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Coronavirus – Redundancy and your debt arrangement 

20/05/2020

The coronavirus pandemic continues to devastate lives across the UK, and for some businesses, furlough hasn’t been enough to keep employees on payroll.  

This week, aviation manufacturer Rolls Royce confirmed 9,000 job cuts. The announcement follows swiftly on the heels of the news earlier this week that high street restaurant chains Bella Italia and Café Rouge filed for administration, which would leave over 6,000 people jobless.  

It’s a worrying time for anyone, let alone those who are in any form of debt arrangement.  

If you are in a debt arrangement and you’ve lost your job, you might be feeling floored. But despite this financial setback, now more than ever, it’s important to continue with the positive progress you’ve made by taking control of your debt. Here are some tips to help.  

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I’ve been made redundant. What do I do about my debt arrangement? 

No matter what form of debt arrangement you have in place, it’s vital that you contact your provider as soon as your employer confirms that you’ve been made redundant. You must do this within two weeks of hearing that you’ve lost your job.

Your debt arrangement provider will also need to know how much is in your redundancy pay, so it could be a good idea to confirm this amount with your employer before making contact. 

You might be worried that any redundancy pay might be taken off you, but actually, your debt arrangement provider just needs this information so that they can work with you to adapt your plan to your changed circumstances.  

Do I have to hand over my redundancy settlement? 

With certain debt solutions, there are provisions in place to make sure you don’t have to give up your redundancy payout. For example, if you’re in an IVA, you’ll be allowed to keep up to six months’ worth of your pay from any settlement before having to contribute a penny to your arrangement.  

However, if you do find work before the six months are up, it’s important to be aware that you may have to pay something from your redundancy settlement towards your agreement. And if you receive an offer of employment, it’s up to you to let your insolvency practitioner know about this, too.  

I’ve been made redundant. What are my rights? 

If you have been affected by the recent slew of redundancies hitting the UK, it’s important to be aware of your rights:  

  • Make sure your redundancy is fair – This includes being invited to at least one consultation to discuss your redundancy with your employer, at which your employer will need to explain their reasons for making you redundant. It’s also an opportunity to discuss any available alternatives to redundancy. It is not a fair redundancy if, for example, you’ve been made redundant and someone else has been recruited to do your job, or your role has automatically been given to a colleague who does similar work without assessment taking place first. 
  • Check you’ve been given enough notice – Legally, your employer has to give you one week’s notice for every year you’ve been employed by them (or what’s stated in your contract of employment, whichever of the two is the higher). If this notice period can’t be met for any reason, your employer will instead have to pay you in lieu of notice. 
  • Take some time off to seek work – If you’ve been in employment for over two years, it’s your right to take paid time off (up to two days a week) during working hours either to apply for a new job or to undertake training to upskill for a new job. Not a lot of employers know about this right, but it’s yours to use if you need it. 

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How much redundancy pay could I be entitled to? 

There are two types of redundancy pay; contractual and statutory.  

Contractual redundancy pay is outlined in the terms and conditions of your employment contract, and will detail any extra money your employer has agreed to pay as part of the specific agreement between you and your employer. If offered, this is over and above statutory pay. 

Statutory redundancy pay is available to every employee who has worked for an employer for two years or more. How much statutory redundancy pay you’ll receive depends on your age, and how long you’ve been in your current role.  

  • You’ll get a half-week’s pay for each full year you were in your job and aged under 22.  
  • You’ll receive one week’s pay for each full year you worked in your role and were aged between 22 and 41.  
  • If you’re aged 41 or older, you’ll receive one and a half week’s pay for each full year worked. 

Bear in mind that your weekly pay will be capped at £538. You can use this handy calculator to check exactly how much in total you’re due.  

How can I prepare for my next job? 

It’s a challenging job market out there – and it will be for some time. But that doesn’t mean there aren’t opportunities if you’re willing to diversify or consider something new. Despite many sectors being hit hard by the pandemic, some industries have seen increased demand, including healthcare, supermarkets, farms and civil services.  

  • The Department of Education has launched a new online Skills Toolkit, which is designed to help people who are on furlough or who have been made redundant to boost sought-after digital and numeracy skills. The courses are all available for free, and can be found here 
  • Visit the National Careers Service website to explore different career options and how to work towards them.  
  • Make contact with a recruiter who works in your sector. They’ll have the contacts to let you know who’s still hiring – and what they’re looking for.  

If you’re scared you’ll lose your job because of the coronavirus crisis or you’ve already been made redundant, it’s important to seek advice about any existing debts you may have. At Creditfix, we can offer free advice to help those facing unaffordable debt. Speak to one of our friendly, professional specialists today by calling 0808 253 3299.  

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