Redundancy is a form of dismissal from a job when an employer needs to reduce their workforce. If a worker is made redundant they may be eligible for certain things such as redundancy pay, a notice period, a consultation with the employer, the option to move into a different job and/or time off to find a new job.
“Following a quick checklist can help you take stock of your overall financial position, check in on personal and professional goals, review what changes might need to be made and decide what’s next.
“There are plenty of free to use resources available for people looking for support with both the Money Advice Service and Pension Wise offering independent advice.
“If you are dealing with a complex financial position it’s worthwhile seeking the support of a specialist financial planner or adviser.
Shona went on to provide guidance on what people can do if they’re facing redundancy.
“You might know you need the money immediately to help you meet day to day living costs or you just might not know yet.
For many people though, covering certain essential costs will take priority and Shona detailed that paying off debts and taxes will rarely be a poor decision: “If you are in a position where you don’t need to make full use of your redundancy payment due to another income source or savings, consider whether it’s time to pay off any debt. The interest you are charged on debts can often be higher than the interest paid on savings so paying down debt can make financial sense in the longer term.
“Much will depend on how much your redundancy payment is, your overall tax position and whether your employer will contribute to your pension instead of making some or all of the payment to you. Up to £30,000 of a lump sum redundancy payment will be tax free but tax and national insurance contributions may be payable on non-exempt amounts such as any paid holiday, payments in lieu of notice or the cash value of any assets you receive as part of your package, for example a company car, mobile phone or computer.
“For most people, the tax position should be taken care of by their PAYE code and the correct amount of tax will be payable as it is taxed at source like a normal salary payment but you should still check to make sure. If it isn’t right and you have a balance to pay or a refund to claim, you’ll need to complete a tax return. If your affairs are complex, it may be helpful to have this completed by a professional.