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How to survive if redundancy strikes
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This is the first recession many of us have experienced in our working life, with the threat of losing your job and struggling to find another suddenly a major concern. See how to make the most of your payout if redundancy strikes
Almost two million people are now out of work in the UK, and this figure is climbing with daily news on another company shedding staff.
Within the last week alone steel makers Corus, computing behemoth Microsoft, electronics giant Philips and energy provider E.ON have all announced they’re cutting thousands from their workforce.
For those affected in these and other companies, the employment picture is bleak, with many businesses putting a recruitment “freeze” in place.
If you are unfortunate enough to be made redundant you’ll want to ensure you make the most of any pay-off, and keep as much from the taxman as possible.
earn more interest
What are you entitled to?
Despite the current economic turmoil, many people have little idea what they would be entitled to if they lost their job.
All full-time employees who have worked for their current employer for two years will be entitled to a statutory redundancy payment.
For those aged 22 to 40, this amounts to one week’s pay for each full year they have worked. If you’re under 22 you get just half a week’s pay for each year worked, while those over 41 years of age get 10 days' pay for each year.
Of course, some employers will offer payments that are above this minimum and staff who are told they have to leave immediately should also get paid in lieu of any notice.
Avoid paying higher rate tax
The first £30,000 of any redundancy payment is tax-free. If you’re paid more than this, then the rest is paid at your highest rate.
For those who are currently higher-rate taxpayers, there are steps you can take to improve your cashflow position.
Ask your company to ensure this money is paid after you receive your P45 – the tax document you get when you leave your job. This will ensure that only 20% of the remaining payout is taxed at source.
If you get this money in your last pay packet, 40% will be deducted at source.
30 January 2009
