Coping with Redundancy Financially
Depending on how you look at it, redundancy can either be a devastating time or the chance for a fresh start. How you felt about your job and your financial situation will have a great bearing on how you feel about being made redundant. Coping with redundancy can be made easier if you have some financial safeguards in place to take some of the strain.
Redundancy Notice RequirementDepending on how long you have been in your job, there are laws regarding notice of redundancy. If you have an employment contract there should be terms and conditions set in place regarding redundancy, but the law should override these terms. Notice period is an escalating scale and if you have been in employment for less than four weeks no notice is required. Less than two years then should receive one week’s notice, and for more than three years but less than four, you should receive three weeks notice.
Redundancy PayIf you are entitled to any redundancy pay then it will depend on a few factors. Redundancy pay is usually calculated by the employee’s age and their length of service in the job. If you are under 22 then you should receive half a weeks pay for each full years service. If you are over 22 but less than 41 then the payment should be one full week for each full year of service. For employees aged 41 and over the payment should be one and a half weeks pay for each full year.
Redundancy and DebtsDepending on the amount involved, redundancy payments can be quite a large lump sum and can be used for new opportunities such as a business plan. But this payment may need to last for a considerable time so it is important to seriously consider what you are going to do with this money.
Credit Cards and LoanMake sure that your creditors are aware of your new situation. New repayment plans should be negotiated with your creditors that could include reduced payments and longer repayment terms. Coping with redundancy and financial stress will be a lot easier if you are paying less towards your debts.
If you have taken out Payment Protection Insurance on your credit cards and loans then now will be the time to claim. Your payments should be covered for at least a year but always read the small print before contacting your lenders.
Using Redundancy Pay to Clear DebtsIf you have received a large redundancy payout then you should consider clearing high interest loans. Getting rid of high interest debts such as loans and credit cards will stop interest charges accumulating. This is especially important if you have high interest, short term loans with no payment protection insurance.
Investing in a BusinessWith redundancy and a redundancy payout, the chance to explore new business avenues may now be open to you. Maybe you have always dreamed of setting up your own business but have never had the finances or time. This option should be considered very carefully and professional financial and business advice should be taken.
There are many small business advisories, both independent and run by the government, and there may be grants available if you are thinking of setting up your own business. However, it may take a long time before your business makes a profit, and business overheads can eat into your redundancy money. If your business does fail then you may be left with nothing at all. Make sure that you have financial safeguards in place, and if you can, do not borrow any money secured against your home.
Redundancy and BenefitsMake sure that you claim all the government benefits that you are entitled to. The amount you can claim will be dependant on the size of your redundancy payment. But you may be able to receive help with your rent payments and council tax. State benefits will be calculated on how much capital you have; if your have over £16,000 you will not be entitled to income support. Capital below that figure will mean tariffs will apply, which means a reduction in benefits.
Coping with redundancy will be made easier with good financial advice and the support of family and friends. Redundancy is one of life’s many bumps in the road that a great number of people encounter. Hopefully you will see this time as a way to explore many new avenues and exciting new opportunities, and then progress to something bigger and better.