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How to prepare for redundancy

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.

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For many people losing their job, or being made redundant, is a fear that is often at the back of their minds. The worry 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.

Unfortunately, due to the coronavirus (COVID-19) pandemic thousands of people around the UK could be facing redundancy in the coming months. According to some estimates, 150,000 people have lost their jobs to redundancy during the pandemic.

And with the furlough scheme coming to an end in October, according to the National Institute of Economic and Social Research, about 1.2 million people could be unemployed by Christmas. 

What steps can you take to prepare for redundancy?

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.

Organise your finances

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 subscriptions service that could live without for a few months? Could you switch to a cheaper energy supplier?

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.

Pay off your debts

If you have any credit card or loan debt, it's a good idea to start paying that off faster.

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.

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 your repay your debt.

Here are some tips to help you pay off your debt

Start saving

If you don't already have an emergency fund stashed away, it's vital that you start putting away cash to get you through the lean times. Ideally, it's useful to have at least 3 months salary set aside, so if you lose your job unexpectedly, you have enough time to figure things out.

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.

Add to your skills

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 avail yourself 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.

Update your CV

It's not uncommon for many of us to forget about our resumes and CV once we're employed. But it's a good idea to keep your CV updated, adding any achievements or career milestones as you go along.

Can you get a mortgage payment holiday?

For homeowners, the monthly mortgage is their biggest expense and one of the first ones to be concerned about if you lose your job.

Thankfully, soon after the lockdown was put in place, the UK Government announced that mortgage lenders would offer all struggling homeowners a 3-month mortgage payment holiday.

Currently, you can ask your lender for a mortgage payment holiday until 31 October, 2020. The holiday means that you won't have the pay your mortgage for 3 months and it will not impact your credit score.

Read our guide for more details on the mortgage payment holiday

Can you get income protection insurance?

In normal circumstances getting income protection insurance is worth considering to protect you and your family if you were to lose your job. It can help cover any bills and expenses while you're unemployed and searching for a new job.

Unfortunately, during due to COVID-19 most insurers are not offering income protection or unemployment insurance policies during the pandemic.

However, if you had an income protection policy in place before the pandemic started, you be able to make a claim. Be sure to contact your provider to be clear about exactly what you'd be covered for.

Will COVID-19 affect my redundancy rights?

The UK Government instituted new legislation to make sure that employees on furlough who are made redundant receive statutory redundancy pay based on their normal wages, rather than the lower 80% rate offered through the Coronavirus Job Retention Scheme.

While most companies are offering employees normal statutory redundancy packages, some employers have been attempting to short-change employees by basing their redundancy packages based on the 80% furlough wages.

Find out more about what your redundancy rights are here.