5 things to know about redundancy

1

THINK AHEAD

Look at where you could cut down spending in order to build up a savings cushion if you do end up losing your job. Boost your credit score, if possible, while still employed – the better your score, the more attractive you’ll be to lenders if you need to borrow money in the future. Be aware that redundancy pay may affect any claim you might make for Universal Credit and child benefit, as they’re both means-tested.

2

WEIGH UP YOUR OPTIONS Arm yourself with information. Dig out your contract 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 possible?’

3 HOW MUCH?

If you’ve been in the same job for at least two years, your employer has to pay you statutory redundancy. The amount you’ll get depends on: Your current salary. How long you’ve been in the job (only complete and continuous years of service count).

Your age (for example, 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 £16,320 in 2020/21 (£16,980 in Northern Ireland), even if your actual earnings are higher, or your length of service longer, than this.

4 IS IS TAXABLE?

Redundancy pay is compensation for a 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 paid, are taxed according to your usual tax band. Work out roughly how much you’ll lose in tax ( gov.uk/estimate-income-tax). Your employer should notify HM Revenue and Customs, but you may need to complete a self-assessment tax return.

5

INDEPENDENT ADVICE

Free help is available through Citizens Advice, Money Helper (formerly the Money Advice Service), or Acas. Also check your household insurance for free legal expenses cover. If you need a solicitor, find one through lawsociety. org.uk or call 020 7320 5650.