Six steps to dealing with redundancy

8 November 2012

Headline unemployment figures are telling an encouraging story at the moment, with jobless numbers falling by 7,000 to 2.59 million over the three months to July, according to the Office for National Statistics (ONS). And the number of people in work also rose by 236,000.

But dig below those headline stats and the picture looks less rosy. Long-term unemployment, particularly among those over 50, is getting worse: the number of people who have not worked for the past year or more has risen to over 900,000, the highest figure for 16 years.

At the same time, unemployment among young people continues to rise - by 7,000 over the past quarter. And the number of people having to settle for part-time work is higher than it's ever been, at more than eight million.

No wonder there's little sense of job security in the UK, with job cuts announced every week across the economy. So it can pay to be prepared for the worst, from checking your employment rights and sorting out your finances to getting your CV in shape for your next job search or firming up that idea for a small business.

As traumatic as it always is when the axe falls, it is vital to keep calm. These days, redundancy has lost the stigma that used to be attached to it, and there are various steps you can take to minimise both the financial and the psychological impacts.

Here's our step-by-step plan to surviving redundancy.


If your name appears on your employer's hit list, check you are being treated fairly. Legally, your employer must consult with you in advance and give you notice (or pay in lieu of notice). You can check your contract for details.

The statutory minimum notice period is one week's notice if you have been there between a week and two years, then a week for each complete year, up to a maximum of 12 weeks. Where 20 or more employees are affected, the employer must consult with the union or an employee representative at least 30 days before the redundancy applies (90 days if 100 or more employees are involved).

You should ask for any proposal made to you to be put in writing before agreeing to it. Look on the website for more details. Or tap into the help available from sources such as your local Citizens Advice Bureau (CAB).

A spokesperson for CAB says that although visits to bureaux to discuss redundancy have declined by 11% in the past year, visits to the redundancy pages of its online advice guide service have spiralled by 65%.


If you believe you have been chosen unfairly then you may be able to take your employer to a tribunal for unfair dismissal. Ask for advice from your union or Advisory Conciliation and Arbitration Service (, the employment relations organisation.

An example of unfair dismissal might be where your union has been consulted on your redundancy but you were not, or where you were selected the day after you informed them you were pregnant.

If you started your job before 6 April 2012, you can challenge the fairness of a redundancy, provided you have worked there continuously for at least one year. However, for those who joined on or after 6 April 2012, the eligible period is now two years.


It can pay to respond quickly to redundancy news by asking if your employer can offer you an alternative position or let you work part-time. You could also offer to accept a pay freeze. If there is no wriggle room, make sure your employer gives you some time off on full pay so you can look for work or organise a training course.


If you have been employed for at least two years at the organisation, you are entitled to a redundancy payment from your employer. Some employers are more generous, but all must provide at least the statutory minimum.

Be warned - you may have worked for your employer for decades, but unfortunately they are only obliged to pay up to a certain limit. So don't go booking that dream cruise before you know the financial facts. The amount paid is based on your age, length of service and current salary.

Your employer should send you its calculations in writing. If not, write asking for a written statement. If it drags its heels, contact ACAS. If your employer fails to cough up, you may need to make an appeal to an employment tribunal: for guidance, call the Employment Tribunals enquiry line on 0845 795 9775.

If your employer has gone bust then the state organises payment. You may need to apply to the Redundancy Payment Office using an RP1 form from the insolvency practitioner dealing with your employer's insolvency.

For more information, contact the Insolvency Service Helpline on 0845 145 0004.


Don't be shy about signing on and claiming any benefits due to you, such as Jobseeker's Allowance (JSA) or Income Support. This cash may be vital in keeping your head above water until the next job comes along. Ask at your local CAB or Jobcentre Plus what you are entitled to.

After redundancy you are most likely to apply for JSA, which comes in two forms. Income-based JSA is means-tested, and only available to those with savings of less than £16,000; but if you are eligible it can lead to other useful financial help such as council tax benefit.

Contributions-based JSA is available if you have made enough national insurance contributions, but is paid for a maximum of six months and does not entitle you to other benefits. The maximum you can claim for either is £71 a week (if aged over 25) - and you must be actively looking for work. Find out more at or get help with the sums at

Meanwhile, take a scythe to your household spending until your financial future looks clearer. Tackle any unnecessary spending by cutting out takeaways, for example, or rediscovering the appeal of home cooking and nights in.


This calculation is based on three factors: how long you have been continuously working for your employer (the maximum you'll get is for 20 years of employment); your age; and your weekly pay - up to the current maximum of £430.

You will get:

  • Half a week's pay per full year of service while you were aged under 22
  • One week's pay per full year of service while you were aged between 22 and 40
  • One and a half weeks' pay per full year of service while you were aged over 41.

So, if you are 50, earning £500 a week before tax, and you have worked for your employer for 17 years, you will be entitled to £9,245, which is 21.5 weeks at the maximum payment of £430 a week. Check your sums at


If you are lucky enough to receive more generous redundancy terms than the state minimum (check your contract), you will need to watch out for tax pitfalls. While £30,000 of any redundancy payment is tax-free, be aware of what actually makes up the £30,000, and that part of it may include certain amounts such as pay in lieu of holidays, which is taxable.

Ellie Gamble, associate director of accountancy firm Grant Thornton, says: "If your contract says you have a right to pay in lieu of notice, that element will be taxed. Even if you reach a compromise agreement with you employer over your redundancy package, that doesn't change the tax status. It's a legal document, not a magic one."

You may be able to reduce the tax charged by asking your employer to put the cash in excess of £30,000 into your company pension. You can do the same with a personal pension. Gamble says: "The only problem is your money is then tied up, but it is the most popular action people take to reduce tax on redundancy money."

The taxman has also changed the rules so that since April 2011 employers must use the 0T tax code for redundancy payments. This means amounts over £12,500 will be taxed at source, and then you claim overpaid tax back later through your self-assessment tax return.

"You will get it back, but it can affect your cash flow," warns Gamble.


  • Jobcentre Plus may be able to help you find new work. You can visit an office, phone or use the website ( and scan thousands of vacancies across the country. It also provides information about training and volunteering.
  • It's also worth registering with a recruitment agency, which may be a giant generalist organisation such as Reed ( or a smaller agency specialising in a particular sector such as teaching.
  • Word of mouth is important. Get in touch with old friends and contacts through social networking sites such as LinkedIn, as they may know of opportunities in your field.
  • If redundancy releases a pent-up desire for a career change, then look for free guidance (including how to sharpen up your CV) at the National Careers Service website at
  • Research by insurer Hiscox suggests that as many as one in five small businesses setting up these days is born out of redundancy. If you decide to go it alone after losing your job, you may be eligible for free help and support or even qualify for the New Enterprise Allowance. For more information, visit

Practical advice and tips about starting up your own company is available from the government-backed website businesslink.

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