Redundancy - the basics

Downsizing is new management-speak for redundancy. But the effects are the same for anyone whose job disappears as companies cut costs. A massive 650 people lose their job each day according to research from Direct Line and statistically, one in three of us will face redundancy during our working lives.

Although you cannot avoid the finger of fate, redundancy does not have to be a negative thing. It could allow you to change career or set up on your own. And if you manage to find a new job quickly, you may have a nice lump sum too.

Once the initial shock has subsided, it is important to stay focused. If you have been with your employer for at least two years, you are entitled to the minimum statutory redundancy. This is half a week's pay for every year of service worked between the ages of 18 and 21, a full week's pay for each year from 22 to 40, rising to a week and a half's pay per year worked over the age of 41. An extra week is then added on top. Pay is calculated at a maximum of £250 a week, regardless of earnings. Many businesses pay more than the legal minimum, often up to four or six weeks pay per year served.

Your employer must pay the full term of the notice period in your contract, even if they send you home. Being put on 'gardening leave' means you cannot start a new job until the notice period ends. Some firms pay the notice period and release staff to start work as a gesture of good will. Other 'perks' may include CV and jobsearch assistance, financial advice and a discounted price for your computer.

Lump sum redundancy payments of up £30,000 are tax-free. If your payment is higher then it is worth asking your employer if they can pay the extra cash into your pension to avoid income tax. Alternatively, the additional money could be paid the following year when you may be on a lower tax rate. If your employer agrees to pay your notice as part of the redundancy lump sum then this too could be taken tax-free up to the £30,000 limit.

Some firms extend pension, insurance and health cover by several months for former employees to provide a comfort zone. If this is not on offer then add it to your list of priorities.

With occupational pensions, speak to your employer's pension advisers before you leave, particularly if you want to pay some of your lump sum into the scheme to avoid tax. You should also get a valuation statement. Once you leave, speak to a financial adviser before deciding what to do.
Life assurance is usually attached to occupational pensions and will lapse when payments stop. If you have dependants then this is an essential gap to fill.

Unemployment insurance can cover all or part of your mortgage payments in the event of redundancy. It usually pays out after a specified period of unemployment - anything from four to 52 weeks. Most policies will pay out for one year but it is not cheap - around £5 per £100 of mortgage protected.

If you have made sufficient National Insurance contributions and have little or no money saved, you may claim Job Seeker's Allowance of £54.65 per week for up to six months.

Finally, getting your hands on a large lump sum can be very tempting. But after an initial celebration, you should treat your payout very carefully. Think of it as your lifeline over the coming months. Work out a new budget so that your bills are paid and your spending is under control. Shifting the bulk of the money into a savings account will prevent dipping in and ensure that it is earning some interest.
More a question F_S,

How long must you pay NI contributions to entitle you to a Basic pension at 65.

I have read 44 years but have been told by many that it is only 35 to 37

Which is correct.

TA :)

Good post BUT do you know how/where I can get further detailed information about the redundancy selection procedure and how and when you can appeal? (if I am selected)

My civi employer is downsizing and moving and although I have been there over 2 years which is longer than anyone else doing my exact job I now regret having the type personality which means I speak my mind (oops)

Any info would be gratefully received

Many thanks
From my experience redundancy selection criteria vary from company to company - they set their own.

Where I worked the company decided its criteria and published an outline of what was to be assessed to the affected population of the workforce via a consultation process with the employees. The detail process of assessing was then performed by the management and the predetermined number of people out of the door was selected as those at the bottom of the points score, very clean and unemotional in that respect. Sort of thing we used to assess were preformance, attendance, skills, basically stuff that you can defend and isn't too subjective although there were some subjective ones in there like future potential as well. Once those to go had been identified they were then notified, this was the point at which they could appeal which was done at our place as a "hearing" with the personnel director, the individual plus their rep (union if they were a member or someone else they could chose) plus the manager who had done their assessment. I guess if the in house hearing fails then its down to the individual to take legal action for unfair dismissal/discrimination etc during/after the event.

I think there are some broad government guidelines that companies have to work within when they are making redundancies, I guess the DTI web site might be a starting place place to look for this info.

Good luck.

Mr Happy

In my experience (not yet been a victim myself) the criteria follows the following lines:

Those that were hired by mistake (this man cannot do the job, how the hell do we get rid of him now?)
Those who are a Pain in the arrse to the boss (embarrasing scenes after a booze fuelled lunch)
Those who are earning a salary above the level that they should be (think sidelined manager now fulfilling a supervisors job)
Those who display no interest in staying through the hard times ahead (turn up lates, lots of sickies)
Those who have requested it.

If you don't fit into any of those catagories then you should be OK.

Sure, there's the getting rid of the role/dept. type affair too but it's a lot more rare than the above five in my experience.
weekend warrior, have a look at this website.

It is fairly straight forward, my brother works at a large firm in London and had to make some people redundant earlier this year, he found this site extremely useful as it gives advice to both employer and employee.

Hope it helps.

It is true that in reality, redundancy selection is entirely artibtrary and then usually dressed up in a thin rationale. But some companies make more effort - as Shoota describes. Happy's list of preferred reasons is spot on. One of my former employer's sat down with a staff list and looked just at the salary column to make cuts. If your employer is a listed company then it may be more prone to cut deeper, more often, and/or more suddenly to keep investors happy.

Don't forget if they plan to lose more than 20, they will have to give the entire company the chance to elect a staff representative for the 30-day consultation process.

I am sure you will be fine, but if this does happen to you, then do aim to get payment in lieu of notice included as part of your redundancy payment so that it is all tax free - makes a big difference if you can. And don't take no for an answer even on big issues. My old employer was a huge international company about to lose a lot of people and they refused to make this and other concessions at first, saying it was not company policy. But a very small group (about 4) of us pushed and got the decisions reversed.

Best of luck
Thanks for all the advice

The Company I work for has just gone into administration/receivership. Not sure which one yet as all the big knobs are busy in a meeting with some accountancy firm.

Personnel director has been honest enough to say he does not know whether or not they will be able to pay redundancy or not.

I am now desperately trying to get all my TA stuff off my laptop in case I am met tomorrow morning by some gorillas who will confiscate all work property.

If they do turn up I am knackered with my car as well as I am travelling Saturday to a course in lieu of camp for 2 weeks.

Timing is everything but we do not even know if we will get paid for October.

Any legal advice gladly accepted.

Mr Happy

FS will know more but I think they can't sack you if they can't find you so pack yourself off to your course ASAP and wait for the letter that you won't receive until you return from your course.

Your car might be your redundancy package too and if it's not and you want it offer a stupidly low price for it.

That laptop could probably be forgotten at home until you've finished downloading from it too. It's also a bit of a bargaining tool if you know what I mean... because lets remember, they won't be able to waste money on solicitors to get it back...

Goodluck WW

Mr H
Your man in Amsterdam (nobody, but nobody gets sacked here)
Much sympathy, warrior. I had to turn out the lights at a company employing over 300 some years ago, organising all the final letters/payoffs/sale of assets etc. Depressing experience, particularly as there was no real need for it in the first place (bank's incompetence in handling a capital loan).
Weekend warrior,

I have replied in more detail on PM but wanted to add some of the info to the site in case anyone else needs it (hopefully not).

There may be a ray of hope in that the government has a redundancy payment scheme for employees of companies which are insolvent. It can pay unpaid wages, accrued holiday and even compensation if the company did not go through a proper process before the redundancies were announced. In some cases, you can claim redunancy payment. There is also a helpline: 0845 145 0004.

The website has all the details and the limits which apply:

They may not be able to provide everything you are owed but it could be better than nothing. I suspect they will be helpful but if for some reason they are not then let me know and I shall look into it.

Don't feel alone with this - lots of people in here have been through it so don't be tempted to see it as rejection or failure on your part. It's not. Come back and chat whenever you need to.


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