UK Redundancy Advice

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It was 2001 that i received the envelope on the desk, telling me i was "at risk" for redundancy. Due to the political environment of the company i was working for, it was actually about 6 months later that decisions were taken. During that period of time i felt physical fear, sometimes manifesting itself as pain, because, not long before, my wife had our 3rd child, a year after having our 2nd and finances were tight.

Not surprisingly during that 6 months i also did lots of research and sought lots of advice about redundancy itself, redundancy tax implications, etc. In fact, i became something of an expert.

One of the first things i did, once i started thinking rationally, was to look into what i could expect from my employer if i accepted voluntary redundancy, or if i waited around and was given compulsory redundancy.

So here is what the employer should do in a redundancy situation :

1. He or she should plan who will be made redundant and be clear about the reasons for this.

2. He or she should inform the affected people as soon as possible - this is obviously a moral obligation but will also benefit the company - if people find other jobs, redundancy payouts and impact on staff morale will be lower

3. If 20 or more employees are to be made redundant, the employer must consult with a Union (if it exists)

4. A period of consultation is fairly normal in large companies and may be conducted in smaller companies directly with the workforce. During this consultation, criteria for redundancy should be drawn up.

5. If the employer fails to do this, an Employment Tribunal can award the employee a "protective award" - meaning that wages will be paid for a certain period of time, although this is generally quite short

6. If after the consultancy period is over no alternative arrangements have been made, the employer can make the staff redundant.

7. The employers reasons for making a staff member redundant must not be personal or based on his or her view of that employee. If he chooses to make somebody redundant on race, sexuality, religious grounds or, for example, membership of a Union, he can be prosecuted for unfair dismissal.

8. Once a decision has been made, the affected employee should be given opportunity to respond. The employer should consider the views expressed and then hold a second interview to advise on the outcome and issue the redundancy notice.

9. If other work can be offered, the employee may choose to accept this or turn it down. If the reason for doing so is unreasonable, the employer will not have to pay redundancy pay. The pay and terms and conditions do need to be similar (in some organisations and the UK civil service, salaries are usually protected regardless of the grade of the new job)

10. An important point to remember is that although an employer cannot arbitrarily change terms and conditions of employment, he is allowed to do so if it is necessary for the continued functioning of the business. So, don't make the mistake of refusing to accept changes in your terms and conditions or you too could find yourself out in the cold - without a redundancy payout !

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Hello again.

Well the really good news is that if you are a UK taxpayer, your redundancy payment, so long as it is less than £30,000, is entirely tax free. That's not bad - for higher rate tax payers that means they save £12000 !

But be careful - if you were silly enough to write redundancy payments into yoru contract of employment, they will be treated as benefits and taxed accordingly. It is unlikely your employer will have done this without your agreement, but do check.

Of course the redundancy tax implication is the simple bit - as usual with our good friends at HM Revenue and Customs, there are forms to fill in.

When you submit your self assessment form in October (or January if you do it online) you need to get a copy of IR204, the publication that tells you how to complete your tax return for this element.

But what if your payment is above £30,000 ? Well the way around this is to pay an additional redundancy payment due to you as a non-taxable benefit, for example through pension contributions.

If you are facing redundancy, it is not unreasonable to know what you are likely to get and whether you can negotiate this in different ways.

Many companies offer redundancy packages that are greater than those required in law. For example, one company i worked for offered a minimum of three months pay. Others will do the absolute minimum.

What does UK law say that redundancy payments should be ?
Well, this is what the state says you are entitled to :

- 0.5 week's pay for each full year of service where age during year less than 22
- 1.0 week's 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+

So if you have worked for 4 years at a company and are now only 21, you will only get 2 weeks redundancy pay plus, obviously, any money you are owed and any money due for your notice period (so if you have a month's notice period, you will get this and 2 weeks pay).

Now if you work for a private company, things may be different. And, importantly, you may be able to negotiate with your manager to get a better balance of benefits. For example, if you do not expect to be immediately short of cash, you could elect to have the employer pay into your pension scheme instead. If you feel you could survive on state benefits, you could do the same too, because state benefits are means tested and will only be paid if your savings are below a certain threshold. You could also ask your employer to pay for a training course on which he can offset the fees against his tax bill - as an individual you would not be able to do so.

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Not unnaturally, unless you are very fortunate, your first thought following redundancy will be "how can i afford to pay my bills".

There is no easy answer to this but experience shows that the swifter you deal with this issue, the less of a problem it will become.

Start by listing and itemizing your expenditure. Look for opportunities to reduce non-essential expenses and social items. Stop using credit cards (this is making the situation worse) and instead work to weekly or even daily budgets for food and essentials. Stop smoking. Give up those visits to the pub. And dont make the mistake of indulging in a bit of retail therapy to make you feel better.

Check whether you've got the best deal on your utility bills, and see whether you are in credit on your direct debits - if so, you might be able to stop paying for a couple of months.

What insurance policies do you have in place that could assist with mortgage, loan or credit cards ? If you have these, you should make placing a claim an immediate priority.

Do you need that gym membership ? Do you have services that you could cancel (for example satellite TV) ?

Do you have things in the attic or the garage that you don't need ? An opportunity to make some cash on eBay or at your local car boot sale ?

Then consider your debts - write to your credit card, loan and mortgage companies and ask them to :

1. Freeze the interest rate applicable to your card or loan
2. Extend the period of the loan and reduce the payment
3. Consider granting you a payment holiday (be realistic about the amount of time you need to get back on your feet)\

Then look at the benefits available to you - don't be ashamed to sign on at your local JobCentre Plus because benefits are there for exactly this purpose - to support you after a job loss.

Whatever you do, keep your chin up ! The absolute worst thing that could happen is that you will lose your house - but you are far, far less likely to have this happen if you act now !