Keep your cool if you lose your job
CALMLY GETTING YOUR FINANCES SORTED AFTER REDUNDANCY IS A PRIORITY, SAYS TRICIA PHILLIPS
REDUNDANCY is a terrible shock – nothing can prepare you for the sledgehammer blow of suddenly losing your job and your future being thrown into chaos.
And then there’s the damage it can do to your finances – so it’s vital you know your rights and the best way to protect your money.
YOUR RIGHTS
IF you have worked for your employer for two years or more, you have the right to statutory redundancy pay.
This is a legal minimum and your employer can’t pay you less. Some firms are more generous and may offer their own better terms.
The statutory redundancy you get is based on how long you’ve been in your job and your current salary – capped at earnings of £538 per week.
There is also an overall maximum statutory amount you can get, capped at £16,140 in this tax year.
Only complete years of service count, and it has to be continuous. Age plays a part too.
■ Under 22 you get half a week’s pay for each year.
■ Between 22 and 40 you get a week’s pay for each year
■ Over 41 you get a week and a half’s pay for each year.
These are minimums, and some firms will offer more generous terms. If you are going to get more than basic redundancy, the first £30,000 is tax free.
When it comes to notice periods, your employer must give you a statutory minimum of one week’s notice of redundancy for up to two years’ service and one week’s notice for each year you’ve worked after that – up to a maximum of 12 weeks’ notice.
You may have a longer notice period in your contract so check that.
You may also be expected to work this period or you might be allowed to leave earlier. In this case you’ll get pay in lieu of the notice period too.
If you have any holiday owed, your employer must pay you for it or let you take your holiday before you leave. If you’ve worked there for less than two years, you are not entitled to receive a statutory redundancy payment.
CHECK COVER
HAVE you a mortgage payment protection policy, payment protection insurance or short-term income protection cover?
These can all help you to keep on top of your bills if you are made redundant. The level of cover and exclusions can vary greatly, so you’ll need to check the small print on your policy.
They typically don’t pay out immediately – there’s usually a deferral period of around three months. Mortgage payment protection policies pay out a set amount each month, typically after three months after your earnings stop and usually for 12 months. Some pay out for 24 months.
Payment Protection Insurance – sometimes called Accident, Sickness and Unemployment (ASU) cover – is typically taken out on loans or credit cards and enables you to keep up repayments by paying out a set amount for 12 to 24 months.
Again, payments typically start three months after earnings stop.
Short-term income protection insurance replaces a part of your income for a fixed period of time – usually 12 or 24 months.
But don’t confuse this with other income protection policies that only pay out for sickness and ill health and not if you lose your job.
CLAIM BENEFITS
DEPENDING on your personal circumstances, you may be able to claim benefits. Be aware the system is complex, so get help. Try the likes of Turn2us.org.uk (where there is a benefits checker) or Citizens Advice. Alternatively, try the Government website at gov.uk.
The main benefit is the new-style Jobseeker’s Allowance, based on your National Insurance contributions, which you can get for up to six months.
You may also be able to get help with housing and childcare costs via Universal Credit. It’s based on household income, so your partner’s income will affect how much you will get.
Note what’s coming in and going out. Work out how long you can keep going without any struggle...
KNOW WHERE YOU STAND AND REBUDGET ACCORDINGLY
ONCE you have an idea of your redundancy pay, any insurance cover, benefits, savings or other forms of income you have, do a budget.
Note what’s coming in and going out. Work out how long you can keep going without any struggle. Then extend that with some ruthless chopping and switching.
Break outgoings into essentials, like bills and food, the would-liketo-keeps and don’t-needs. Ditch the don’t-needs for now and be really tough on your would-liketo-keeps, such as subscriptions and takeaways.
Check you are not over-paying on any of your regular bills such as energy and insurances – and switch if you can find cheaper alternatives.
Remember every penny you chop off your monthly costs will add up and mean your redundancy pay and savings safety net (if you have one) will last longer.
DEAL WITH DEBT
IF you are paying out large sums on credit cards or loans, you need to try to get these cleared as quickly and cheaply as possible. Interest on many of these products is high and will take up big chunks of your cash.
Switch credit card debt to a 0% card and work out how much you need to – and can afford to – pay each month to get it cleared during the introductory term.
TSB offers 29 months; M&S Bank and Natwest 28 months; HSBC 25 months and MBNA 24 months. Talk to lenders directly about any options you may have to switch to cheaper products, freeze interest or extend the term of a loan agreement to reduce the monthly repayments.
During these unprecedented times, these organisations are being more flexible and have been issued guidance from the Financial Conduct Authority to help find solutions to help those struggling to manage their finances. If you have unmanageable debt, get free, independent advice from one of the debt charities.
Contact your local Citizens Advice or visit citizensadvice.org.uk; call the National Debtline on 0808 808 4000; call Stepchange Debt Charity on 0800 138 1111 or stepchange.org.
BUILD A SAFETY NET
AS soon as you possibly can, such as when you get back on your feet and have a new job, start putting a bit away.
It may seem hard at first but this is the best way to build up a financial safety net to give you some peace of mind for your financial future.