Planning for Redundancy

Planning for redundancy

Redundancy can be an unsettling experience. It’s natural to feel upset, stressed and even angry but being prepared can help you take control back.  

Here are 3 steps to get you started!

Step 1: Understand your redundancy payout

An important first step in planning for redundancy and making a decision that’s right for you is to understand your entitlements and the redundancy package that’s on offer.

A good place to start is to ask HR or Payroll to provide you with information about your package and entitlements as a net amount (i.e. after tax). If you’ve arranged to meet with one of our financial planners, they can help make sure you fully understand the offer.

Your redundancy package can be made up of several different payment types including:

  • Your redundancy entitlement
  • Additional redundancy incentives being offered
  • Payments in lieu of annual leave, long service leave or any notice period you haven’t worked if your employer wants you to finish up immediately

Redundancy packages aren’t taxed the same as your normal pay so the tax you pay on your redundancy package is usually a lot lower.

More information about the different payment types and how they are taxed is available in our Redundancy: The Basics fact sheet.

Step 2: Get to know your current finances

Putting a budget together that outlines your spending today is a great place to start. For now, try grouping them into categories such as: 

  • Must have – Food, utilities, rent, mortgage, other debts and commitments like school fees etc.
  • Should have – Insurance, savings etc.
  • Nice to have – Holidays, hobbies, eating out, shopping, gifts etc.

You may also like to use ASIC’s online Money Smart Budget Planner to create a more detailed budget.

Next, think about how your spending will change if you take a redundancy. Where can you save? Where will you need to spend more? For example, will you lose access to a company mobile or vehicle?  

Step 3: Make plans for your future

Even if you already have plans for the future, facing redundancy whether voluntary or forced is a good time to explore your options.

If you’ve been with your current employer for a while your redundancy package could be worth a lot of money which could provide you with new opportunities like starting your own business, a new career or turning redundancy into early retirement! If you haven’t been with your employer for very long, redundancy may only mean a small payout and finding another job in the same field.

Whatever the case, getting professional advice from one of our financial planners can help you plan for and manage your redundancy. Get in touch and let us help you make the decision that’s right for you.

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