If you have recently been made redundant, you may be concerned about finances, debts and whether you can retain your home. There are ways and means of mitigating the impact of redundancy, and there is help out there.
What Benefits Are Available if You’ve Been Made Redundant?
When you are being made redundant, you can apply for Jobseeker’s Allowance to cover costs while you find your next job. You may also be entitled to a redundancy payment which can cover living costs until you are employed again.
The rules and regulations covering redundancy take in everything from notice period to holiday pay, statutory redundancy and payment dates. While there is no doubt that facing redundancy is a major challenge and concern, there are ways and means of realigning your finances and taking advantage of help available.
Continue reading to get all the nitty-gritty details and see if we can help.
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How Long Is the Statutory Redundancy Notice?
While employment contracts can vary, the absolute minimum statutory redundancy notice is at least one week if you have been employed between one month and two years. Thereafter it is one weeks’ notice for each year between two years and 12 years. If your employment term exceeds 12 years, then you will receive 12 weeks’ notice.
So, for example, if you had been with the company six years, then you would be entitled to one week for the first two years and four weeks for the additional four years, making a total of five weeks statutory redundancy notice.
How Much Redundancy Pay Should I Receive?
Under current regulations, you will not be entitled to a redundancy payment if you have worked at a company for less than two years. After this, the level of redundancy is staggered as follows:-
|Age||Level of redundancy|
|Each year under 22||Half a week’s pay|
|Age between 22 and 40||One week’s pay|
|41 and over||1 ½ week’s pay|
Some employment contracts will provide a higher remuneration in the event of redundancy so you should check your employment contract as soon as possible. To be clear, there is a difference between redundancy notice and the terms of redundancy pay.
What Happens if My Employer Goes Bust?
In the event that your employer goes bust, you will still receive statutory redundancy which is funded by the national insurance fund. While there are limits on payments from this fund, it is possible to claim unpaid wages, holiday pay, statutory notice pay and any outstanding pension contributions.
It is worth taking advice on applying for redundancy payments if your employer has gone bust.
How Long Does It Take to Get My Redundancy Pay?
Under normal circumstances, your redundancy payment should be included in your final wage. There will be occasions where redundancy entitlement is made as a separate payment later on, but this would need to be agreed between employers and employees.
It really would depend upon the circumstances of the redundancy, has the employer gone bust or are they simply looking to reduce their workforce. Either way, your employer should keep you fully aware of the situation and timescales.
Do I Pay Tax on My Redundancy?
The first £30,000 of a redundancy payment is free of tax which includes not only income tax but also national insurance contributions. It is therefore advisable to check your last wage slip to ensure that no tax has been paid on your redundancy element.
How Can I Reduce My Cost of Living in the Short-Term?
The immediate reaction when facing redundancy is to slash spending to the bone potentially at the expense of existing debt repayments. While obviously a very difficult situation, it is very important to maintain a degree of control over your finances and expenditure.
The first thing to do is list all payments which need to be made each month such as credit cards, personal loans, mortgages, etc. You may have additional savings, an additional income in your household or you may be in line for a significant redundancy payment. You should look at reducing your outgoings but also ensure that priority expenses are protected as much as possible.
What if I Can’t Cover My Debt Payments After Redundancy?
When employers are looking to reduce their workforce, they have to enter what is known as a consultation period which is between 30 and 45 days minimum before any dismissals take effect.
Therefore, assuming that redundancies were planned by your employer, you should have a minimum of 30 days before a decision is made. Your notice period would begin after the consultation has concluded.
Can I Keep My Credit Card Once Made Redundant?
In theory, as long as you can maintain your credit card payments going forward, then there is no reason you should lose your credit card. However, if you are only entitled to a minimal redundancy payment, have minimal savings and no other income stream in your household; you may struggle to maintain payments.
If there is a chance that you may struggle to make repayments going forward after your redundancy, then you should approach your credit card provider. There may be an opportunity to reduce your short-term repayments while you find your financial feet again. In the event that no agreement can be reached, and there is no prospect of new employment on the horizon, you may need to take debt management advice.
Should I Use My Redundancy Money to Pay Off My Debts?
Upon receiving notice of redundancy, many people will automatically seek to pay off as many debts as possible using any redundancy payment. While very honourable, this may not be the best way forward in the short to medium-term.
Review your debts, your repayments what you may or may not be able to afford in the short to medium-term and make a plan. However, you must ensure that you place some of your redundancy payment to one side as an emergency fund. The last thing you need in the immediate aftermath of redundancy is ever-increasing financial pressure.
Will Redundancy Impact My Mortgage?
If your mortgage agreement includes payment protection insurance, then regular payments will be paid from your insurance for a set period of time in the event of unemployment. This should be detailed in your mortgage agreement.
Will PPI Help With My Personal Loan Repayments?
If you acquired PPI with your personal loan, then you should be entitled to repayment cover in the event of unemployment. Despite the PPI mis-selling scandal, this is what PPI cover was designed for!
Thankfully there are various statutory levers built into the employment system with regards to redundancy notice and redundancy payments. Even in the event that your employer has gone bust, you should still be able to claim from the national insurance fund.
It is also advisable to review your finances and consider a form of debt management if you are facing a struggle to cover your immediate debt repayments.
Quick Debt FAQs
You only need to ask somebody who suffers from money anxiety disorder to realise how this can impact your life. It can prompt extreme behaviour from an individual which goes above and beyond just being concerned about money – it becomes a kind of obsession.
The debt snowball method is a process by which you make minimum payments on all of your outstanding debts. Any surplus capital is used to top up repayments on your smallest debt which will be paid off quicker, and then you move onto the next smallest debt.
Many local authorities in the UK will offer a local welfare assistance scheme which is there to help those experiencing extreme hardship. It is there to help with the cost of essential goods such as food, clothing, household items and covering your utility bills.
While your home will be recognised as an asset and could potentially be sold to repay your creditors, this is not as straightforward as many people assume. Upon bankruptcy, the legal ownership of your home would be transferred to a trustee to prevent a sale.
The issue of a CCJ will not be the first time that the creditor has tried to contact you to arrange payment of an outstanding debt, or an alternative arrangement. Ignorance, burning correspondence, binning the letters and just burying your head in the sand is not the answer.
A CCJ will come after a default note has been added to your credit file will certainly have a huge impact on your credit score. Traditionally, like other debt management arrangements such as IVAs, a CCJ will remain on your credit file for six years.
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