10 key questions you should ask about redundancy - with answers from the experts
What would redundancy be like and how would you cope? Or do you prefer not to think about it?
“Redundancy is currently the great unmentionable,” says Dr Joanna Currie of Bristol Business School. “So many people are in denial about it - until it happens. In fact, a bit of forward planning can do quite a lot to soften the blow and reduce the time it takes to get back on your feet.
“That means having a redundancy plan - coming to terms with the possibility of losing your job and what the implications will be.”
So here are the 10 key questions you should ask about redundancy - with answers from the experts:
What is redundancy?
It’s not being sacked, but being dismissed because your job no longer exists. In other words, it’s the job that has become redundant not you, so try not to take it too personally.
Should you jump before you’re pushed?
Consultants agree that taking voluntary redundancy can be good sense if you are unhappy with your present job or have plans to start up on your own, using your redundancy money as capital. You get a lump sum, some paid time off and often access to training courses, careers advice and other perks.
While you can sign on as unemployed straight away if you wish, you are unlikely to be able to claim Jobseeker’s Allowance or other benefits until the time you have been paid by your ex-employer is over.
Employers usually prefer to offer voluntary redundancies, even though they are more expensive. Should you accept an alternative job? Remember that if you turn down what your employer claims is a reasonable alternative you could miss out on redundancy pay.
Some bosses are offering what’s known as ‘bumping’ - inviting workers to take a step down the career ladder to keep a job rather than risking trying to get another. It’s up to you to decide whether job security is worth a salary cut. But recent tribunal decisions have shown that bumping is considered a fair and legal way of dealing with redundancies.
What’s the first thing you should do?
Don’t panic. It’s tempting to be angry with your boss or colleagues, but it’s in your interests to stay calm and professional. You will probably need a reference at some point.
Before you leave for good, make sure you have:
• Your P45.
• Written details of your redundancy package, showing how your benefits have been calculated and information on your pension rights.
• Contact details for the bosses you find most approachable.
What are you entitled to?
You’re entitled to either work out your notice, go on ‘gardening leave’ or receive pay in lieu of notice. If you’ve worked for the company for two years you are entitled to:
• Half a week’s pay for each complete year of service below the age of 22 and one week’s pay for each year between 22-40.
• One and a half weeks’ pay for each year above the age of 41.
Statutory redundancy pay is currently capped at £430 a week, but many employers have their own arrangements that are often more generous. You don’t pay tax on statutory redundancy payments unless they’re more than £30,000.
Will your employer help?
Companies are assigning outplacement counsellors to redundant staff to help them through the job hunting jungle. It’s said to increase their chances of success by at least 30 per cent, so it’s worth investigating in case you need it.
The process usually starts with a discussion about your career, prospects and ambitions. Psychometric tests will help assess personality, ability and aptitude. According to DBM, the biggest consultancy in this field, redundant workers seeking help from outplacement counsellors not only get a new job quicker, but often get a better one.
Says DBM: “We see people from secretarial level right up to directors. The important thing is not to panic.”
Is there any financial help?
If you’re made compulsorily redundant you might be eligible for Jobseeker’s Allowance, but not if you have savings of £8,000 or a partner who works more than 24 hours a week.
Another benefit - Support for Mortgage Interest - helps to pay the interest on mortgages up to £100,000, but you could have to wait to get it depending on when you took out the loan. Your local Citizens Advice Bureau will provide detailed advice.
What about more qualifications?
Management and entrepreneurship courses have grown by 500 per cent in the last four years. An increasing number of universities are running special courses for redundancy victims.
If there’s money available for a new start - go for it. Currently there’s around £20 billion in loans, grants and aid available to help redundancy victims turn their dreams into reality. At the last count there were over 1,500 sources of money available to UK redundancy start-ups, ranging from EC grants to the Prince’s Trust.
There are also grants available through the EC - for instance, the European Social Fund has nearly £1.7 billion available to assist all types of UK business. You can find out what’s available by visiting the J4b website (www.j4b.co.uk), which has details of over 1,000 grant and loan schemes for small businesses.
How are your job hunting skills?
When did you last have to look for work? If it’s more than five years, you’ll probably have to drastically update your job searching techniques. Today over 60 per cent of jobs now come through online recruitment agencies and at least 50 per cent of companies largely disregard references.
About 75 per cent of recruiters ask for CVs to be submitted online and psychological assessment centres are increasingly used to recruit personnel - the days of the cosy chat over coffee are certainly over.
Have you thought about your pension?
If you have a work pension, don’t forget about it once you stop working for the company. Affordability may be tricky, but it’s often a good idea to keep up your contributions if you can. If you receive a good redundancy payout, you could think about topping up your pension pot with a lump sum. You can leave the pension where it is, although you may prefer to transfer it to an individual scheme with lower charges. You could even think about moving it into a self invested personal pension where you have more control.
How can I insure against redundancy?
You can take out insurance to provide a limited level of financial cover - usually around 50 per cent of income up to £2,000 a month and usually for only 12 months.
You can only claim if you have been made redundant involuntarily, not if you resigned, were sacked or knew you were being made redundant when you took the policy out. Sometimes it can be difficult to find a policy that just covers redundancy, as most combine accident, sickness and unemployment.
And a final extra piece of advice from Dr Currie: “Don’t agree to the first deal you’re offered. Play it cool. Say you’ll need to think about it. Then come back with suggestions of your own. You’ll be surprised how much better the final deal can turn out to be.”