May 15, 2018  | Tags: redundancy, financial advice

Our Insights

Few things in life are as terrifying as the uncertainty that comes with taking a redundancy. 

Could you be at risk for redundancy? What should you do if you are compelled to take one? And how can you continue to meet your family’s financial needs following a redundancy?

Plan Ahead for a Possible Redundancy

If you are in-tune with your company’s financial health and plans for growth or restructuring, then you may be able to anticipate a potential redundancy. You may even hear of other fellow employees taking a redundancy and wonder if you’ll get 'the tap on the shoulder, or whether you should consider a voluntary redundancy. 

Redundancy is when a business owner decides to let go of one or more employees whose roles have become obsolete. Redundancy may also happen as a consequence when the company becomes insolvent or goes bankrupt. Either way, a redundancy typically happens through no fault of your own. If you must take one, it’s simply a result of pure circumstance.

Even so, you want to brace yourself for the financial repercussions of not having a steady income. So if you see a potential redundancy on the cards, try to prepare by saving as much as you can and seeking professional advice, from both a lawyer and financial adviser. Now more than ever you want to be prepared to move on from your current job, if the need to do so arises.

Think about options to grow your skills such as by studying again or starting self-employment. Talk with a financial adviser to get tips on saving and preparing for redundancy. 

What to Do When Surprised by a Redundancy

For many, a redundancy comes as a complete shock.

While you struggle to recover from the news that you no longer have a job, you may be extremely worried about your financial security and future. 

The very first thing to do in this situation is to ensure that your employer’s decision has a legal basis and that you’re getting all of your entitlements. For example, this could include a contract payout, annual leave, long service leave and other incentive payments. 

Contact a lawyer for help in understanding your rights and entitlements in the event of a redundancy. Next, seek expert financial advice to better understand how much pay you can expect and what the tax implications are. 

How to Maximise the Payout from a Redundancy

Once you’re faced with a redundancy, it’s time to decide what direction you’ll go in next. 

Were you just about ready to retire, anyway? Or do you want to get back into the workforce as soon as possible? 

If you need to get another job, remember that the payout from your redundancy must last you until your next paycheck. That’s an indefinite amount of time so it’s wise to take steps to minimise your expenses.

Set up an emergency fund you can tap into should a major urgent expense arise. Set limits on all your other spending. Plan a new living budget and see what you can do to reduce what you owe on loans, credit cards and utility payments. This is also a time when you likely won’t be able to pay down debts as quickly as you used to.

If you’ve gotten a large payout, don’t use up the cash windfall rashly. Put it all into a savings account and only draw out the monthly minimum you need to live on according to your budget. 

You may come into some new employment faster than you anticipated, but the problem is that you can’t always anticipate that after taking a redundancy. That’s why you’ll be better off strictly budgeting out your finances in the beginning to make them last as long as possible.

You might not have a job after taking a redundancy, but that doesn’t mean you should ignore your super. This is a great time to check the amount you have in your super fund, consolidate accounts and consider contributing part of your redundancy payout to your super, if you can afford it. Again, seek advice from your financial team about the best move for you.

Recovering from Redundancy

Taking a redundancy can be a scary and uncertain period. But with plenty of preparation, you can make the most of the situation. This is a good time to reevaluate your skills and possibly even take educational courses to make yourself a more marketable employee.

Depending on the circumstances, you may qualify for training grants, unemployment assistance or other subsidies from the government. A financial adviser can help you through this.

A redundancy could also provide you with the opportunity to pursue that career dream you never thought would be possible, or you may have a chance to start your own business!

Seek advice

We've mentioned it a number of times throughout this article, but please seek advice. Redundancy carries implications, both financially and personally. It's critical to make informed decisions and get the best possible result for you and your family. 

For advice about your redundancy strategy, contact Calder Wealth Management.

Call us on (08) 8373 3333 to schedule your free initial appointment.

Written by Ben Calder, Private Client Adviser at Calder Wealth Management.