Coping with redundancy

However, Professor of Psychology Cary Cooper from Lancaster University Management School believes this is not a bad time to be made redundant, commenting: “It is psychologically better to lose your job now rather than in more affluent times. It will still feel like a rejection but you can rationalise it by saying that it's just the times in which we live”.

What are my rights?

Your employer must consult you before you are made redundant and follow a three-stage statutory process: first letting you know in writing, then holding a meeting with you, and finally giving you the right to appeal the decision.

Don't be afraid to challenge the reasons given for being made redundant. Employers have to show it is a genuine redundancy and you should be told about the selection criteria. If your employer doesn’t follow this process, your dismissal could be unfair and you could take them to an employment tribunal but be aware that legal aid is not available for such cases.

Your union or ACAS will help with disputes. The ACAS helpline is 08457 474 747.

Where companies know they have to shed staff, they often ask workers to volunteer for redundancy. This does not affect your right to redundancy pay as it is up to your employer whether you are selected for redundancy. In addition, you must be allowed paid time off work to look for another job.

Where there are other suitable jobs available in the firm, your employer must offer them to you. You can turn them down but you may not get redundancy pay unless you have a good reason to reject the offer. The new job must be suitable, with similar hours and pay and within your capabilities. You can try it out for four weeks and, if it isn’t suitable, you must give in your notice during the trial period.

Those who have worked at the same firm for at least two years are entitled to statutory redundancy pay – a week for every year you have been with them for those aged 22 to 40 and one-and-a-half weeks for older employees. The payment is capped at £380 a week up to a maximum of 20 years. In practice, many employers offer better terms – two weeks for every year employed is typical – or you may be able to negotiate a better package. Don’t forget the added extras such as pay in lieu of notice and holidays, bonuses due or commission. Ask whether employee benefits such as company pension contributions, cars and private health schemes are included.

If your employer has gone out of business, you should claim your redundancy pay from the National Insurance Fund. The helpline is 0845 145 0004.

You will not be taxed on the first £30,000 of your redundancy pay but salary paid in lieu of notice is taxable.

What benefits am I entitled to?

Jobseeker’s allowance. There are two types: contribution-based, which depends on national insurance payments, and income-based, which is means-tested and is designed to provide a minimum support to poorer families. To be eligible you must be at least 18 and meet regularly with an adviser from your local Jobcentre Plus and actively look for work.

Contribution-based Jobseeker’s Allowance is £50.95 for those aged under 25 and £64.30 for older people but the amount may be reduced if you have part-time earnings or receive a pension. Importantly, claiming it will keep your National Insurance record up to date.

If you qualify for the income-based allowance you may be able to get help with your living costs, your rent and your council tax.

Homeowners could have the interest on their mortgage paid after 13 weeks – and it may continue for the first four weeks after you return to work. It is capped at mortgages up to £200,000, but you must be receiving other benefits and have less than £16,000 savings. Or if your lender is signed up to the homeowner mortgage support scheme you can defer 70% of the interest for up to two years.

Parents may also receive a contribution towards childcare while job hunting. Depending on your income, some people on the contribution-based allowance could get help with these costs too.

While you are on Jobseeker’s Allowance, you may be able to get help with the costs of looking for work, such as fares to travel for an interview, and even the initial costs when you start work such as buying new clothes for work and housing costs for the first few weeks.

The Welsh Assembly Government has launched a new scheme called ReAct, which pays up to £2,500 to help pay for training for those under notice of redundancy or who have already been made redundant. For more information go to www.wales.gov.uk or phone 01792 765888.

Where can I look for a new job?

Start in your local area. Jobcentre Plus has one of the biggest databases of jobs available as well as details on training and career information. Sign up to job agencies specialising in your type of work and join the many job websites, such as www.monster.co.uk, www.fish4.co.uk/jobs and www.totaljobs.co.uk.

Update your CV, highlighting your key skills and adding in new achievements and experience you have acquired since you last compiled it. There are several sites that will help you including cv-service.org, cvwriting.net and cvtips.com. Most of them also offer interviewing tips and advice on writing a covering letter but they often charge a small fee.

You can use other online tools for networking such as LinkedIn.co.uk and make sure your Facebook or Bebo page do not have anything too embarrassing about you in case a future employer checks it.

Let all your friends and contacts know you’re looking for a job. Keep in touch with your old firm and go to any professional networking events available. Consider volunteering for unpaid or part-time work while you’re looking. It can enhance your CV and shows you’re willing to put your time and abilities to good use. Direct Gov has many ideas about finding a job and even volunteer positions with the 2012 Olympic Games at direct.gov.uk.

The new Young Person's Guarantee will provide up to 470,000 extra job and training opportunities for young people over next 15 months. The guarantee offers:

• The opportunity to apply for new jobs created through the £1bn Future Jobs Fund
• Extra training and support to get an existing job – with help especially targeted at key employment sectors with high levels of recruitment
• Work-focused training
• A place on a Community Task Force
• Help with self-employment
• Internships for graduates and non-graduates.

Looking after your redundancy pay

Use your pay-off wisely. It may have to tide you over for several months. Consider paying off your high-interest debts such as credit cards and then resist the urge to start spending again. Open a new savings account for the surplus paying a good rate of interest so that it’s not sitting in your current account earning next to nothing and making you feel wealthier than you are.

If you’re not good at handling money, you may want to discuss a budgeting plan with one of the many free consumer advisers such as your local Citizen’s Advice Bureau or the Consumer Credit Counselling Service on 0800 138 1111 (cccs.co.uk). Also ring the National Debtline on 0808 808 4000 who will send you a budget planner.

Don’t try to borrow to meet your immediate needs. If money is tight, check if your mortgage company or other lenders will give you a payment holiday or lower the repayments for a while. Remember, interest is still racking up on your borrowings during this time.

If you have payment protection insurance with your mortgage or credit cards, put in a claim immediately. This will pay at least the minimum monthly payments each month usually for the first year but can take a while to come through. Alternatively, check out your policy if you have income protection insurance.

If you have a large lump sum, you might need independent financial advice. You can find an adviser from Independent Financial Promotions (IFAP) at unbiased.co.uk or the Personal Finance Society (PFS) at findanadviser.org.