Finance is one of the first worries everyone has when they find out they are being made redundant. In a redundancy survey we conducted, we found that 23% of people believed they could survive 3-4 months if they lost their job. This shows how important it is to carefully budget while you are job hunting in these first months.
In our survey 36% of people were not sure what they would entitled to if they were made redundant. We asked Money Advice Scotland for some advice on calculating redundancy entitlements and budgeting for redundancy.
I am about to be made redundant. How can I prepare financially?
After establishing how much your redundancy payment is, you should take some time to look at your household spending. You may find savings, and your outgoings may well reduce with costs such as travelling to work, reducing or stopping altogether.
Once you have done this, look at what length of time your pay off will last for, it may be longer than you think and may give you enough time to find another job.
Check to see if any outstanding credit that you have is covered for redundancy. This could apply to any credit from your mortgage, car finance or the fridge freezer you bought on finance. If you cannot find this information, contact the creditors and ask.
Calculate a weekly or monthly budget and be strict with managing it. Utilise money comparison websites to save money on utilities, groceries, insurances etc.
How can I calculate what pay out I am entitled to? Is there a minimum I am entitled to?
Different organisations have different policies regarding redundancy, although contractually they must pay a minimum amount provided you meet certain criteria.
You’ll normally be entitled to statutory redundancy if you have been an employee for a minimum of two years with current employer.
If you meet these criteria the minimum you will get will be:
· Half a week’s pay for each full year you were under 22
· One week’s full pay for each year you were 22 or older, but under the age of 41
· One and half week’s pay for each full year you were 41 or older
If you are unsure about how you’re payment has been calculated you can get advice from ACAS or Citizens Advice Bureau as well as from your Trade Union.
Always ensure that you get written notification of redundancy including the amount offered.
Is my redundancy payment tax free?
Your redundancy payment is tax free if it is under £30,000.
I am worried about my rent or mortgage, what do you advise?
Check the terms of your mortgage as you may find that payments get covered for a period if made redundant.
You may be entitled to take a ‘payment break’ with your mortgage. This is usually a period of 1-3 months whereby payments are deferred, which will take pressure off expenses.
Speak to your mortgage advisor, they are there to help and may offer a reduced payment for a period.
Depending on your relationship with the landlord speak to them and update them ON what your situation is. Providing that you have been a good tenant they will try to help.
Look into whether you are entitled to Housing Benefit which will be a contribution to your rent or mortgage.