8 THINGS YOU NEED TO KNOW ABOUT REDUNDANCY

Our guide to tackling the process

Just when we thought this year couldn’t get any more challenging, the threat of big job losses rears its ugly head. Here’s our practical guide to riding the wave of redundancy – whether you’re ‘at risk’ yourself or need to support others – and coming out the other side stronger than ever…

There’s no sugar-coating it: while the Government’s Job Retention Scheme (JRS) staved off mass unemployment during lockdown, the road ahead looks rocky for many. The Resolution Foundation estimates that around one in seven furloughed workers are at risk of losing their jobs completely once the scheme ends in October. The Office for Budget Responsibility is projecting unemployment will hit 10% by the end of the year; the highest UK unemployment rate since the recession of the early 1990s.

Worryingly, forecasters predict that women are twice as likely to be made redundant than men because of the sectors they work in and the number of women in part-time roles. ‘The pandemic has magnified the structural issues and inequalities that already exist in the system,’ says Jackie Leiper, distribution director at Scottish Widows and chair of its Women’s Empowerment work stream. ‘Women tend to have disrupted careers with fewer contributions going into long-term savings, so by the time they’re 65, they’re likely to have a fifth of what a man would have.’

Redundancy isn’t something any of us expect to face, but in these unique times, it’s wise to understand how it works so that you can be in the best position financially and emotionally to weather the storm.

1 What should I do if I think my job is ‘at risk’?

The industries hardest hit through the crisis are likely to be those that need to cut jobs. Arm yourself with information: dig out your contract of employment to check your company’s policy around redundancy and what you’re entitled to. ‘It’s useful at this stage to consider your primary aim,’ says Kim Crangle of Payne Hicks Beach solicitors. ‘Would you be agreeable to being made redundant for the right package, or do you want to avoid redundancy if at all possible? This will affect your strategy in terms of how you approach the issue with your employer.’

IS YOUR REDUNDANCY GENUINE? ‘A genuine redundancy is one where your employer has a real business reason to make you redundant, such as it doesn’t need you to do your job any more, your workplace is closing, or your

‘Facing redundancy can be an incredibly anxious time, so it’s important to make sure you are in the best position possible financially’

ANDREW JOHNSON OF THE MONEY ADVICE SERVICE

employer is going out of business or needs fewer employees,’ says Tracey Moss, senior employment expert at Citizens Advice. ‘Cases where your redundancy might not be genuine include if your employer has discriminated – for example, if they make you redundant because you’re pregnant or on maternity leave.’

UNFAIR DISMISSAL There’s a whole list of reasons that can’t be used as the basis for redundancy, ranging from age, race and gender to pregnancy, whistleblowing and making a flexible working request. If you think you’ve been selected unfairly, or that the procedure isn’t fair, you can appeal. In most cases, you must contact Acas (the Advisory, Conciliation and Arbitration Service; acas.org.uk) before you can make a claim to an employment tribunal (gov.uk/employment-tribunals).

2 What is the process?

First, there will be a consultation period: how long depends on the number of staff being made redundant, but if it’s 20 people or more, there will be a group consultation. The consultation period must start at least 30 days before anyone’s job ends. ‘Usually, your employer has to follow a process, but they can do things differently if they have a reason,’ says Tracey Moss. ‘For example, they may currently do the meeting online rather than face-to-face.’ If fewer than 20 people are facing redundancy, you should have at least one individual consultation.

Ask questions in the consultation meeting: why is your job at risk? Who else is at risk? Also, be prepared to consider and suggest options – would you accept a reduction in hours to remain employed? What other roles could you do in the business? If you are competing for roles with colleagues, what criteria will be used? ‘Keep a note of meetings and challenge anything that doesn’t reflect what was said,’ says Kim Crangle. ‘Take a trade union representative or colleague with you to any “at risk” consultations – both for moral support and for note-taking.’

If you are offered an alternative role in the company, any reason for rejecting this must be sound, such as lower pay or it’s a demotion, otherwise you could risk losing your redundancy package.

Most employers will allow you the right to appeal if you’re unhappy with a redundancy decision, but if not, you can go to an employment tribunal.

3 How much money will I get?

If you’ve been employed in the same job for at least two years, your employer has to pay you statutory redundancy. The amount you get depends on three factors:

• How long you’ve been in the job (only complete and continuous years of service count).

• Your current salary.

• Your age (for example, anyone under 22 will get half a week’s pay for each year of service; but if you’re over 41, it’s a week and a half’s pay for each year of service).

The overall maximum amount of statutory redundancy pay you can get is capped at £16,140 in 2020/21 (£16,800 in Northern Ireland), even if your actual earnings are higher or your length of service is longer than this. Use this tool to check how much you might get: moneyadviceservice.org.uk/en/tools/redundancypay-calculator.

While statutory redundancy pay is the minimum you can be paid by law, you may get more under the terms of your contract (even if you’ve worked there for less than two years). Check your company website for info.

ON FURLOUGH?

If you are, you can still be made redundant,

but you are entitled to redundancy payments (based on your usual salary if this is different from the furloughed rate), notice of dismissal, any wages owing and holiday pay.

EXTRA MONEY YOU MIGHT BE DUE

• In some instances, you might be allowed to leave your job earlier. In this case, you’ll get pay in lieu of notice, which is effectively compensation from your employer for ending the contract early. These payments are subject to income tax and NI deductions.

• Check whether you have any holiday owing. If you do have holiday owed, your employer has to pay you for it or let you take it before you leave. You are entitled to a ‘reasonable amount’ of paid time off to look for work or undergo training.

HOW REDUNDANCY WILL AFFECT YOUR WORKPLACE PENSION

Contributions will stop when you are made redundant. It’s usually best to leave it where it is and receive the pension when you retire, but you can also transfer it. Take expert advice if you are considering doing this.

4 What if my employer has gone bust?

‘Hopefully your employer will have enough cash to pay its workers all of the termination payments they are owed, such as notice pay, redundancy payments, and wages and holiday pay owed,’ says Tracey Moss from Citizens Advice. ‘If not, the Government’s Redundancy Payment Service may cover some of what you’re owed under statutory rules, which is the minimum you’re entitled to under the law.’

5 Will I be taxed on my payout?

Redundancy pay is compensation for your lost job, so it qualifies for special tax treatment. The first £30,000 is tax-free and you won’t have to pay National Insurance on it, but, holiday pay, pay in lieu of notice or any other amounts that are pay for your work rather than compensation for the job loss are taxed according to your usual tax band (basic or higher rate). Work out roughly how much you are going to lose in tax using an online income tax calculator. Your employer should notify HMRC, but you may still need to complete a self-assessment tax return to pay any additional tax. If you think you owe tax or might be due a rebate, you can notify HMRC yourself.

6 How much notice will I receive?

This is decided by your length of service:

• If you have been employed between one month and two years, it’s at least one week’s notice.

• If you have been employed between two and 12 years, it’s one week’s notice for each year you have been employed.

• If you have been employed for 12 years or more, it’s 12 weeks’ notice.

The notice period starts when you’ve been formally notified that you’re being made redundant and given a finishing date (not from when you’re told you’re at risk).

7 Where can I get independent advice?

• If you are a member of a trade union, it will be able to help you work out if you have a claim and will support you through the process.

• Free help is available from your nearest Citizens Advice (citizensadvice.org.uk or call the helpline on 03444 111 444, or for Welsh speakers, 0808 223 1144).

• Check your household insurance for free legal expenses cover.

• Go to moneyadviceservice.org.uk for information on understanding your employment rights, what in-work benefits you might be entitled to, and how to handle redundancy.

• Acas offers free, confidential and impartial advice. Call the helpline on 0300 123 1100. In Northern Ireland, contact the Labour Relations Agency on 03300 555 300.

• If you need a solicitor, call 020 7320 5650 or go to solicitors.lawsociety.org.uk.

8 How can I best use my payout?

This depends on how much it is. The first call on any money, though, will be for paying priority bills and expenses and ensuring you have enough put by in an emergency fund (ideally, the equivalent of 3-6 months salary). If you’ve received a substantial amount, think about how to make the money work for you. ‘Your pension is a tax-efficient option for saving,’ says Jackie Leiper. ‘If you are using your redundancy money, you can pay the equivalent of 100% of your taxable earnings in that tax year. But you can also carry on paying up to £2,880 a year towards your pension when you don’t have any earnings. Alternatively, use your ISA allowance (preferably a stocks and shares ISA, as interest on cash ISAS is low at the moment) to save.’ You should also check your State Pension forecast, says Jackie, and, if you don’t have 35 years of National Insurance contributions, you may be able to use some of your redundancy money to top it up (you need 35 years of contributions to qualify for the full State Pension).

‘Your redundancy payment may be the single biggest payment in your life, so use it to reset your finances and put yourself in a better position to go forward’

JACKIE LEIPER, DISTRIBUTION DIRECTOR AT SCOTTISH WIDOWS