The possibility of redundancy is something most workers fear. But preparing for the worst and knowing your rights beforehand can go a long way in helping you get through the tough times. Here’s what you need to know.
Many people worry about losing their jobs, particularly if they’ve been made redundant in the past, or they know their employer is struggling. The fear that you may not be able to pay your bills, your mortgage or any debts you may have can be extremely stressful even in the best of times.
The good news is that there are lots of things you can do now to protect yourself against possible redundancies in the future, and thinking about it now means you'll be in the best position to take those important steps.
Here we explain what you can do today to soften the financial blow of redundancies in the future:
If you feel that you could be at the risk of redundancy, it can help to start preparing for it before it happens. Start by thinking about what you would do if you lost your job tomorrow.
Here are some of the most important steps:
The first step in preparing for any loss in income is to find out where you stand financially. Take a hard look at your incomings and outgoings and work out how much money you'll need to cover the essentials, such as mortgage payments, bills and food, each month.
The next step is to find areas where you can cut down. Are you paying for an insurance policy you don't need? Are you paying for a subscription service that could live without for a few months? Could you switch to a cheaper energy supplier?
Some of these changes are worth making straight away – for instance switching suppliers, while others are worth keeping up your sleeve for if the worst happens. For instance, you might enjoy your Netflix while you’re employed, safe in the knowledge you can cancel it if you’re out of work. If you do make changes now, funnel any money saved into a savings account so you know you’ll have it ready to help if you are eventually made redundant.
Making a budget and sticking to it is a great way to manage your finances and keep track of your spending. Here's how to get started on writing a budget.
If you have any credit card or loan debt, it's a good idea to start paying that off as fast as you can. Clearing your debts now means that when you’re redundant you’ll have fewer outgoings to worry about and you won’t have to miss payments and ruin your credit score.
See you if you can save money by moving your credit card debt onto a 0% balance transfer card, or by getting a debt consolidation loan with a low-interest rate. That means more of your cash will go towards paying back what you owe and less will go into your bank’s pockets.
If those aren't workable options for you, speak to your lenders about working out a payment plan so you can clear debts as soon as possible.
It's vital to keep in mind that if you do lose your job, it'll be much harder to find good deals to help you repay your debt.
Here are some tips to help you pay off your debt
If you don't already have an emergency fund, it's vital that you start putting away cash to get you through the lean times. Ideally, it's useful to have at least three months’ salary set aside, so if you lose your job unexpectedly, you have enough time to figure things out. If you can save six months’ worth, you’ll have even longer to find a new job.
Even a little savings pot is better than nothing, so get started now with what you can and build up your fund over time.
Given that the idea is to have access to emergency cash quickly, an instant access savings account may be a good option, so you won't be penalised for withdrawals. Interest rates tend to be poor for easy access accounts but shop around to find the best deal you can. Some current accounts have preferential rates attached, so check your provider to see what’s on offer.
If you suspect that your job could be on the chopping block in the near future, it's a good idea to take advantage of any training you can get through your current job.
In the current climate, where thousands of people may be vying for jobs, it is increasingly important to do whatever you can to make yourself stand out to employers.
At the same time, get to know as many people in your industry as possible as any contacts you make could prove very useful in the future.
It's not uncommon for many of us to forget about our resumés and CV once we're employed. But it's a good idea to keep yours updated, adding any achievements or career milestones as you go along. That means you’ll be first off the block when it comes to applying for new opportunities following a redundancy.
For many homeowners, the monthly mortgage is their biggest expense and one of the first ones to be concerned about if you lose your job.
One option might be to ask for a mortgage payment holiday. This can give you three months’ breathing space while you look for your next role. However, a holiday can impact your credit rating and will mean you pay more interest overall, so it should be a last resort once you’ve exhausted other options.
In normal circumstances getting income protection insurance is worth considering to help pay your bills if you were made redundant. It can help cover any expenses or debt payments while you're unemployed and searching for a new job.
You need to make sure you buy the right insurance type – as not all policies cover redundancies. For instance, long-term income protection doesn’t usually cover losing your job, and instead is designed for sickness and ill health.
The main insurances worth considering include mortgage payment protection insurance (MPPI), payment protection insurance (PPI) and short-term income protection insurance (STIP).
MPPI and PPI keep paying the specific bills they’re attached to - such as mortgages or loans and other debts. STIP will pay out a proportion of your income, typically 50-60% for a specific period. You can use your money where it is most needed, rather than being tied to a specific debt repayment.
Some providers pulled their cover during the pandemic amid fears around high levels of redundancy, so you might find policies are more expensive and harder to come by - although they are being offered again now.
However, if you had an income protection policy in place before the pandemic started, you should be able to make a claim. Be sure to contact your provider to be clear about exactly what you'd be covered for.
Salman is our personal finance editor with over 10 years’ experience as a journalist. He has previously written for Finder and regularly provides his expert view on financial and consumer spending issues for local and national press.