Your redundancy checklist
Since psychiatrists introduced the stress scale in the 1960s, being made redundant has been considered one of the situations most likely to cause you illness-inducing tension. Redundancy ranks just after the death of a loved one, being sent to prison, a divorce, or in some cases being married in the first place.
But if you have ever found yourself daydreaming at your desk about a better life, redundancy could be a blessing in disguise. It could be the kick you need to take action, review your income and expenditure and find a new career.
“Read any successful person’s autobiography, and if they’re honest, most, if not all, high achievers have been made redundant from something at one time or another,” says Richard Bingley, director at Bucks Business School, at Buckinghamshire New University.
Nevertheless, it is important to know your legal rights and how to cope with your finances if you have just lost your job or fear this is the year your company will undergo a restructure. “Brief yourself and seek expert advice about how redundancy is implemented in the workplace”, says Bingley. “Understand what is lawful, what is not, and work out what you may or may not be entitled to.
Don’t just negotiate for money but look at internal vacancies and other options, which could give you the time and resources to deal with what can be a very painful and drawn-out experience.”
What are my rights?
Employers have to follow strict legal procedures when making someone redundant, including offering pay, a notice period, a consultation with your boss or the HR department and, in some cases, time off to find a new job, or the option to move into a similar role within the same organisation.
You can only be made redundant because your role no longer exists – for example, because a business has gone bust or your work is being done more efficiently by someone else after a restructure.
You cannot be put out of a job because you or your partner has fallen pregnant, because you are disabled, a member of a trade union or because of your age, gender, race or religious views. If you suspect any of these factors have played a part in your redundancy, you can take your employer to court for unfair dismissal. Visit Gov.uk/employment-tribunals to find out how to make a case.
“Following the announcement of planned redundancies, your employer should clearly communicate the redundancy process along with information about what happens at each stage,” says Bev White, managing director of Penna Career Services, which helps companies and individuals to manage redundancy.
“The process will differ depending on the scale of redundancies and large numbers of job losses may trigger a formal consultation process. Either way, the main crux is that your job is at risk if the organisation deems that your role or division is no longer required.”
You must be given a set notice period before your job ends. Legally, this means at least a week’s notice if you have been in the role between a month and two years. Above two years, you should receive one week’s notice for each year up to 12 years. You are entitled to no more than 12 weeks’ notice if you have been in the job for 12 years or more. It is worth checking your contract, however, as many employers offer longer than the statutory minimum.
How much pay will I receive?
You have to have been working for your employer for at least two years before you are able to claim statutory redundancy pay, and the amount you receive is pegged to the number of years of service, capped at 20 years.
This equates to half a week’s pay for each year you were working for your employer while you were under 22 years old, one week’s pay for each year you were between 22 and 40, and one and a half week’s pay for each full year you were 41 or older.
Weekly pay is capped at £475, a limit which came into force on 6 April last year. This means the maximum you can receive under the basic legal requirement is £14,250. However, many workplaces are far more generous.
Andrew Johnson, money expert at the Money Advice Service, says: “If you have been employed by your place of work for less than two years, you may still be entitled to redundancy pay. You should speak to your employer to find out. The minimum you will be given is called ‘statutory redundancy pay’, but have a look at your contract because you may be entitled to more than this.”
Check out the redundancy pay calculator at Moneyadviceservice.org.uk to help you work out how much you should receive.
Redundancy pay of less than £30,000 is not taxed, although your employer will deduct tax and national insurance contributions from any outstanding holiday pay owed to you.
Danny Cox, a chartered financial planner for Hargreaves Lansdown, says there are often considerable other benefits offered to those being made redundant. “It’s important to investigate all of the options available. These might include covering the cost of re-training, discounted prices to buy a company car, extra time off for job interviews and career counselling, or IT and office equipment – I bought a chair and a desk for £50 when an office I worked in years ago closed down.
“Employees should carefully look at their redundancy packages and whether Save As You Earn schemes or share options can be exercised early as part of the offer. Life insurance, death- in-service and sickness benefits normally stop when employment ends, but you may be able to extend these or take over paying for the cover on an individual basis.”
What benefits can I claim?
While seeking a new job, you can apply for government benefits from the first day of your unemployment including, depending on your circumstances, Jobseeker’s Allowance (JSA), Housing Benefit, a council tax reduction, free school meals for your children and help with NHS costs such as prescriptions.
To claim JSA in England, Wales or Scotland, telephone Jobcentre Plus on 0800 055 6688 or claim online at Direct.gov.uk. In Northern Ireland, you need to claim in person, by telephone or by letter. Visit Nidirect.gov.uk to find your local benefits office.
Bear in mind that if you claim working tax credit, you will no longer be entitled to it if your job ends and you must let HMRC know. If you fail to do so, you could be fined £300.
You can learn more about what benefits you're entitled to in our Salary and benefits section.
Dealing with finances
Financial advisers say the best thing you can do when you first lose your job is to keep as much cash available as possible.
“Everyone should have a cash reserve for a rainy day and emergencies,” says Rowena Griffiths, a chartered financial planner at Female Financial Management. “Ideally, this should be three to six months’ living expenses. This money should be easily accessible and not invested in stocks and shares as we have seen how recent stock market falls affect the value of investments.
If you don’t have savings and will struggle with bills, it’s worth speaking to your creditors as soon as you can.
“Your mortgage or loan provider may offer a three month payment ‘holiday’. They won’t like it if you stop paying them without approaching them first, though. Pay the minimum monthly amount to credit card companies and go through your bank statements to identify outgoings that can be temporarily suspended such as gym membership,” adds Griffiths.
“If you are aged 55-plus and have pensions, these can now be accessed if you need money to live on, but you should always seek advice before cashing them in.”
Make yourself redundant
Most employers will offer members of staff the opportunity to apply for voluntary redundancy before they make compulsory job cuts.
There is nothing to stop you applying for a package if you are keen for a career change anyway. But, says Claire Dawson, acting head of employment at law firm Slater and Gordon, your company is under no obligation to accept your application as your role may be considered too important and you can still apply for redundancy, even if your job is not in question.
Dawson says: “Where a company has a budget to make headcount reductions, managers may have some flexibility about who goes on the list.
“You may be able to raise this with your manager directly if you think you have that kind of relationship with them. But be careful, if you raise it and they don’t agree, you have already demonstrated you are less than committed to the company and it may just expect you to resign and leave in any event, with no package.”
How can I survive a restructure?
If a company is restructuring its workforce you ought, if it is possible, to be offered ‘suitable alternative employment’ within the same workplace. Whether a new job is considered to be suitable, under the legal definition, depends on how similar the work you are required to do is to your existing job, what terms are offered, as well as the pay, benefits, status, hours and location.
If your employer can offer you a suitable alternative role and does not you may have a case for unfair dismissal.
“When organisations make redundancies, it’s usually as a cost- saving strategy or repositioning for future growth – so if you want to stay you need to demonstrate how you can contribute to the future success of the business,” says Bev White, managing director of Penna Career Services.
“If you choose this route, you should approach it as you if you were applying for a brand new job. Update your CV and brush up on your interview skills.Treat every opportunity to discuss your job as a reason to impress. Show how your skills are invaluable to the business and meet the direction in which it is going in the future.”
The term is interchangeable with stock exchange, and is a market that deals in securities where market forces determine the price of securities traded. Stockmarket can refer to a specific exchange in a specific country (such as the London Stock Exchange) or the combined global stockmarkets as a single entity. The first stockmarket was established in Amsterdam in 1602 and the first British stock exchange was founded in 1698.
Save as you earn
A tax-efficient cash saving scheme that lets employees save towards buying shares in the company they work for at a discounted price. At the end of a specified term, participating employees have the option to buy shares in the company or take the savings in cash. The share option works like a warrant, with a special share price set (known as the option price). If the company’s shares have increased in value when the term is finished, employees can buy the shares at the option price. If the shares are worth less than the option price, the employee simply takes the cash.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.