What Should You Do if Made Redundant?
Redundancy Payments & Job Seekers Allowance Help with Money Problems
Apr 4, 2009
The Confederation of British Industry (CBI) has predicted that unemployment will reach 2.9 million by the end of 2009. Those made redundant experience a sudden drop in income and are more likely to develop money problems. However, involuntary redundancy does entitle them to redundancy payments and state benefits, such as Job Seekers Allowance (JSA) and housing benefit. Others have unemployment insurance or have access to personal savings.
Job Seekers Allowance and Housing Benefit
Individuals that have been made redundant may be entitled to state benefits, such as Job seekers Allowance (JSA) and housing benefit to help with money problems. The involuntary redundant are entitled to a Job Seekers Allowance payment of £60.50 per week. Tenants may also be eligible for housing benefit if they are made redundant and have personal savings of below £16,000.
Redundancy Payments from Employers
If made redundant by an insolvent employer, a claim can be made from the National Insurance Fund. Form RP1 is available from the Insolvency Service. Once statutory redundancy payment obligations have been satisfied, those made redundant could literally be offered anything by an employer. Some employers offer very generous packages, including re-training. The minimum statutory redundancy payments are listed below:
- 0.5 weeks pay for each full year of service where age during year less than 22;
- 1.0 weeks pay for each full year of service where age during year is 22 or above, but less than 41;
- 1.5 weeks pay for each full year of service where age during year is 41+
The first £30,000 of any redundancy payment is paid completely tax-free as the government understands that being made redundant creates money problems for many families. Others that are approaching retirement age may wish to benefit from a tax-free income by increasing contributions to their personal pension plan.
Become Self-Employed
Many people that have been made redundant choose to become self-employed and work from home. Whilst some peoples' skills automatically translate into becoming self-employed, such as hair dressing, others may find it more difficult to come up with a business idea. Those with a young family may wish to consider setting up as a registered childminder or starting a dog walking or dog sitting business.
Take Early Retirement
Having been made redundant, many over-50's choose to opt for early retirement. Whether this is feasible depends upon the size of a pension pot and whether it is sufficient to live on without creating further money problems. Sometimes a redundancy payment, when combined with a pension pot, is sufficient. Others choose to take their pension and continue working on a part-time basis.
It isn't an ideal time to be made redundant as competition for jobs is fierce. Those with a permanent contract should check to see if they have an unemployment insurance policy in operation. Also check state benefit entitlements as Job Seekers Allowance and housing benefit can provide a potential life-line. Consider setting up on a self-employed basis or taking early retirement.
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