We explain what money you might get and the benefits available once you leave your job
Thursday 03 Sep 2020 Author: Laura Suter

One unfortunate effect of the pandemic is that lots of people have lost their job, with thousands being made redundant in recent months.

The latest jobs figures show that 730,000 fewer people were on company payrolls compared to the start of the Covid-19 crisis. Despite this, the official unemployment rate stayed at 3.9% but it is expected to soar before the end of the year.

The Bank of England estimates that the unemployment rate will rise to 7.5% before Christmas, which would mean around 2.5 million people in the UK being unemployed. Already the news headlines are filled with stories of companies laying off large numbers of staff, but it is expected that when the Government’s furlough support scheme is withdrawn in October there will be a big spike in the jobless numbers.

It’s worth understanding what you can do if you find yourself out of work, and the help available to you.

What does redundancy mean?

If you’re made redundant it’s because the company no longer has a need for that job role, and it should not be based on something you personally have done (as it would be if you’d been fired).

There are legal protections in place should you be made redundant. How much you’re protected and what process the company takes depends on how long you’ve worked there and how many people the company is making redundant.

The basic rules are that certain criteria can’t be used in the decision to make you redundant, such as your age, gender, membership to a trade union or being pregnant. But firms can decide to use other criteria, such as your performance, how long you’ve been with the company and whether you’ve had disciplinary action against you.

If you’re being made redundant your employer can’t do it on the spot. They must give you some notice, but it varies depending how long you’ve been with the company. If you’ve worked there for less than two years you only need to be given a week’s notice, while those who have been there more than two years get a week’s notice per year worked up to a maximum of 12 weeks.

What benefits can I claim if made redundant?

There are various Government calculators that can help you work out what benefits you’re entitled to, based on your income, savings, your partner’s income and your existing benefits and pensions. You can access them here.

However, broadly speaking the main ones that might be most applicable are Jobseeker’s Allowance or Universal Credit. For both you can apply online although you might need help completing some forms and the phone lines are currently very busy. Services like your local Citizens Advice Bureau can help you if you’re struggling to know what to claim or how.

Universal Credit: This replaced a whole host of different benefits and rolled them into one. Typically, you need to be over 18 but under state pension age, out of work and have less than £16,000 in savings between you and your partner.

It’s paid monthly and for someone over the age of 25 and single is £409.89 a month. You could get more if you have children, have a disability, care for someone or need help with housing costs. However, one big flaw is that you usually must wait five weeks to get your first payment. Some people might be able to use savings or redundancy pay to tide them over, but if not, you can request an advance.

Jobseeker’s Allowance: This is for those who are between 18 and state pension age and not in full-time education. It is based on your Class 1 National Insurance contributions over the past two to three years. You’ll get the new-style Jobseeker’s Allowance for up to 182 days (which is about six months) and it equates to £74.35 a week for those aged 25 and over who are single.

How does redundancy pay work?

Many employers will decide to offer enhanced redundancy pay, which can significantly increase your payout. But there are also legal minimums if you’ve worked for the company for two years or more.

The statutory amount is one week’s pay for each full year you worked for your current employer between the ages of 22 and 41. It’s cut to half a week’s pay for those years you worked when you were under the age of 22 and bumped up to a week-and-a-half pay for the years you worked over the age of 41.

Your weekly pay rate is normally based on the average amount you earned per week based on the previous 12 weeks, however this has been amended in Covid-19 times as many people have been on furlough and so earned less than usual.

If this is the case, then your weekly rate will be based on your normal (pre-furlough) earnings. However, this weekly pay is capped at £538 and the maximum statutory pay is £16,140.

For example, someone aged 30 who earns £25,000 a year and has worked for their employer for three years gets £1,442.31 in redundancy pay, while the same person who has worked there for seven years would get £3,365.39.

If they had only worked there for a year, they’d get nothing in statutory pay. The Government has a calculator where you can work out what your pay would be.

The good news is that any redundancy payment up to £30,000 is entirely tax-free. You should also get paid for any wages or holiday pay owed to you, and you should be paid through your notice period (or be paid in lieu of notice) but this will be subject to the usual tax and national insurance deductions.

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