Redundancy and what to do first

Redundancy is a financial event with a defined set of actions, and doing them in the right order in the first fortnight materially improves the outcome.

Check the process

Before anything else.

Redundancy is regulated in most jurisdictions, with requirements covering genuine redundancy situations, fair selection, consultation, notice and alternative employment.

Which means a redundancy that does not follow the process may be unfair, and there are generally strict time limits for challenging it.

Get advice quickly from a union, an employment adviser or a solicitor if anything about the process seems irregular.

And do not sign a settlement agreement without independent advice, which is generally a legal requirement for such agreements to be binding and which the employer usually pays for.

Establish the money

What you are owed.

Statutory redundancy pay where you qualify, calculated on age, service and pay in most systems.

Contractual redundancy pay, which may be more generous.

Notice pay or pay in lieu of notice.

Accrued untaken holiday.

Outstanding expenses and commission.

Any bonus entitlement.

And pension contributions up to the leaving date.

Tax treatment of redundancy payments varies and there are frequently tax-free thresholds, which is worth checking since it affects the net amount.

The first fortnight

In order.

Claim any benefits you are entitled to, since claims generally start from the date of application rather than the date of redundancy — delay costs money.

Register with the public employment service, which may be a condition of some benefits and which provides job search support.

Check whether any payment protection insurance, mortgage payment protection or income protection applies.

Contact your mortgage lender or landlord if payments will be affected, since options are better before arrears.

Review and cancel non-essential outgoings.

Calculate how long the redundancy payment plus savings will cover essential expenditure, which is the number that determines urgency.

And update your professional profile and contacts before the shock wears off.

Benefits and support

Frequently under-claimed.

Unemployment-related benefits, which may be contribution-based, means-tested or both.

Housing support.

Help with local taxes.

Support for retraining, which several countries provide for people made redundant.

Free or subsidised courses.

And support schemes for specific sectors where large-scale redundancies have occurred.

A full benefits check from a free advice service is worth doing rather than assuming ineligibility, particularly where a redundancy payment affects means-tested entitlement.

The pension question

Frequently overlooked.

Contributions stop, and the pot remains invested.

Check whether any death-in-service or life cover ends, since it generally does — which matters if you have dependants and a health condition that would make replacement cover expensive.

Consider continuing contributions personally if affordable.

Do not access pension savings early to bridge a gap without advice, since the tax treatment and the long-term cost are substantial.

And be alert to pension scams, which target people who have received a lump sum.

The lump sum

Where decisions matter.

Resist committing it before knowing how long the job search will take.

Keep it accessible in cash rather than investing it, since the timeframe is short and uncertain.

Consider clearing high-cost debt, which reduces the monthly requirement and therefore extends the runway.

Be cautious about overpaying a mortgage with it, since the money cannot easily be recovered.

And be alert to anyone offering investment opportunities, since redundancy payments are a known target for fraud.

The job search

Practical points.

Start immediately, since the average search takes longer than people expect and momentum matters.

Tell people you are looking, since a substantial proportion of roles are filled through networks.

Treat it as structured work with defined hours rather than as continuous anxiety.

Consider interim, contract and part-time work, which provides income and frequently leads to permanent roles.

Use any outplacement support the employer provides.

And consider whether retraining is appropriate, which is discussed elsewhere on this site and which redundancy sometimes funds.

Looking after yourself

Which affects the financial outcome.

Job loss is associated with measurable effects on mental health, and the effect is worse with prolonged unemployment.

Maintaining routine, contact and activity is protective.

Employee assistance programmes sometimes continue for a period after leaving.

Free counselling is available through several routes.

And the financial decisions made while distressed are generally worse, which is a practical reason to address the state as well as the situation.

General information only, not financial, legal or employment advice. Rights and entitlements vary by country — consult a union, employment adviser or free advice service quickly, since time limits apply.