Managing redundancy can be a daunting prospect, but our top ten tips can help to put you in control of your finances and help you get through this unsettling time.
Redundancy Pay and Tax
To qualify for statutory redundancy pay, you need to work for an employer for at least two years. The first £30,000 of redundancy pay is tax-free! Everything over that is charged at a marginal rate of tax. If you can afford it, take advantage of additional tax relief by making a pension contribution.
Your employer may offer an alternative job in the place of redundancy. You can turn this down if it is substantively different to your old job, and still qualify for redundancy pay and Universal Credit. Go to Citizens Advice to find out more about your rights as you manage redundancy.
Covid-19 Specific Schemes
The current Job Retention Scheme, or “Furlough” will end on October 31st replaced by the Job Support Scheme. From November 1st you can be asked to work 33% of your hours, paid by your employer. To be eligible, you must have been on your employer’s payroll since September 23rd 2020. While an employer is claiming for part of your wages through the Job Support Scheme, you cannot be made redundant or put on notice!
Going through your direct debits and figuring out what you can cancel or move to a cheaper deal is an easy and very effective way of saving money while you manage on a reduced income. Check your energy provider, car insurance, phone and broadband contracts!
If you’ve got a spare property, spare room, or even spare parking space you can rent them out! Make sure to capitalise on the rent-a-room tax break where you can earn up to £7,500 each year! This income stream will help you stay afloat while you search for your next role.
You have until October 31st to ask your lender for a payment holiday should you need it. After that, lenders are still required to provide help known as ‘forbearance.’ Don’t be afraid to contact your lender and ask for help.
You may also qualify for Support for Mortgage Interest. This is a series of interest-only payments to your lender at a rate of 2.61% that can help you manage redundancy. It caps out at £200,000 and lasts for a maximum of two years. However, you must have been out of work for 39 weeks before payments will be made.
As with mortgages, until October 31st, you can request a three-month payment holiday on any loan or credit card! This gives you precious time to find a new job. After October 31st, you can get in touch with your mortgage lender or bank to seek additional help while you manage redundancy. Lenders are required to help you find affordable repayment plans for mortgages and other types of credit.
Jobseekers Allowance, Working Tax Credit and many other out of work benefits have been replaced by Universal Credit, which you may be entitled to. Go to entitledto.co.uk to see what help is available to you.
Two in five working people have less than £100 in savings. A lack of savings can make managing redundancy very difficult before you’ve even begun. A good rule of thumb is to have three months’ essential outgoings available in an instant access account. While it may not help you this time around, consider Financial Coaching to learn more about how to manage your savings to build your financial resilience for future bumps in the road.
Help to Save
The Help to Save scheme allows certain people entitled to Universal Credit (formerly Working Tax Credit) to get a bonus 50p for every £1 they save over 4 years! This takes some of the work of managing redundancy off your shoulders.
Talk to someone
Managing redundancy and navigating what may be a difficult period isn’t easy for anyone. Don’t be ashamed of your situation, you are not at fault. If you feel your mental health isn’t quite what you’re used to, reach out to a friend, family member or colleague. You’ll probably find you aren’t alone in the way you feel. You can also get help from one of the many organisations recommended by the Money and Mental Health Policy Institue.