Redundancy advice
Wednesday, November 5th, 2008A few months ago I was regularly having conversations with people who said: ‘credit crunch? Nah … won’t affect what MY company does!‘ But it isn’t just city bankers who are being shown the door now, and things could be a lot bleaker during 2009. So … how DO you protect yourself if redundancy strikes? Here is some Redundancy advice free to listeners and readers of Wallet Watcher.
As ever, forward planning is the key. Don’t bury your head in the sand and don’t assume it can’t happen to you. Many of us wait until we’re already in trouble before we make a plan. It could already be too late to save your house by that point, and panic is never a good ally when you’re trying to be coolly strategic.
The second thing, in the words of Joe Strummer, is ‘Know Your Rights‘. Work that system for all it’s worth … you’ve paid enough tax into it over the years after all. Some statistics first. Around 1.8m in Britain are now officially unemployed. Though cynics will point to the number of long-term sickness benefit claimants in the UK, and say the number is already much higher. By the end of 2009, many are saying we’re going to have 3m on the dole.
Now your rights, and you have a major advantage if you work for a larger company. If the firm employs 20 people or more, it MUST consult the union before it gives anyone notice. This will be a staff rep if it’s a non-union organisation, but either way. Remember my redundancy advice UK readers – IT’S THE LAW! They can’t just ignore this. And they HAVE to give 30 days notice …. 90 days if more than 100 people are to go. You can’t refuse to go unfortunately, but they DO have to pay you.
Don’t get too excited, redundancy pay is a lot meaner than it was last time we had a major recession. If you’ve been there two years or more you’ll get half a week’s pay for each year of complete service if you are under 22, a full week up to age 40, and 10 days if you are 41 or over.
But CHECK your contract! You may find you’ve waived this right when you signed up (though you almost certainly didn’t notice, who does!) Conversely, your firm may offer better deals than the statutory minimum, and remember that the first £30,000 is tax free. So a tax rebate should be on its way to you. You won’t be surprised to hear that the taxman has tightened up on things though. To ensure you do get your cash tax free, you must be genuinely redundant. Getting sacked doesn’t count, nor does ‘gardening leave, nor does a pay-off in lieu of notice … Remember redundancy doesn’t mean YOU losing your job, it means the JOB has to disappear.
What if you get more than £30,000? Well lucky you. You can shield the excess from tax by putting it into your pension … and that also has the benefit of future planning. This is money you can’t now spend! Pensions may look like poison at the moment (blame the stockmarket) but the value of shares will rebound over time. So as long as you’re not retiring in the next few years, this could be a very good time to salt away a tax free sum.
Do you have unemployment or redundancy insurance? If not it may be the time to buy it. And check existing life insurance policies you ALREADY have … you may be surprised to find you’re already covered! It may not be much, but it could keep you afloat.
Now could be a good time to think laterally. Even if your employer is a two-man band, with you playing the trumpet, all is not lost. Try negotiating with your boss, as he probably wants to keep the show on the road too. Maybe he can cut you down to one day a week rather than killing your job altogether. That way, there’s less disruption to his business, and you keep SOME money coming in. In your new and unwanted free time, you can look for other part time work. The old irony. Just as it’s easier to borrow money from banks when you’re rich, it’s MUCH easier finding a job when you’re still in one.
Finally, planning ahead again. This could be a very good time to audit your skills. Portfolio working was a buzzword a few years ago, but it could be making a comeback. I’ll be looking at turning your expertise into hard cash in a fortnight’s time. And if you haven’t done it yet … construct that household budget! Saving money has NEVER been such a good idea. I’ll have lots of ideas for you on THAT one next week.
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