The spectre of the dole queue, long forgotten as a feature of British life, has returned to the front pages. Last week we learned that the UK jobless numbers rose at their fastest rate in 17 years in the three months to August. The headline total hit 5.7%, its highest point since the early months of the decade. “These data are grim,” says Alan Clarke at BNP Paribas. “Employment is falling off a cliff and it is still early days in this slowdown.”
In other words, a lot more people will soon be out of work in Britain. The construction, retail and financial sectors keep on shedding staff; this week’s CBI Industrial Trends survey predicts that 42,000 manufacturing jobs will be lost in this year’s fourth quarter; and the trickle-down effect of lower City bonuses will soon be felt. Capital Economics sees the headline jobless total “rising by 1.5 million to around 3 million, or 9%, by the end of 2010”.
We all hope it’s not going to happen to us. But it’s worth kowing what to expect if the dreaded axe does fall. If you’re made redundant from full-time paid employment, you’re entitled to a notice period, which you’ll have to work through, or for which you’ll be paid. The terms will be in your employment contract, but you should get at least one week’s notice for every year worked, up to a maximum of 12 weeks.
You’ll also be entitled to statutory non-taxed redundancy pay if you have worked for your employer for more than two years (and you’re between 18 and 65). You get half a week’s pay for every year of service between the ages of 18 and 21, one week’s pay for every year between 22 and 40, and one-and-a-half weeks’ pay for every year between 41 and 64. That may sound reasonable, but the maximum payout is based on a weekly wage of £330 and 20 years’ entitlement. So the best you can expect is £9,900 (20 years at 1.5 x £330) – not to be sniffed at, but unlikely to feel like much compensation for losing a job you’ve had for two decades. The good news is that most employers at least try to offer more than the statutory package, and anything you get under £30,000 as non-contractual pay in lieu of notice (PILON) will come to you tax-free. You can also cut your tax bill on a large lump sum further by putting some of it directly into your pension fund.
Some firms are also trying to ease the pain of making large numbers of people redundant by supplying outplacement counsellors who can help you find a new job – though with the economy deteriorating, that will become ever harder. But there is a silver lining to being let go in bad economic times, says Anthony Hilton in the Evening Standard. It’s seen as a “reflection on the market not on the individual”, and so at least there’s far less stigma attached than when the economy is going well.