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How your Redundancy Package can Affect your Benefits

By: Paul Geraghty - Updated: 23 Oct 2020 | 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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Hiyou can only claimjob seekersallowancefor 6 months . When you get your12 weeks noticefrom insolvencythey deduct12 weeks job seekerswhich you have had fromJSA .Soif job seekersruns out 6 months from your finishdate you In theoryonly get 3 monthsis this correct.As you havegiven 3 monthsback .
Jackrussel - 23-Oct-20 @ 9:46 AM
Hi I have just submitted some details to you, can you confirm you have received this. Kind regards Rachel
Bertie - 9-Oct-20 @ 8:00 PM
I was made redundant on 30th Sept 2020.I claimed my redundancy via RPS and also JSA on the 5th Oct. As I have worked for the insolvent company for 26 years I am also entitled to 12 week lieu of notice period.Following my call to the Department of Work and Pensions regarding my JSA claim they have stated I should be available attend an interview immediately, and available to to start work after the end of my notice period.This does not make much sense as I have 12 week notice period, and most employers looking to recruit are not going to wait this long - Can you clarify this please.I have also been given a permitted period from 5/10/20 - 03/01/21 to find a job in the same field.The JSA payments will be deducted from my lieu of notice period so in essence they are taking this money back.I have been through a very traumatic time during the last 10 months and would like to take back step without having harassing calls from the DWP.I would appreciate your advice.Regards Rachel
Bertie - 9-Oct-20 @ 7:56 PM
Iv been on universal credit top with furloughed pay I'm being made redundant my last wage will have approx 3 weeks holiday pay plus 2 years redundancy pay approx £1400 will this high wage effect going onto full universal credit will it be added on as pay or will it all work out the month after
Bucks - 9-Oct-20 @ 4:11 PM
Been made redundant on the 31st August I got £3500, Iv just got my statement from uc and I’m not entitled to any money, not even my child aspect on my uc ! Why ???
Samzie - 12-Sep-20 @ 3:58 PM
I was full time for 20 years and 15 years part time I have been told I’m going to be made redundant and if I go voluntary I get a bit more money My total offer is just under £6000 which I think is an insult given the timeI have been with them so I have gone back to them with a suggestion of an enhanced package but running out of time please help
Sam - 10-Aug-20 @ 8:06 AM
Hi, I am due to receive around £7000 redundancy pay in August and was wondering how this will affect my universal credit in the months following.
Nick - 28-Jul-20 @ 1:41 PM
I have taken VR from my work and total VR is 14750 which including notice of lieu £3450. Please advise if I will be entitled to any mean tested benefits.
Mo - 28-Jul-20 @ 8:48 AM
Hi I'm getting made redundant £4675 redundancy. £4675 9weeks notice in lieu. 12.75 days holiday witch is £998.82. How would this effect universal credit and will the days in lieu and holiday postpone the claim
Sduns5 - 23-Jul-20 @ 11:13 AM
I'm getting uc but been told I could get made redundant end next mouth I got 2 kids my missis dont work if I get like 6k will this effect my uc as I'll be out work will they expect me to live on this or will I still get my uc
Scot - 10-Sep-19 @ 7:22 PM
My boyfriend is getting made redundant the end of September, he’s looking at a £14 grand payout, how will this affect our uc payments ? We wanted to get new windows and a new kitchen but don’t know if we have to use the redundancy money to live and then reclaim uc when it runs out, can anyone help! Thanks
Conny - 6-Aug-19 @ 8:06 PM
Hi. I get a small amount of uc every month on top of my wages. It's less than £50. Im facing redundancy with a out a £10k payout. How would this impact my ability to receive uc going forward?If it was a new claim 10k in savings wouldn't affect anything. Would I be better off stopping my claim for now and reapplying later in the year if the worst happens?
Jemimapd - 6-Jul-19 @ 8:16 AM
I have been made redundant and claimingredundancy from the government.My mother has been in hospital and now needs looking after.If I get carers allowance will this affect the notice pay that I am entitled to.? I know jobseekers allowance would be taken off any notice paybut I wouldnt be claiming that while getting carers allowance anyway.
Ab64 - 26-Jun-19 @ 8:38 PM
My husband has just been told company is closing and has 2 choices either relocate to the new company or take redundancy every thing is going to fast the closure of the company is end of May , we are in rented acomadation I work part time do you know if the new company would help with removal and f we relocate Or if my husband takes redundancy money and I still continue to work part time can he claim benifit he’s 63 he has been with the company 11 years so his redundancy package will roughly be about twelve thousand
Babs - 10-May-19 @ 8:00 AM
Hi got myself worried sick here I had been off work I’ll for over a year sick pay ran out went onto esa support group and p.i.p got paid off last week and will received 6 k today that’s all I have in bankbut I will receive 5k in 4 weeks time and £17 a week a older pension because I’m 55 now I’m worried should I just go down and let them know or am entitled to use some of the 6 k to buy somethings I need without them knowing im hearing you can only have 6k in savings I’m about 15k in debt now I feel I will loose some benifit the tax man has been paid and the counsel tax man took his too I work hard for that money now I’m scared to spend it any advise would be much appreciated
Bob - 28-Mar-19 @ 5:52 AM
Hi can anyone give me a straight answer ive been off work for 7mths with a foot condition, my partner and i have a joint claim with universal credit, but now im being made redundant only about £2,000 does this money affect our claim ?
Steve - 25-Mar-19 @ 4:13 PM
Hi would redundancy pay affect my universal credit payments?
J - 7-Dec-18 @ 4:02 PM
Very simple question, to which I cannot find an answer? I am scheduled to be without a job from 1st January 2019. I will be paid 4 weeks Payment in Lieu of Notice, and also will receive 7 days Payment in Lieu of Holiday. When will the first day that I can claim Universal Credit be? a) 1st January 2019; or b) 8th January 2019; or c) 29th January 2019; or d) 5th February 2019; or e) Some other date Thank you, in anticipation of your assistance.
Man_of_the_World - 6-Dec-18 @ 11:37 PM
Joe - Your Question:
Hi I was wondering if anyone could help us please.4 years ago we started to claim tax credits to help paying for my sons nursery costs (£860/month) We used to receive around £400/month if I remember correctly. Unfortunately after 2 years from starting to receive it I was made redundant, and I received approx £1000 redundancy payment which I turned into education so that I wouldn`t have a gap between jobs. Later on we got a letter saying that our income was higher than what we told ( due to the redundancy pay) so we have to pay back all the money we received. I explained the situation to HMRC but they don`t seem to care to hear me. Could anyone advise please if there`s anything I could try to do before I take a loan to pay this money back? Many thanks in advance

Our Response:
The link here should tell you all you need to know including how you can challenge the decision and/or what you can do if you are experiencing harship as a result.
RedundancyExpert - 17-Jul-18 @ 11:26 AM
hiI was wondering if anyone could help us please. 4 years ago we started to claim tax credits to help paying for my sons nursery costs (£860/month) We used to receive around £400/month if I remember correctly. Unfortunately after 2 years from starting to receive it I was made redundant, and I received approx £1000 redundancy payment which I turned into education so that I wouldn`t have a gap between jobs. Later onwe got a letter saying that our income was higher than what we told ( due to the redundancy pay) so we have to pay back all the money we received. I explained the situation to HMRC but they don`t seem to care to hear me. Could anyone advise please if there`s anything I could try to do before I take a loan to pay this money back? Many thanks in advance
Joe - 16-Jul-18 @ 7:09 AM
Hi, I was made redundant and my savings and redundancy are less than 6k, am I entitled to universal credit? Also do you have any links that detail this please? Thank you.
Miss M - 2-Jun-18 @ 12:47 AM
Bob - Your Question:
Hi all,I wonder is anybody knows this?If I was to be made redundant and paid let’s say £30k but then used that money to pay off all loans and credits cards I have to the sum of £30k which would leave me with nothing left, would I then be entitled to any state benefits?

Our Response:
Under the 'deprivation of capital rule', a claimant who deprives him or herself of capital for the purpose of retaining or obtaining entitlement to means-tested benefits (i.e. Income Support, Housing and Council Benefit, income-based Jobseeker's Allowance, income-based Employment and Support Allowance and State Pension Credit) will be treated as depriving themselves of capital. Under the regulations the claimant will then be treated as still possessing the value of the actual capital given away as "notional capital" for benefit purposes. However, if you receive a redundancy payment and wish to claim Jobseekers Allowance because you are looking for another job, then your redundancy payment would not affect your ability to claim this benefit.
RedundancyExpert - 19-Apr-18 @ 12:11 PM
Hi all, I wonder is anybody knows this? If I was to be made redundant and paid let’s say £30k but then used that money to pay off all loans and credits cards I have to the sum of £30k which would leave me with nothing left, would I then be entitled to any state benefits?
Bob - 18-Apr-18 @ 9:24 PM
I’m being made redundant this week, am I entitled to unused holiday pay on top of redundancy pay
Darling - 11-Mar-18 @ 7:08 AM
Rose - Your Question:
I'm in receipt of contributory ESA (higher rate). I've been off sick for over a year and no longer receive sick pay from my employer. Now my employer is making a number of people redundant. If I volunteer for redundancy will that affect my ESA? Thanks.

Our Response:
You can see more via the Turn2Us link here, which should answer your question.
RedundancyExpert - 12-Dec-17 @ 11:16 AM
I'm in receipt of contributory ESA (higher rate). I've been off sick for over a year and no longer receive sick pay from my employer. Now my employer is making a number of people redundant. If I volunteer for redundancy will that affect my ESA? Thanks.
Rose - 11-Dec-17 @ 12:30 PM
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
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