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How your Redundancy Package can Affect your Benefits

By: Paul Geraghty - Updated: 17 Oct 2017 | comments*Discuss
 
Redundancy Benefits Redundancy Payment

When you’re made redundant, you may have to live on benefits for a while. So how does your redundancy package affect your eligibility?

Voluntary Redundancy and Benefits Entitlement

If you leave your job voluntarily, unemployment benefits are normally not payable (for six months). People who are made redundant should not be affected by this. However, people sometimes wonder how accepting voluntary redundancy accepts their eligibility for benefits. It does not. The resulting unemployment is still considered involuntary and those affected should be able to receive Jobseeker’s Allowance without any problems.

Occasionally, however, people have been known to encounter some difficulties in relation to this question because of poorly-informed clerical staff at the Jobcentre. If it comes to that, you may need to appeal a wrongful decision. In the end, though, you should win. Omitting the word voluntary from the description of why your last job ended is sometimes said to help avoid these kinds of misunderstanding.

Accepting an Alternative Job and Benefits Entitlement

Sometimes your employer will offer you another job as an alternative to making you redundant. If you feel that the new job differs substantially from your old one, and reject it for this reason, your unemployment will still be considered the result of a redundancy and therefore involuntary.

If you’re not sure whether the new job is right for you but would like to try it out, you are entitled to do it for a trial period. By statute this should be at least four weeks, although you and your employer can agree to a longer trial period. If, during the trial period, you decide that the new job isn’t right for you, and leave, you will still be considered to have been dismissed by reason of redundancy and therefore involuntarily unemployed.

Refusing an Alternative Job and Benefits Entitlement

The only circumstance in which being offered another job by your employer might give rise to difficulties is if there is a disagreement about whether or not the new job is equivalent to the old one. If you say it is not and your employer says it is, it’s conceivable that the Jobcentre staff might take the view that your unemployment is voluntary. In this case, your employer would probably also refuse to pay you a redundancy payment. You could appeal the matter to an Employment Tribunal for a final adjudication. Presenting evidence to the Jobcentre staff that the matter is under appeal to an Employment Tribunal should secure your access to benefits pending the judgement.

Redundancy Payments and Benefits

Provided you have two years of continuous service with your employer, you should receive a redundancy payment when you leave. Although statutory redundancy payments tend not to be very high, if you have a more generous contractual arrangement, or if you have been with your employer for a long time, the amount involved may be substantial.

Many state benefits are means tested, although not all. Unless you immediately spend your redundancy lump sum, for example by paying down debt you have, for the purposes of means assessment, it will count as savings. Large savings may reduce the amount of benefit you get or even mean that you won’t get any. This subject is explored more fully in a separate article so will not be dealt with further here.

Redundancy and Benefits – Conclusion

If you’re facing redundancy, the harsh reality is that you may be dependent on benefits until you find another job, so it’s important to how the choices you make, and the redundancy package you get, can affect your entitlement. You may want to look at the various ways to invest a redundancy package, here.

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[Add a Comment]
Hi my partner is being made redundant this week, I don’t work currently. We have a 1 year old and a 3 year old. He had a loan with work which is being take out as soon as he gets his last wage. This means he won’t have any money for rent/bills. Will we get any help? Also will my child tax go up? Really worried. Thanks
Selina - 17-Oct-17 @ 8:13 PM
Meg - Your Question:
I currently work 27.75 hours. My employer has informed me that from January my hours will be cut to 25.p.w. This means a drop in pay as I will loose 15 hours per month pay which I cannot afford to loose. I have also been offered severance pay as I am 62. I need some advice as to whether I can claim JSA if I take voluntarily severance and what if any other benefits I could claim.

Our Response:
You can see more via the Money Advice Service link here, which should tell you all you need to know.
RedundancyExpert - 17-Oct-17 @ 3:38 PM
I currently work 27.75 hours. My employer has informed me that from January my hours will be cut to 25.p.w. This means a drop in pay as I will loose 15 hours per month pay which I cannot afford to loose. I have also been offered severance pay as I am 62. I need some advice as to whether I can claim JSA if I take voluntarily severance and what if any other benefits I could claim.
Meg - 13-Oct-17 @ 10:40 PM
Queenie - Your Question:
Due to insolvency of the company I worked for and no consultation period am I entitled to a reduction on my council tax? I already pay single person rate.

Our Response:
You would have to find out via the gov.uk link here .
RedundancyExpert - 9-Oct-17 @ 2:41 PM
Due to insolvency of the company I worked for and no consultation period am I entitled to a reduction on my council tax? I already pay single person rate.
Queenie - 7-Oct-17 @ 10:49 AM
IB67 - Your Question:
Hi, being made redundant this month (1st time). How do I go on about claiming JSA & getting cover towards my state pension whilst looking for work?I have been in continual FT employment for over 30 years.

Our Response:
Please see gov.uk link here , which should help answer your question.
RedundancyExpert - 2-Oct-17 @ 11:46 AM
Hi, being made redundant this month (1st time). How do i go on about claiming JSA & getting cover towards my state pension whilst looking for work? I have been in continual FT employment for over 30 years.
IB67 - 1-Oct-17 @ 5:57 PM
I received notice of redundancy yesterday, 02/08/2017, with a termination date of 02/11/2017.I'm being paid enhanced redundancy but which date should my continuous service be calculated to - the date the notice was served or the termination date?
dribble - 3-Aug-17 @ 11:27 AM
I have been on esa for two years and i am still employed but dont work or get paid. Will my employer hsve to pay me off and pay redundanvy.
dougie - 1-Aug-17 @ 6:15 PM
Iam 65years of age and have been offered volentray redundance.. I only get help with my housing benefit.would i still get help with my housing benefit I do get a state pension
Paddy - 20-Jul-17 @ 7:46 AM
Hoppo75` - Your Question:
Hi. I am being made redundant at some point in the near future and hope someone can help me. I would like to understand the actual impact of the redundancy payment I'm likely to receive in terms of tax. I do understand the % rules (no tax on the first 30k etc), but I'd specifically like to understand the impact on my tax if I'm fortunate enough to see continuation of employment elsewhere. I don't know if there is such a thing as a calculator that may tell me; - This is how much you've earned this year - This is the expected net redundancy you'll receive - If you continue employment at a certain monthly salary, this is what you can expect to happen.Any help would be great (which will be significantly more than the company have been able to provide!)Thanks

Our Response:
Your possible current redundancy payment would not affect tax on any future job elsewhere.
RedundancyExpert - 20-Jun-17 @ 2:51 PM
Hi. I am being made redundant at some point in the near future and hope someone can help me. I would like to understand the actual impact of the redundancy payment I'm likely to receive in terms of tax. I do understand the % rules (no tax on the first 30k etc), but I'd specifically like to understand the impact on my tax if I'm fortunate enough to see continuation of employment elsewhere. I don't know if there is such a thing as a calculator that may tell me; - This is how much you've earned this year - This is the expected net redundancy you'll receive - If you continue employment at a certain monthly salary, this is what you can expect to happen. Any help would be great (which will be significantly more than the company have been able to provide!) Thanks
Hoppo75` - 20-Jun-17 @ 10:29 AM
Worried - Your Question:
I am probably going to be made redundant soon after 20 yrs I am single parent and I get tax creditsIf I get redundancy payout will I keep my tax credits I rely on them I have a mortgage and 3 kids to support

Our Response:
You can see more via Money Advice link here for more information. However, if you have children and are not earning, then it is unlikely you will be eligible.
RedundancyExpert - 19-Jun-17 @ 12:41 PM
I am probably going to be made redundant soon after 20 yrs I am single parent and I get tax credits If I get redundancy payout will I keep my tax credits I rely on them I have a mortgage and 3 kids to support
Worried - 16-Jun-17 @ 8:13 PM
Ld1978 - Your Question:
I was made redundant at the end of march and received a large payment which I have in savings and premium bonds. I had a baby in Feb and have a 3 year old. Should I claim child tax credits or will my savings be looked at. Hubby is self employed and we are using savings to top up his wageThanks

Our Response:
You can check if you qualify for tax credits directly via the gov.uk link here.
RedundancyExpert - 16-Jun-17 @ 1:52 PM
Jaq3962 - Your Question:
I am being made redundant on 30th of June 2017. I have worked less than two years so I'm not entitled to redundancy however my company is paying me three months notice. Will this effect my entitlement to benefits? What benefits if any would I be entitled to? Would I be entitled to claim straightaway?

Our Response:
If you have paid National Insurance for a two year consecutive period of time, you should be able to claim Jobseekers Allowance if you will be looking for further work.
RedundancyExpert - 13-Jun-17 @ 12:54 PM
I am being made redundant on 30th of June 2017. I have worked less than two years so I'm not entitled to redundancy however my companyis paying me three months notice. Will this effect my entitlement to benefits? What benefits if any would I be entitled to?Would I be entitled to claim straightaway?
Jaq3962 - 6-Jun-17 @ 6:47 AM
I was made redundant at the end of march and received a large payment which I have in savings and premium bonds. I had a baby in Feb and have a 3 year old. Should I claim child tax credits or will my savings be looked at. Hubby is self employed and we are using savings to top up his wage Thanks
Ld1978 - 2-Jun-17 @ 8:52 AM
Hi there, I was made redundant whislt on Maternity Leave. My SMP have officially ran out this month (May) and my contract termination date is 1st July. What can I do? I am basically left with nothing until they paid me my severance at the end of July.
JoW9 - 31-May-17 @ 8:47 AM
I was made redundant 31st March and paid my final salary on 13th April. Universal havesaid I earned this money after I submitted my claim and my entitlement is nothing. Is this correct.
bonah - 22-May-17 @ 11:35 PM
Kaz66 - Your Question:
I am being made redundant on 31st May, does what my husband earn affect whether I would be able entitled to Jobseekers allowance?

Our Response:
No, if you have paid your National Insurance Contributions for the past two years, then you should be entitled to JSA regardless of your husband's earnings. Please see link here for more information.
RedundancyExpert - 17-May-17 @ 2:44 PM
I am being made redundant on 31st May, does what my husband earn affect whether i would be able entitled to Jobseekers allowance?
Kaz66 - 12-May-17 @ 3:39 PM
smithy - Your Question:
I could be made redundant in 4months time our company is in administration and if they close I will only get statutory redundancy will I have to sign on the dole to get my statutory redundancy

Our Response:
You will get your statutory redundancy regardless of whether you sign on or not.
RedundancyExpert - 12-May-17 @ 2:45 PM
KB - Your Question:
I am being made redundant on friday. I am currently off sick and now in arrears wi5h my rent. is there any help I can receive to help me with this.

Our Response:
I can only direct you to the site Turn2Us, link here which should be able to help further.
RedundancyExpert - 11-May-17 @ 10:35 AM
I am being made redundant on friday. I am currently off sick and now in arrears wi5h my rent . is there any help i can receive to help me with this.
KB - 10-May-17 @ 12:34 PM
I could be made redundant in 4months time our company is in administration and if they close I will only get statutory redundancy will I have to sign on the dole to get my statutory redundancy
smithy - 5-May-17 @ 12:31 PM
Boo - Your Question:
I'm being made redundant today I'm also 37 weeks pregnant will I be able to claim any 9ther benefits for the kids?

Our Response:
Please see Entitled To link here which should help answer your question.
RedundancyExpert - 4-May-17 @ 11:54 AM
I'm being made redundant today I'm also 37 weeks pregnant will i be able to claim any 9ther benefits for the kids?
Boo - 3-May-17 @ 2:49 PM
I am nearly 63 and have been made redundant with a redundancy payment of 20k my comoany pension might just pay for a takeaway for one so will I be able to claim anything please
Jan - 30-Apr-17 @ 10:32 PM
I am being made redundant with a package of 27k .I would like to set up my own business but work part time while setting up business . How would redundancy pay affectchild tax credits and job seekers as I will be using it to set up my business.
stevie g - 30-Apr-17 @ 8:38 AM
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