Redundancy: Your questions answered
Nearly all of us have been affected in some way by the recession, and many of us will know someone who has lost their job as a result.
According to the Office for National Statistics (ONS), the redundancies level for the first three months of 2009 was at its highest since records began in 1995.
Figures from the Citizens Advice Bureaux show that there has been a 114% increase in the number of people contacting the charity with redundancy concerns and a 61% rise in people seeking information about Jobseeker's Allowance.
For many people, being made redundant is not only a devastating experience but also a huge financial blow. If you suddenly lose your source of income, you may not be able to meet mortgage repayments, pay your bills or continue to support your lifestyle.
1. So, what exactly is redundancy?
If you're made redundant, it's important to remember that you haven't been sacked. Redundancy occurs when your employer needs to reduce staff levels - not because you're under performing at work.
In the current economic climate, redundancies will most likely stem from a company's need to cut costs.
However, you may also be ‘let go' if your job is no longer necessary as a result of new technology, the job you were hired for no longer exists or the business you work for is closing down.
2. What are my rights?
Employees are protected from being fired or being made redundant unfairly under the Employment Act 1996.
It's up to your employer which reasons they use to select individuals for redundancy, but they must be able to prove they are fair.
If you're made redundant, you must be given a statutory notice period. This is one week if you've been employed between one month and two years.
Thereafter, you should receive one week's notice for every year you've worked with the company, up to a maximum of 12 weeks.
Employers must also consult with individuals to explain why they have been selected and discuss possible alternatives to redundancy.
If your employer is making more than 20 people redundant within a 90 day period, it should consult with any recognised trade union who will negotiate a redundancy package on your behalf.
3. Will I get a payout?
If you've worked for your employer for at least two years, you're entitled to a redundancy payout. The amount you'll get will be based on your weekly pay, age and continuous employment with your employer.
The statutory legal minimum is:
• Half a week's pay for every continuous year of service under the age of 22.
• One week's pay for every year between the ages of 22 and 41.
• One and a half weeks' pay for each year after the age of 41.
However, regardless of how much you earned when employed, a maximum of £350 for each week you worked will be taken into account when your redundancy payout is calculated. You won't be taxed on the first £30,000 of your redundancy pay.
If you're employer has been declared insolvent, you can apply for a payment from the National Insurance Fund.
Don't forget to ensure you are also paid for any unused holiday, outstanding expenses and employee benefits.
4. What benefits am I entitled to?
If you're made redundant, you're entitled to state support.
You should be able to claim contributions-based jobseeker's allowance if you're actively seeking work and have paid Class 1 National Insurance (NI) contributions.
However, the weekly rate is a meagre £64.30 if you're over 25 and just £50.95 if you're between 16 and 25.
If you've not paid enough NI, you've only made self employment contributions or are on a low income, you might be able to claim income-based jobseeker's allowance.
You may also be able to claim housing benefit, council tax reduction and child tax credits.
State benefits are complicated and not everyone is entitled to the same payments, so it's a good idea to check what you can claim. The Jobcentre Plus website should prove useful.
5. What happens if I can't meet my debt repayments?
Since January 2009, there has been more assistance available for homeowners receiving benefits to help them pay their mortgages.
If you're receiving an income-related support allowance, you should now be entitled to support on your mortgage interest payments after just 13 weeks – down from the previous limit of 39 weeks!
Also, check if you're eligible for Homeowners Mortgage Support (HMS). Under this scheme, you may be able to delay some of your mortgage interest repayments for up to two years.
Finally, remember to check whether you're entitled to a pay out under any existing insurance policies you may have, such as income protection insurance (IPI) or payment protection insurance (PPI).
6. What should I do next?
Your first step should be to decide your next career move. If you were unhappy in your previous line of work, maybe now is the time to embark on a career change.
Make sure you update your CV and polish up your skills. You might find it beneficial to sign up for a training course or two.
When you begin job hunting, remember that Job Centre Plus and some private recruitment agencies can be incredibly helpful. They can line up interviews and bridge the gap between you and the employer.
7. Who can I go to for advice?
If you feel you've been unfairly treated, your first step should be to get in touch with your trade union and speak to your employer.
If this doesn't work, you may have to take your case to an Employment Tribunal.
For free, confidential and impartial advice, you can contact the Advisory, Conciliation and Arbitration Service (Acas) or Citizens Advice. For more information on redundancy and your rights, check out the DirectGov website.
**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**
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