THE jobs axe fell with a vengeance last week with 14,000 redundancies announced in two days, following the release of figures showing unemployment had jumped to an 11-year high in September, topping 1.8 million. Many experts now predict nearly three million will be without work by 2010.
Bank staff were left reeling after Royal Bank of Scotland announced 3,000 redundancies in global investments. Though these are cuts which may have come anyway with the downturn in the economic cycle, they will be the first of more than 20,000 likely
to follow in the banking sector.
Elsewhere, BT said it was shedding 10,000 posts, construction equipment maker JCB announced a further 398 redundancies on top of the loss of 178 posts it revealed last month, 250 jobs were written off at truck maker Leyland and Friends Provident axed 280 posts.
This will come as gut-wrenching news for those caught up in the wave of cutbacks, but as axed workers try to fight their way through the fog of shock, it is vital they concentrate on getting any money that is due to them. So what are your rights if you are handed your P45?
Some employees can rely on a generous redundancy payoff. At the banks, for example, some staff will get one month's pay for every year's service, with no limit. Long servers will at least get a fat cheque to cushion the blow.
Elsewhere staff may not be so lucky. For many workers, generous payoffs are a thing of the past, not least because of the increase in short-term contracts. Even at banks and other financial institutions, those with less than two years' service may get nothing.
They will have to rely on the Government's minimum statutory redundancy payment to get by, which is far from generous. After two years with your employer you get one week's wages if you are aged between 23 and 40, and one and a half weeks' wages if you are over 41. But this is only up to a maximum of £330 weekly for 20 weeks. So that gives the under-40s £6,600 after 20 years, and the over-41s £9,900. Younger workers fare even worse, qualifying for half a week's wage for each year worked under the age 22.
In any event, your redundancy payment is taxable, and much of it will be taxed at 40%, as it will be added to your other earnings for that year.
There is one major concession, though: the first £30,000 is free from both tax and National Insurance. To qualify for tax exemption you must be made redundant. Gardening leave, for example, is not redundancy, and neither is three months' salary in lieu of notice. Such payments will be fully taxed.
Worryingly, HM Revenue & Customs is increasingly scrutinising redundancy payments made to people in their 50s, questioning whether they are truly redundancy payments rather than an early retirement settlement.
It is possible to shelter redundancy payments above £30,000 from tax in a pension. However, you may do better by asking your employer to swap part of your redundancy lump sum for a discretionary payment into your pension. This allows the employer to save 12.8% in National Insurance, which he may be happy to share with you via an enhanced payment.
This can be particularly attractive if you are over 50, as you can currently take 25% out of your pension immediately as tax-free cash. The rest of the money is used to boost your pension at retirement. However, you must think carefully before going down this route, because you will tie up the bulk of the lump sum for years.
If you leave work halfway through the year, you may be due a tax rebate as you will not have used all your personal allowance. Make sure you get a P45 when you leave, as this will make sorting out your tax affairs easier. Where you have a job to go to, or expect to get one shortly, any rebate will be paid through your pay packet when you join a new employer.
However, if you doubt you will work further in the tax year, write to your tax office explaining your situation and asking for a refund. In the case of financial hardship, ask them to expedite the matter.
Don't forget to take a look at your all-round finances. Jobs come with all kinds of benefits, including life insurance via the pension scheme, and medical and disability protection.
