Money Talks: I've been made redundant - what now?

When faced with losing your job, there are a few things you can do to smooth the financial way, writes Carol Brick

Wed, 29 Sep, 2021 - 18:00

I have just learned that I am to be made redundant, which is no surprise as the company I am working for was badly by the pandemic.

I have been informed that I will be paid only the Statutory Redundancy Payment with no top up as the company is in trouble financially – is there tax payable on this payment and have you any other advice from a financial point of view for somebody facing imminent redundancy?

I am very sorry to hear this. Redundancy is not something that any of us expect to face and it is wise to gather as much information as you can at this stage so that you can be in the best possible position both financially and emotionally in order to weather this storm.

Let me firstly address the tax side of things. The good news is that as this is a statutory redundancy payment, it is payable to you tax-free. Obviously, if any additional relevant payments are made to you over and above this in the form of holiday pay, pay in lieu of notice etc. these will be subject to full income tax according to your usual marginal rate.

One of the most important factors to consider now is your overall financial situation. Hopefully, your term of unemployment will be as short as possible and with proper financial planning at this stage, you can retain a good standard of living and maintain your credit rating with your banks during this time.

Some key pieces of advice to take on board would be as follows:

It is so important to be fully aware of what is happening with your workplace pension and other important staff benefits like death in service cover and health insurance. Payments made by your employers to such policies will now cease so you need to review these carefully to ascertain which ones need to be either replaced or amended by yourself. Health cover and life cover would be the major ones here. You may be able to continue your health cover on your own without risking a break in cover.

This would be especially important if the policy is covering your whole family. Your Death in Service Cover (Life Cover) usually equates to 4-times your salary. You will certainly need to factor this into your financial preparations and take out your own independent cover.

Also carefully review your Staff Pension Scheme and decide if you wish to leave it where it is or transfer it to another policy. It is important to take expert financial advice before making any decisions in relation to these policies.

Coping on less money means that you will have to seriously review your expenditure and try your best to budget accordingly. Even minor savings in your expenditure will contribute to an overall reduction in outgoings. Take a close look at the areas where you can cut spending in order to build up a savings cushion to keep you going for the next few months. Cut out any unnecessary and discretionary expenditure.

Carry out a detailed audit of your expenditure including all standing orders and direct debits – if you haven’t done this in a while, then I can guarantee that there will be some that you can amend or cancel at this stage to reduce your overall expenditure.

Talk to your mortgage lender and explain your situation. Maybe it might be possible to take a payment break during this term of unemployment. It’s also worth checking if you have any payment protection insurance. Maybe this might have been part of your mortgage package when you took out the finance. If you have this insurance, it should cover your payments for the duration of the period that you will be without employment.

I would recommend not using your credit card during this period so that you do not incur any unnecessary debt at this time.

I completely understand that this time can be stressful and unsettling, however, it is so important to look to the future and maintain a positive attitude. I wish you the very best and hope that you secure alternative employment in the very near future.