Facing Redundancy?  The Financial Implications...

Without a doubt, being made redundant is one of the most financially, emotionally and psychologically devastating crises during a professional career.  Job loss continues to be an unfortunate consequence of the ongoing and volatile economic downturn.  If you are being shown the door and handed a pink slip, use the opportunity to plan ahead for your professional and financial future and evaluate the resources available to you during your period of unemployment.

Maintain Positive Ties

The UK Mental Health Organisation considers redundancy and debt two significant stressors that produce the onset of mental illness and depression, and for good reason:  redundancy produces feelings of anxiety, stress, isolation, failure, grief and anger, putting enormous pressure on family life.  It is important not to panic and view the period as one of transition and not crisis.  A positive frame of mind, elevated self esteem and ambition are crucial to successful job interviews with prospective employers. 

During unemployment, maintain routines and family ties and establish a reinforcing support network.  Networks can be extremely helpful in supporting a new career search.  Capitalize on your transition period by updating your cv, marketing your experience and expertise and retraining for a new career.  Exploring new aptitudes and pursuing self employment are also possibilities.

Know Your Rights and Consider Alternatives

When faced with possible redundancy, regrettably most employees remain woefully ignorant of both their own rights and their employer’s responsibilities. 

In most cases a redundancy should not come as a shock or surprise.  In both collective and individual redundancies, employee consultation with the affected employees or the employee’s representative is protocol.   During consultation, employers should also provide acceptable alternatives to redundancy, including redeployment, wherever viable.  If you have not been consulted prior to dismissal, you may be eligible for protective pay (up to 90 days) from the Employment Tribunal.   Likewise, if fair or objective criteria have not been used in redundancy selection, affected employees might be eligible to file a claim for unfair dismissal.

In many cases, employees are entitled to redundancy pay based on period of employment, age, and weekly pay.  Acceptance of redeployment, does, however, waive an employee’s right to redundancy pay.

Free, confidential and impartial advice on legal employment issues is available through the ACAS (the Advisory, Conciliation and Arbitration Service) at 08457 47 47 47.

Evaluate Financial Obligations and Resources

Creating and adhering to a budget that balances income and expenditures is absolutely essential during a period of unemployment.  Budgets should include realistic debt and mortgage payment plans that are manageable and negotiable with financial institutions.  When faced with job loss, it is imperative to notify lenders and credit card companies immediately to discuss payment options, rather than attempt to conceal the redundancy.  Your lender will be more sympathetic if you present your unemployment situation candidly. 

If you have a flexible mortgage contract, you may be entitled to a temporary halt on payments called a mortgage payment holiday. Lower mortgage payments or a longer repayment period are other relief options as well.  Mortgage payment holidays are  awarded if the loan-to-value ratio is over 80% and if payments are up-to-date.

Interest will still continue to accumulate during mortgage payment holidays and future payments will probably rise, making the future financial repercussions of this option potentially high.

To help manage financial circumstances during unemployment, National Debtline offers free budgetary advice and debt management plans and can be reached at 0808 808 4000.

This article was kindly sponsored by Crystal Umbrella, the umbrella company you can trust.