CorpComms Magazine

Even at times of economic downturn, when everyone is aware of others losing their jobs, most people still think it will never happen to them. Redundancy can come as a huge shock even if you knew that companies in your sector were in trouble.

 

‘It ranks right up there with divorce, really,' says Julia Whittle, principal at the financial advisory group Punter Southall Financial Management. ‘Being made redundant is hugely stressful.'

 

Unfortunately, the current economic downturn not only makes redundancy more likely, it also makes it harder to cope with and more likely that redundancy packages will be far from generous.

 

It is certain that more and more people are finding it hard to cope with the stress of the financial downturn. The Samaritans' Central London branch has reported a 25 per cent increase in calls during August and September this year compared to the same period last year, and volunteers are reporting more calls about financial worries.

 

It is clear that financial stress is taking its toll, and there is no event likely to put more pressure on your finances than losing your job. ‘With the downturn in the economy, it is likely that we are looking at a genuine redundancy situation for many people,' says employment lawyer Lucy Williams, from Page, Gulliford & Gregory, a Southampton-based solicitors.

 

If you receive that long-dreaded letter informing you that your job is on the line, the first thing to do is to calmly prepare for the consultation period which your employer must carry out. ‘If you can keep your head down and deal with the consultation process clearly and logically, you may be able to prevent your own redundancy,' says Fiona Martin, an employment litigation lawyer with Martin Searle Solicitors in Brighton.

 

During consultation, you should be given the opportunity to have meetings with managers in which you should ask what the business reasons are for your job being on the line, and why you have been included in the selection pool. This is the time to tell your employer if you would be happy to take a pay cut, go part time, or job share in order to save your job, says Martin. This could be crucial as your employer may not have considered such options.

 

She adds: ‘If there are no other options and your job must go, the company must look for alternative suitable roles. This may mean a demotion, but consider that may be better than no job at all. It is always easier to find a job when you are already employed.'

 

It is also important to consider whether you could re-train to do a different job within the organisation, or whether you have skills of which your employer is unaware.

 

If you are selected for redundancy, then ask to see your selection scores. Martin says: ‘There will be a matrix of objective criteria that you have been scored against and you should be allowed to see this and challenge it if it is not correct. This is particularly important if you have a new manager who does not know you well.'

 

Finally if redundancy is the only option, then you should have your package checked. Some companies will pay for a solicitor to do this, but not all. Williams says: ‘You don't necessarily need to hire a lawyer to check your redundancy package if you can't afford it. There are organisations such as Citizens' Advice or a Law Centre which will do it for free. If you are in a union, then go to your union representative for a check.'

 

As the economic downturn tightens, it is less and less likely that companies will pay more than the statutory amount - a dismal one week's pay per year's service for most people up to a maximum of £330 per week, and capped at 20 weeks.

 

Employers must give notice of at least one week per year's service and pay this at your usual rate of pay, capped at 12 weeks. If you have any outstanding holiday to take, this will be added on.

 

The first £30,000 of a redundancy package is usually free of tax, but you should not take this for granted, says Ellie Gamble, senior manager in the employment solutions department of accountancy firm Grant Thornton. ‘It is never safe to assume this. You need to check your original contract of employment and whether or not you are entitled to pay in lieu of notice - this clause can interfere with the tax status of a redundancy payment.' National Insurance is not payable on redundancy payments. If you arrange for your payment to be made after you have left then you will only be taxed on anything above £30,000 at the basic rate and you can pay the difference at the end of the next tax year if you are a higher-rate taxpayer.

 

The next thing to do is tighten your belt - even if it is just for a set period. Apart from the obvious reasons for this, it will enable you to compartmentalise your money worries and focus on finding a new job. ‘At the moment, this is critical because companies cannot afford to be generous with severance payments and the market is awash with other people looking for new jobs,' says Whittle. All of which means that you have less money and less time to look for a new job which may be harder to come by.

 

Ask your old employer if you can keep the employee benefits, such as medical cover or life cover, for a period of time, even at a discounted charge, to cover the gap between jobs. Either reduce debts in order to reduce your outgoings, or if you can bear the risk, think about gearing up to cover costs in the interim.

 

There are lots of ways to raise capital. If you have shares, your pension fund may be able to buy these from you - a clever way to release cash. If you are over 50, you can release cash from your pension now anyway.

 

Reduce outgoings temporarily by suspending club memberships, for example. The main thing, says Whittle, is to work out how long you have got before things get very difficult and aim to cover that period. ‘If you still don't have a job after that period is up, then will be the time to take emergency measures.'

 

It may be tempting to drop out of contact with friends and former colleagues if you are feeling bad about your redundancy, but it is better if you can keep your networks going as this will help you find a new job faster, says Williams. ‘Don't lose faith in yourself and try not to take redundancy personally. Most importantly, don't hide yourself away.'

 

Williams recommends using a recruitment consultant, as many will not charge until you have been placed in a new job. Some people may also benefit from seeing a career coach to help them see in a straight line and work out how to use their skills and natural talents to further their search for a new job. Do not rule out re-training or switching career.

 

Social stigma is undoubtedly one of the major problems faced by people being made redundant, and it gets worse the more highly paid and senior you were. Whittle says: ‘Your life and your status are tied up with your job and suddenly all your plans for the future have disappeared. It does happen that people get dropped by their friends.'

 

If you are getting into debt as well, this can all lead to emotional breakdown if things do not improve for you quickly. Joe Ferns, deputy director of service support at The Samaritans, says: ‘A negative life change such as redundancy comes with a whole raft of implications. There are the obvious knock-on effects, such as financial issues, but there can also be feelings of low self-esteem and guilt at what someone perceives to be their failure to provide for their family.'

 

Denise Knowles, relationship counsellor at Relate, agrees: ‘I have had one man who says he has even become doubtful about his ability to help his son with his homework. The breadwinner will often feel that he has let himself and his family down, which leads to a big loss of self-confidence.'

 

Relationships inevitably suffer under such pressure, so it is essential to communicate with your partner and family about how you feel. Knowles adds: ‘It is perfectly normal to feel you have been discarded or put out to graze, but the feelings of shock and worry you have need to be voiced or your partner may not understand your behaviour.'

If you are taking positive action to find a new job, people around you will find it easier to feel positive and support you.

Try to manage your family's expectations as well as asking for support. ‘People have often built up a certain lifestyle that needs supporting and you often see families carrying on as normal with the poor breadwinner shouldering all the burden.' This will not help anyone. It is better to cancel the expensive holiday in the south of France, and explain that Christmas will be on a budget this year, than try to keep up the pretence that everything is normal.

 

Knowles adds: ‘Try to look at this as an opportunity for the family to pull together and get creative instead.'