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 affects 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.
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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 know 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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