Making Cents | The Redundancy Checklist: Six things you must do if you’ve lost your job

Continuing with the theme of redundancy and in this article, I’m going to outline what I believe you need to think about and focus on if you lost your job, and there are six of them – consider them your redundancy checklist.

Know your numbers

If you don’t know how much you’re spending each month, then find out, because the basis for your financial plan starts with estimating how much you’ll spend during the time you’re unemployed. And you want to know the exact amount, don’t guess.
So, I’d say, spend some time on this because it’s important.

Start by looking at your fixed costs i.e. mortgage, rent, food, loan repayments, insurances etc. and then look at what your discretionary spending is, and they are the ones you need to focus on and either eliminate or reduce, because they’re not a priority spend.

Hopefully your situation is going to be a temporary one, and you can go back to what was normal spending before you lost your job, but until that happens you need to track your spending and keep your outgoings down to a minimum.
Doing this exercise by the way will help put a figure on what you need to earn in your next job. It might be lower than what you were earning before or it might be higher. But just know what it is and don’t think it has to be the same. If you can find a way or reducing your outgoings by say €500 per month, that reduces the amount you need to earn by €12,000 because it’s likely you’d need to earn that amount to net down to €500 pm.

Know what your runway number is

Your runway number is the length of time you’re existing savings and termination payment will last for, until you run out of money.

And knowing how much you spend each month is critical in finding out what your runway number is.

So, if your savings/termination payment amount to say €80,000 and the amount you spend each month over whatever other income you have i.e. job seekers benefit/partners income is for example €4,000, then you have 20 months before you need to find that new job.

And this is where having existing savings in place are so important, because they increase the time (and lessons the stress) before you have to return to work, allowing you more time to focus on identifying the job you want, and giving you more time to re-train etc.

Know what your termination package is and understand what your options are

Your employer is likely to provide you with help in this regard i.e. they will get the administrators of the pension scheme to meet with you to discuss how they arrived at the termination payment they are offering.

You need to make sure the numbers they are using are correct. I’ve seen it happen in the past where the length of service or salary used was incorrect and even if they were out by a couple of months, the difference could be thousands of Euro’s so read the fine print.

Whilst engaging with your employer, I would also ask them if any existing benefits will be paid after you leave and for how long, e.g. health insurance, what happens to shares that haven’t reached their vesting period, can you continue on with the group death in service benefit the company had in place, are you entitled to unused holiday pay, how are PILON payments treated for tax purposes (PILON is pay in lieu of notice), are they going to give you an education/re-training allowance, are they providing outplacement services etc.

Speak with your creditors

If you’re concerned that you might not be able to meet future mortgage or personal loan repayments, you should contact your creditors and tell them about the situation you find yourself in. Making loan repayments should be built into the new monthly budget you’re going to create while you’re looking for a new job, and it should come under the heading of, must make payments.

How quickly you contact your creditors will depend on your situation, but missing repayments when you can make them, or waiting until you’ve run out of money before you make contact are not good choices.

Sign on

You should apply for job seekers benefit the first day you become unemployed.

The reason why you should do this is because you will not get paid for the first 3 days of your claim.

Jobseeker's Benefit is paid for 9 months for people with 260 or more Class A, H or P PRSI paid contributions. And it’s paid for 6 months for people with fewer than 260 Class A, H or P PRSI paid contributions.

The maximum weekly job seeker benefit payment is currently €208 per week with an increase of €138 for a qualifying adult and €40 per child under age 12 and €48 if over.

If an employee is under 55 years of age and the ex-gratia payment made by the employer along with the statutory payment exceeds €50,000 they will lose their entitlement to claim the JB payment and that loss will depend on the amount they receive i.e. if it’s €52,000 they lose 1 week, if it’s €74,000 they lose 5 weeks, if it’s greater than €90,000 they lose 9 weeks.

Don’t be in a rush to do anything with your severance package

I come across people all the time who are in a mad rush to spend their severance package. They want to pay off debt, take a chunk off their mortgage, give some away to their kids, invest it etc.

I would caution against doing that, I would advise you to take your time before making any decision and when you do, just make sure you know what the impact is going to be, and how it interacts with other areas of your finances.

You need to take your time to make sure any decision you make will create the best outcome for you based on your situation right now i.e. if I pay off this debt and no longer have that monthly repayment, I can reduce the amount I have to earn etc. but the trade-off of doing this is reducing your savings and how does that sit with you? if you had a job lined up then it makes it a much easier decision so think this through before you do anything.

And finally, expect the first call you’re going to get after your exit will be from your bank. They’ll see this sum of money land in your account and it’s their trigger to make contact with you. You see they’ll tell you how important you are to them and how valuable a customer you are – yeah right, where was the call when you had €50 in your account and not €50,000.

But that’s not to say you shouldn’t meet with them either, I think you should and listen to them and see what they have to say and offer you, but don’t commit to anything either.

Liam Croke is MD of Harmonics Financial Ltd, based in Plassey, Co. Limerick. He can be contacted at liam@harmonics.ie or www.harmonics.ie