A plan of action if you lose your job

DESPITE Chancellor Rishi Sunak’s fresh initiative to save “viable” jobs, hundreds of thousands could be made redundant when the furlough scheme closes at the end of October, and they need to be ready for it.

Sunak’s new support scheme will be less generous than furlough and with the Government introducing fresh coronavirus measures, the autumn could still bring a jobs bloodbath. Redundancy is a shock to the system but you need to keep a clear head and work out the options available to you.

PLAN NOW

If you are lucky, redundancy pay will soften the blow. Being on furlough will not affect your rights and any statutory redundancy pay must be based on your normal wage.

You may have to pay tax on it, though. Jonathan Watts-lay, director at WEALTH at work, said the first £30,000 is usually tax free, with anything above that added to your income and taxed at the marginal rate: “The good news is that National Insurance is not deducted from a redundancy payment.”

If your company has gone bust and cannot pay, then you may need to claim from the Redundancy Payments Service, part of the Insolvency Service.

If you think you are being denied your full entitlement, including any holiday pay, bonus, commission or expenses, contact Acas for free, impartial advice.

You then have to work out what to do with the money. “Paying off expensive debt can ease the pressure and stop your debt building up even more,” Watts-lay said.

Target your most expensive debts first, for example, credit cards can charge more than 20 per cent a year, while overdrafts charge up to 40 per cent.

Check if you are eligible for any coronavirus-related support, including payment holidays for mortgages, credit cards, loans and overdrafts.

If you fear losing your job it may be worth hunting around for cheaper credit today, as your credit score will be higher while still in work.

You can get insurance against redundancy, such as accident, sickness and unemployment (ASU) cover but this will not pay out if you feared you were about to lose your job when you set up the policy.

Watts-lay said draw up a budget, setting your total ongoing household income against your outgoings: “Then work out what action you need to take to cover the shortfall and where you can cut back on spending. Moneyadviceservice.org.uk has a free online budget planner.”

If you are nearing retirement age, you may consider the idea of retiring early, he said. “You could use your pension tax-free cash to pay off any outstanding loans and mortgages.”

If you got a redundancy payout, you could pay that into a pension to boost your retirement savings and claim tax relief on your contributions.

Watts-lay warned to beware of scammers, who will not think twice about cheating somebody out of their redundancy pay.

TAX BENEFIT

One piece of good news is that you may be in line for a tax rebate, as your income for the year as a whole may be lower.

Tommy Mcnally, founder of Tommys Tax, said many of the 200,000 who have already been made redundant this year may not realise that they are due tax back: “Income tax is based on your annual salary and divided into 12 equal payments. If your deductions to date were higher than necessary, you could get a tax refund just when you need it most.”

HM Revenue & Customs has a simple online tax checker tool at Gov. uk/check-income-tax. The Government has set up a new job help site at Gov.uk/find-a-job and you might be able to claim benefits while you search for work, such as Universal Credit. How much will depend on factors such as whether you have children and how much savings you have.

Be warned, your motor insurance premiums could actually go up if you are unemployed.

Dan Hutson, head of motor insurance at Comparethe Market.com, said you must inform your car insurer if you lose your job or it may reject any claim. However be warned: “Premiums can increase by up to 40 per cent, at a time when people can least afford it.”

‘Redundancy is a shock to the system but you need to keep a clear head and work out your options’

FRESH START

The best response to redundancy is to find another job, fast, but this could be tough as the lockdown bites.

If you are struggling, one option is to set up your own business, ideally using existing work skills, and putting any redundancy payment to work.

How much you have to pay depends on the trade, an electrician has to spend on average £6,873, rising to £9,124 for a plumber.

Ironmongerydirect managing director Marco Verdonkschot said if all goes well, these costs quickly pay for themselves: “Owning your business can be incredibly satisfying.”

Neuroscientist Keiron Sparrowhawk said your mental health can also suffer. Many see the future as bleak but remember, it was the post that was made redundant, not you: “You still have skills and experience to get another job.”