What to do if you’ve been made redundant: a guide
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According to recruitment website Seek, one in four Australians will be made redundant over the course of their career. While the term can feel a little taboo, the truth is that it’s common, and part of the professional circle of life. That’s not to say though that it isn’t traumatic. It is a sudden, and often unforeseeable change in circumstances, namely financial ones. Teams are separated, companies unhinged, and employees left to pick up the pieces and contemplate their next move.
A redundancy payout, also known as severance pay, is the lump sum of money paid out by an employer to an employee when they are made redundant, and is generally dictated by the length of time spent in the company. Depending on the time spent searching for a new job, the redundancy might cover your living costs during the period of unemployment. If you’re fortunate enough to find yourself earning again quickly though, the money might look pretty damn tempting – especially when the Net-A-Porter sale email pings your inbox.
According to finance expert and founder of PepTalkHer Meggie Palmer, there is a right and wrong way to handle the money, should you be on the receiving end of a redundancy. From budgeting to investments to handbags, see her best advice below.
Don’t wallow forever
“Losing a job is stressful. Let yourself be upset, cry, or create a voodoo doll of your former boss if it’ll make you feel better. And then move onwards. Every challenge is an opportunity. Reframing a job loss as an opportunity rather than a disaster is key to opening your eyes to new – and no doubt even better – pathways.”
Talk to your employer
“If you’re offered a redundancy payout or get a sense it could be on the cards, consider asking if your employer will pay it as a ‘bona fide’ or ‘genuine’ redundancy if it isn’t already. A ‘genuine’ redundancy payment is tax free, and that’s a lot more money in your pocket.”
Work out a time frame, and be realistic
“Do the calculations on how long it’ll realistically take you to find a new job. Once you’ve worked out how many months of living expenses you’ll need, quarantine that cash during your job hunt. Make sure you put it in a high interest savings account so you’re earning a return in the meantime.”
Don’t whittle away your excess cash – invest instead
“Got a massive payout and still have money left after the budgeting? Lucky you! My advice is to put rest into investments. Sure, a new Chloe handbag would be great, but I take a short-term pain long-term gain approach.
If you have any credit card debt, clear it immediately. With the rest, you may choose to pay down your mortgage (if you have one) or invest it. If you don’t know where to start, fear not! I was the same when I started dabbling in shares. I’ve made a heap of mistakes and if I had my time again, I’d invest all my cash into a broad range of shares. The easiest way to do that, in my opinion, is Exchange Traded Funds, or ETFs. Essentially you’re buying a basket of shares – a collection of lots of different stocks – so you’re spreading your risk. You can buy them yourself super simply using Commsec or similar trading platforms, or you can use a robo advising investment platform, like Stockspot, who will do it for you as well as diversifying you even further into gold, cash and bonds.”
What’s one of your best pieces of advice when it comes to money management overall?
“Automate your finances. Put a certain amount of money away every week (no matter how small) so you set the habit. You’ll be surprised how quickly it’ll add up.”
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