Redundancy - what's your next step?

‘Kelly’s Know-how’ – October 2020 edition

I have been made redundant, what’s next?

In the last few months, unfortunately I have seen many people being made redundant, including friends and our clients.

So, what is redundancy? Redundancy is a form of dismissal from your job. It happens when employers need to reduce their workforce.

With the current uncertainty created by the global pandemic, lots of companies have no choice but to reduce the number of their staff.

If you have worked for more than 2 years for the same employer, you should receive redundancy pay:

  • half a week’s pay for each full year you were under 22
  • one week’s pay for each full year you were 22 or older, but under 41
  • one and a half week’s pay for each full year you were 41 or older
  • Length of service is capped at 20 years.

Your weekly pay is the average you earned per week over the 12 weeks before the day you got your redundancy notice.

The statutory redundancy notice periods are:

  • at least one week’s notice if employed between one month and 2 years
  • one week’s notice for each year if employed between 2 and 12 years
  • 12 weeks’ notice if employed for 12 years or more

You can receive up to £30,000 of the redundancy package tax free, anything above this amount will be taxable as normal.

Top Tips for if you are being made redundant

If you can negotiate the date of the redundancy payment, try to get it after the end of the tax year. So, if you have been given notice around January time, you should try to get your employer to pay the package after 6th April so that you pay less tax, as arguably you may earn less in the new tax year.

Your first instinct would be to update your CV and start job hunting for another role to fill the void.

This is understandable, the unknown is scary. However, this could be a perfect chance to analyse your situation, and potentially make some important changes.

These are some of reflective questions that you need to ask yourself:

  • Do I enjoy my job?
  • Do I have enough in my ‘emergency fund’? We always recommend having something between 3- and 6-months’ worth of normal expenditure.
  • Does other income cover my expenditure? Use budgeting tools to review your expenses.*
  • Do I actually need another job?
  • Can I retire early?
  • What else do I enjoy doing?
  • Is there something I have been putting off because of lack of time or other excuses?
  • Have I been neglecting people that I love?

* Open Banking on your Personal Finance Portal is a great way to monitor your income and expenditure and see where you could improve your cash flow, or you can find alternative tools (like an excel spreadsheet template) in the Support Tools section of the Financial Hub.

Life is so chaotic and sometimes work just becomes part of the routine; we hardly realise how quickly time flies.

That’s why this is an important opportunity to reassess your life goals.

What difference could it make.

We have been able to help several of our clients who have been made redundant recently.  

Lemon Drizzle Cake

One of them first came to see us in February, when we did a full financial planning review of his situation and showed him that early retirement could be an option and that he actually had enough to live the rest of his life comfortably, doing the things he wants to do.

This client was then made redundant in April. He said that if it were not for the full review, he would have just started looking for another job immediately. However, since we showed him that he has enough money, he was relaxed about the redundancy and decided to start baking lemon drizzle cakes instead! Unfortunately, we haven’t had the opportunity to taste any yet!

There are so many benefits to having a clear view of your finances and a plan for your future; even when something unexpected tries to throw you off course, you can quickly reassess and keep the peace-of-mind that you are in control and know exactly where you are heading.

If you have been made redundant and are wondering about early retirement, thinking of a career change, or just want a review of your financial situation, we are here for you. Similarly, if someone you know is in this situation, we can help ease the stress and panic, and provide peace-of-mind for the future.

With the combination of our sophisticated modelling tools and our knowledge and experience, we can show you many different scenarios and the financial impact on you so that you can make educated decisions about your future.