February 22, 2024


business is good for you

what are my rights and what should I do with my money?

9 min read
what are my rights and what should I do with my money?

<span>Photograph: Audtakorn Sutarmjam/Alamy</span>
Photograph: Audtakorn Sutarmjam/Alamy

Every day the coronavirus-related job loss announcements mount up. British Airways is looking at axing possibly 12,000 posts; Boots is to cut 4,000, Pret a Manger 1,000, the owners of Upper Crust and Ritazza another 5,000. Airbus is talking of 1,700, Royal Mail 2,000 and Swissport, which handles airline baggage, about 4,500. When the furlough scheme ends, economists fear another huge wave of redundancies. We look at your rights and what you can expect financially.

What are my rights if there are redundancies where I work?

First, there are rules around consultation. In a big company (one with more than 100 employees) there has to be collective consultation, with at least 45 days before the first dismissal. During this period the employer has to tell you what is going on and give you a chance to ask questions and raise objections. Shorter consultation periods apply to smaller companies.

After the consultation, there are rules about paid notice periods. If you have been in your job for less than two years, you are only entitled to one week’s notice. After that, you get one week’s notice for every year worked, up to 12 years. So your maximum paid notice period is 12 weeks. Your employer has to either pay you through this period or ask you to leave and pay you the same sum in lieu of notice, including any benefits in your contract, such as pension contributions.

Are they allowed to choose who they are making redundant?

You can only be made redundant if the job you are doing is no longer needed. You cannot be chosen for redundancy on the basis of your age, race, sex, gender, religion, sexual orientation and so on (see the full list at acas.org.uk). If you believe you were unfairly selected, or your employer did not follow a fair redundancy process, you can appeal against the decision and make a claim to an employment tribunal.

<span class="element-image__caption">A statement of redundancy terms.</span> <span class="element-image__credit">Photograph: Rosemary Roberts/Alamy</span>
A statement of redundancy terms. Photograph: Rosemary Roberts/Alamy

How much redundancy money will I get?

As long as you have been with your employer for two years, you are entitled to statutory redundancy pay. This is worth a maximum of £16,140 (£16,800 in Northern Ireland), although few people will get that much.

Payouts are based on your pay, age and length of time in the job. If you are under 22, you get half a week of your pay for each year of employment. Someone aged 22 to 40 gets a week for every year and if you are over 40 that rises to 1.5 weeks’ pay for every year in the job. However, the maximum length of service for payouts is 20 years.

The payouts are also capped at an income of £538 a week, or £27,976 a year. There is a useful official calculator at gov.uk/calculate-your-redundancy-pay. Acas has a redundancy payments helpline at 0300 123 1100.

Payouts are based on your pay, age and length of time in the job

Companies are free to offer more generous terms, with many providing enhanced packages that give the employee the equivalent of one month of salary for every year worked.

Membership of a trade union can be crucial in securing better terms. The Usdaw general secretary, Paddy Lillis, says: “Unfortunately, trade unions can’t always hold back change or prevent job losses. However, what they can do is minimise the impact on their members by examining the business case and exploring all possible alternatives to redundancy.” He says when redundancies are inevitable, the union is able to support its members and to make sure they are treated fairly throughout the process.

What if my company has gone bust?

If the worst happens, and your company suddenly collapses and you are thrown out of work immediately, you are still entitled to redundancy pay – but you have to claim it from the government’s Insolvency Service instead. You can claim the same amount you would have been entitled to if the company was still active – such as your paid notice period, holiday pay and so on. Go to the Insolvency Service for more details.

I’m on furlough – do I get reduced redundancy pay or reduced rights?

Your statutory redundancy rights are written into employment law, so should not be affected if you are one of the huge number of people who have been furloughed.

Your redundancy pay should be based on your normal wage, not your furloughed wage, if that is lower than the sum you were earning before.

Do I have to pay tax on my redundancy money?

<span class="element-image__caption">Should you put some of your redundancy payment into a pension plan?</span> <span class="element-image__credit">Photograph: Rosemary Calvert/Getty Images</span>
Should you put some of your redundancy payment into a pension plan? Photograph: Rosemary Calvert/Getty Images

The first £30,000 of redundancy pay is free of tax. But any payment you get to cover your notice period is taxable in the normal way. If you are lucky enough to pick up redundancy pay higher than £30,000, paying some of it into a pension plan can make financial sense.

I’ve got £15,000 in redundancy money. What’s the best thing to do with it?

For people who do not have savings – and 70% of British people say they are “chronically broke” – then this should become an emergency fund. Keep it in an instant access savings account, with no penalties for withdrawals. One of the best options for now is National Savings & Investments’ Direct Saver account, which pays 1% interest, with no notice or penalties, and can be opened online with as little as £1. You can take out your money again by phone or online. It is not a lot of interest but better than the high street banks are offering, such as the Lloyds Easy Saver account, which pays only 0.01% interest.

If you have expensive credit card debt, then consider paying that off – but only if it still leaves you with enough cash to live on for three to six months.

Should I take a mortgage holiday because of redundancy?

<span class="element-image__caption">The biggest outgoing is typically a mortgage.</span> <span class="element-image__credit">Photograph: Alamy</span>
The biggest outgoing is typically a mortgage. Photograph: Alamy

Probably – it will provide an immediate buffer while looking for a new job. You can apply for a payment break, usually three months but in some cases more, or ask to make reduced payments.

Think carefully before you do this but don’t put it off for long: the scheme is currently only open for applications until 31 October.

Note that it is not free money – interest will continue to build at your usual interest rate during the payment break. This means your monthly payments at the end of the break will go up.

But because interest payments are generally low, the rise at the end of the three months is often not that bad. For example, let’s say you are currently paying £750 a month and you have 15 years left on the mortgage. Assuming the interest rate on the mortgage is 2%, then after the three-month payment holiday is over, the monthly payment will go up to £765.

You can find a useful mortgage holiday calculator at moneysupermarket.com.

Can I get a tax refund now that I have lost my job?

It is worth checking as you might be able to claim back some of the tax you paid while you were working and on PAYE. How much you can get back will depend on how much you earned since the start of the tax year (on 5 April) and how much tax you paid on those earnings. HMRC has a calculator at gov.uk/check-income-tax-current-year.

I’m in terrible debt and am being made unemployed. Do I just stop paying all my bills?

Prioritise your debts. Your mortgage, your rent and any tax or utility bills are classed as priority debts. It is crucial you try to keep up with those, or seek help. Water companies, for example, are offering coronavirus-related payment holidays. You can also freeze your car finance payments for three months if you have been financially affected during this coronavirus crisis. Tenants, however, are in a tough position; the rental eviction ban ends on 23 August, with campaigners calling for new protections to be put in place.

You should worry less about what are classed in the finance business as non-priority debts, which includes credit card bills, unsecured loans and catalogue debts. Do speak to lenders because they may offer payment holidays or arrange lower repayments, and it is better to let them know than to just stop paying. Much further down the line, if you cannot repay you could be taken to court and ordered to pay an amount – but only what a judge deems to be affordable from the income you have.

For help with debts, try Citizens Advice (check online for UK regional phone numbers), Step Change charity (Stepchange.org or 0800 138 1111) or National Debtline (nationaldebtline.org or 0808 808 4000).

What benefits can I claim?

Workers laid off because of the coronavirus crisis and applying for universal credit for the first time may be surprised to learn how little it pays and how difficult the process can be.

The biggest bar to many will be the fact that anyone with savings of £16,000 or more is not eligible to make a claim (and redundancy payments are treated as capital for means-tested benefits). They can only apply for jobseeker’s allowance (JSA) of £74.35 a week and will receive no help with their rent.

When applying for benefits, one of the best places to start is the financial charity Turn2Us.org.uk. It has a benefits calculator, which will give a good indication of the sum you are likely to receive.


‘I’m worried sick about losing my home – we only have a few thousand pounds in savings’ – Hilary, 55, Midlands

Hilary (not her real name) has worked for the past seven years in a food distribution warehouse in the Midlands, whose main business, supplying restaurants, has collapsed during the coronavirus.

“I thought the furlough scheme was our saving grace and that we’d be getting back to work after all of this. Now we’ve been told the whole depot is shutting. To make matters worse my husband, who is 64, has also been furloughed and he’s worried, too, about whether his job will return.

“It’s not as if we are high earners. He only earns a little more than my £18,500. We’ve still got a few years left on the mortgage. It’s only a small two-bedroom house but it’s ours. It’s the thing that is stressing me out most. His earnings won’t cover our outgoings but I’ve been told I have no entitlement to universal credit because he’s working. All I’ll get is jobseeker’s allowance [£74.35 a week].

But it’s not just the job you lose. We were so close at work; it was like a family

Hilary from the Midlands

“While we were on furlough, we were all told to dial in one day to the company. They read out a statement about redundancies. There were no questions allowed; that was it. Because I worked there for seven years, I’ve been given seven weeks’ notice and 10.5 weeks in statutory redundancy pay [worth about £3,500]. You do wonder if the virus was an excuse for streamlining they wanted to do anyway.

“We weren’t going out anyway because of the virus but looking at the future we certainly won’t be doing so now. Can we even afford to go out for someone’s birthday?Probably not. I’ve worked all my life, been through lots of recessions but until now always managed to avoid redundancy. I’m now so anxious and losing sleep.

“I’ve had a lot of support from my union, Usdaw. But it’s not just the job you lose. We were so close at work; it was like a family. We all miss each other. It’s all so upsetting.”

‘The psychological impact is as serious as the financial’ – Uday, 43, north-west

Uday, a father of two young children, was made redundant on 14 July after only six months in his intranet product management job.

“Those who’ve been at the company for less than two years have no rights to redundancy pay, so we’re low-hanging fruit,” he says. Uday’s family have a few months of money for bills but after that it will be a “struggle”, he says. He is the sole provider for his family while his wife studies for her degree in medicine.

“The moment you’re put on furlough, you think it’s likely that they’re going to make me redundant, so I got my CV together during that time,” he says. “I’ve started looking but there’s not much out there. Anything that comes up, I don’t hear back from one way or another.”

Uday says he has been struggling with his mental health since the redundancy and feels that the psychological impact of job loss is under-reported. “People talk a lot about the financial side but it’s not all about money. It’s hard coming into this employment environment.”

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