Recession and redundancy are the ugly couple who always go about hand in hand. When dealing with one it is hard to ignore the other, so knowing your redundancy rights is important. Statistics warn that by 2009 our unemployment figures could be as high as 2 million and it's not just the financial sector that is culling jobs.
Retailers have been forced to make staff redundant after a no holds barred discount campaign failed to throw them a lifeline. The service industry is also losing workers as businesses cut their lunch accounts and the public stay at home instead of eating out. Throw in hoteliers and other hospitality businesses and you can see that the recession is affecting most industries right across the board.
If you are unfortunate enough to be victim to this recession and have lost your job or think you are in danger of doing so, then you should take care to read on. The following will help you secure the best severance deal possible.
Know your redundancy rights
Your employer must adhere to procedures as laid out by law when processing your redundancy. For instance, if your employer is cutting 20 or more jobs they must enter into negotiations with your union or an employee representative. Furthermore, either unions or staff representatives must be informed at least 30 days ahead of any redundancies. In the event a 100 or more workers are let go, that time frame increases to 90 days.
Your employer must meet with you personally to discuss your redundancy, failing that, or breaching any of the above terms will amount to unfair dismissal. It's advisable that you consult your union or staff representative for a comprehensive list of procedures that your employer must follow. Doing so will strengthen your case for an unfair dismissal claims should the need arise.
If you intend on taking your former employer to court you should first ensure you have insurance for legal expenses. Legal expenses insurance is offered as an add-on to many home insurance policies and most high street providers, ie building societies will be able to give you all the details you need.
Insurance will pay up to Ј50,000 legal expenses if you take your employer to court. To do so, you naturally must be quite certain that you have been unfairly selected. Race, age and sex are the most common reasons for discrimination but vary in terms of payouts (if your the claim is successful).
For instance, the compensation awarded to people who were unfairly selected for redundancy based on age tends not to be capped. For racial and sexual discrimination, however, the compensation awarded usually goes no higher than around Ј70,000.
Check your "contractual rights"
Contractual rights should have been in your employment contract when you took the job and it is there you will find out how much redundancy pay you can expect to receive. Employers are required to pay workers aged 22 to 41 a week's wages for every year earned, while older employees get 1Ѕ weeks' pay.
If this strikes you with fear, try not to panic as the majority of employers offer better terms. Again, check your contractual rights for information.
Never agree to anything verbally
Don't accept any redundancy terms unless you have had a 'dismissal meeting'. When your severance package is discussed, you should not be asked to agree anything verbally, nor are you required to accept the initial departure terms offered.
Once you have received your redundancy terms in writing you can consider the fairness of what's offered. Also, you may want to ask yourself what you believe is most important. For instance, do you want to get help finding another job or simply cut and run with the biggest pay out possible?
If you pay income tax at the higher levels this if for you. It pays to remember that only the first Ј30,000 of any redundancy payment is tax-free. If your severance package is above this it will be taxed at your usual high rate. If your redundancy money has been paid to you while still on your company's payroll then full PAYE deductions will be made on payments exceeding Ј30,000.
If your severance is paid after you have left the company and received your P45, then you will only be subject to a 20% tax deduction.
Consider your share options
If you have shares options you should be aware that some schemes automatically lapse the day you become redundant. Others, on the other hand offer a limited time to continue operating within the scheme. It may be something to consider if you believe their value will increase over the short to medium term as a result of the cut backs.
Check your pension policy If possible, check with your pension company to see if your pension accrual is included in your severance pay - it could be quite the money spinner.
For instance, your pension may allow for part of your redundancy payment to be paid directly into your policy. As this will not attract National Insurance contributions and as a result not cost your employer anything, you may be able to negotiate a higher payment.
Try to retain benefits
Your job may have come with some worthwhile benefits such as medical insurance, which you will be sad to leave behind. If you don't ask you don't get, so try persuading your employer to let any benefits run their course until renewal date, instead of stopping them when you get your P45.
For up-to-date information affecting your finances visit http://www.debts.org/economy_latest/
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