop out of the tech bubble and see what their potential is elsewhere, this may be an optimal time to gain a footing in a new sector. 

The storm clouds have not cleared, but there is a silver lining – most laid-off tech workers are finding their feet again.  

According to a study by Revelio Labs late last year, roughly 72% of laid-off tech workers have found new employment within three months. 

Whether they’ve just cleared out their desk or remain behind, beset by survivor’s guilt, tech workers have seen better days. Yet by preparing ahead for their next move and making sure their bases are covered, tech workers can stay ahead of the game and make sure they come out of this turbulent time on top.

Josh Dudick

Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.

Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.

Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.

Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.