The threat of redundancy can make us feel vulnerable, miserable and helpless. But in fact, there are plenty of things you can do. Take control with this step-by-step guide.
We all hope redundancy isn’t something we’ll ever have to experience. But frankly, many of us will, and when it happens it will probably come as a horrible shock.
Knowing your rights should help soften the blow. So here’s a step-by-step guide through the redundancy maze.
The moment of impact
At the moment you’re told they’re ‘letting you go’, you’re likely to feel helpless, furious, shocked or a combination of all three. Your head may be spinning and you’ll probably find it hard to think clearly or make rational decisions.
However, just try and remember:
- You’re perfectly within your rights to ask why the decision has been made. You may not be able to do anything about it, but at least you won’t be left wracking your brains over what went wrong.
- Take a pen and paper to any meetings with your boss. You may think you’ll remember everything that’s been said, but it’s surprising how much eludes you when you’re simmering with rage or suppressing tears.
- Don’t sign anything immediately. A reasonable employer will give you a chance to calm down first.
Straight afterwards
You may want to bolt for the door, but it’s important to get your hands on certain information before you leave.
As well as your P45, the crucial bits and pieces are:
Written details of your redundancy package: These should include a statement showing how your benefits have been calculated, as well as clear information on your pension rights, and details of any paid time off or holiday entitlement.
Contact details: Ideally for your line manager, your trade union representative (if there is one) and the individual you’ve dealt with most in the human resources department.
This will put you in a much stronger position to argue your case if you do think you’ve been treated unfairly.
Your rights
If you’re made redundant, you’ll find yourself in one of three situations:
- You may be required to work out your notice period
- You may be told to go on ‘gardening leave’ (when an employee is required to serve out a period of notice at home or ‘in the garden’)
- You may receive pay in lieu of notice.
Your employer should then let you know immediately which one of these three circumstances applies to you.
Redundancy pay:
If you’ve worked for your employer for at least two complete years, you’re entitled to redundancy pay.
At the moment, the legal minimum for redundancy pay is:
- Half a week’s pay for each complete year of service below the age of 22
- One week’s pay for each year between 22 and 40
- 1½ weeks’ pay for each year above the age of 41
Unfortunately, statutory redundancy pay is capped, currently at £380 per week.
Tax breaks
On the upside, the first £30,000 of redundancy pay is tax-free.
However, the rules in this area are complicated: Some payments related to redundancy - like unpaid wages - will still be taxable.
This factsheet on tax and redundancy (from HMRC) explains things relatively clearly.
There are also a couple of really useful websites that will help you get things straight.
Redundancy Help includes sections on debts and finance, job hunting, counselling, your rights and employment law.
And if you’re an employer, Business Link has a guide that outlines your rights and responsibilities - as well as the redundancy consultation process - if you’re forced to lay off staff.
Individual company arrangements
In practice, many people who are made redundant actually receive payouts which are much higher than the legal minimum.
This is because companies - particularly larger firms - tend to have in place their own specific (and more generous) terms.
It’s also worth finding out if your firm offers any non-financial services - like redundancy counselling - to help soften the blow.
Be aware that your employer may choose instead to make a ‘goodwill’ lump sum payout. This could simply be a nice gesture, but it is often done to compensate for mistreatment or shortcomings in the redundancy process.
So - if you’re offered this sort of lump sum, it’s a good idea to consult a specialist in employment law to find out exactly where you stand. They may be able to negotiate an even better deal, so don’t jump at the first sum that’s offered!
If you’ve been mistreated
If you feel you’ve been unfairly treated in the redundancy process, get in touch with one of the following organisations:
Your trade union: It will explain your rights, fight your corner and could even negotiate an improved redundancy package on your behalf.
The TUC’s workSMART website has lots of information on your rights. And if you’re looking to join a union, it also has a tool to help you find the one that’s right for you.
Citizens Advice Bureau: Here you can get free advice on both the legal and financial aspects of redundancy, either online, over the phone or in personal at your local office.
The next steps
Benefits: Once you’ve been made redundant, there will be various benefits that you may be entitled to.
Don’t be too proud to accept them. They are what your taxes were going towards when you were working, and they could make a heck of a difference while you’re looking for the next job.
The main one is Job Seeker’s Allowance. Once you’re officially unemployed, turn up at your local Job Centre as soon as possible. If you’re eligible, you’ll be able to sign on straight away, and get your National Insurance contributions paid. It's also worth informing your council in case you qualify for help with council tax.
Communicate! Make sure you tell all the financial institutions you’re involved with that you’re unemployed. Banks, mortgage lenders and credit card companies are usually open to the possibility of re-negotiating payment plans following redundancy.
They may be awkward conversations to have, but far better that than defaulting on payments later. Lenders tend to be far less understanding if they feel they’ve been deliberately kept in the dark.
Averting disaster
How can you safeguard your finances against the possibility of redundancy? Firstly, don’t be tempted to take our redundancy insurance (also known as PPI), as nine times out of ten it’s a rip-off. Instead, try to build up a savings cushion that will protect you in times of need.
Secondly, bear in mind that the more skills you have and the better you are at interviews, the more employable you are. There are lots of places on the web you can get help with this. And if you do get made redundant, take some time to learn how to write a perfect CV before you apply for jobs.
So, onwards and upwards. Perhaps redundancy will come with a silver lining if it prompts you to chase that job you’ve always wanted…
Good luck!