Money
Tax and benefits
Helping you cope with redundancy
The recession is biting hard. Every working day 4,000 people are made redundant, 1,000 of them aged 50 or over. The number of redundancies has more than doubled in a year and is now at its highest rate since records began in 1995. As jobs become scarce, redundancy can be the beginning of a long period out of work. Especially if you are over 50
Redundancy is a form of dismissal, so it has to be fair and lawful.
An employer can call for volunteers if, for example, 12 of you are doing similar work and the employer decides to make do with eight. If there are insufficient volunteers (or no request for volunteers) then the selection process for those who are to be made redundant has to be fair.
The choice can relate to your performance in the job and your abilities, but it cannot be made on the basis of your age, race, sex, disability, religion or sexual orientation; nor can it take account of your family circumstances, union membership or your views on health and safety matters.
If you feel that you have been unfairly selected for redundancy you can complain, and if you get nowhere you can take your case to an employment tribunal. It is unlikely that you will get your job back but you may receive compensation. But if you have worked for your employer for less than a year you have very few rights and can be dismissed without reason. Even then the dismissal must not discriminate against you on grounds such as age or disability.
REDUNDANCY PAY
If you are made redundant you will normally get redundancy pay.
Your contract will set out how much. If there is nothing in the contract, you are entitled to the statutory minimum if you have worked for your employer for at least two years.
The minimum redundancy payment is one week's pay for each year you have worked for that employer between the ages of 22 and 40. For each year aged 41 or over it is one and a half weeks' pay. However, there are two limits on the pay and the time that is counted. First, if you earn more than £350 a week, the calculation is done assuming that your pay is only £350 a week. It doesn't matter how much more you earn, your redundancy pay will still be based on £350.
Second, the maximum number of years that can be counted is 20. So if you have worked for an employer all your working life from 18 to 58 and you are made redundant, that still counts as 20 years. The last 20 are counted, so in that case you would get one week's pay for the two years from 39 to 40 and one and a half week's pay for each of the years from 41 to 58. So the total is 29 weeks and that will be multiplied by your weekly pay, up to the £350 maximum.
The most anyone can get from the statutory scheme is £10,500 — 30 weeks' pay at £350.
Of course your contract may give you more. A month's pay for each year's work is fairly common, especially in professional jobs.
And if your employer is keen to get rid of your job (or perhaps you) then it is often possible to negotiate better terms. You may also be able to negotiate an enhanced pension, including an early start – perhaps from as young as 50 (though from April 2010 that will rise to 55).
The first £30,000 of a redundancy payment is tax-free. The rest is taxed as income. Your ex-employer will deduct any tax due before the money is paid. If you are given pay in lieu of notice, holiday pay or any other compensation you are entitled to, that will also be taxable. If you are made redundant it is very important to get a formal notice of dismissal — even if you volunteered — to ensure that the Revenue treats the redundancy pay as tax-free.
If your employer goes bust or fails to pay your redundancy money, you will get the statutory minimum from the Government.
Before October 2006 people over 65 could be dismissed without reason and had no rights to redundancy pay. Since then, that upper limit has gone and employers must be very careful to dismiss older workers properly. It is still lawful to make people retire at a predetermined age as long as that is at least 65 and certain other conditions are fulfilled.
People must be given six months' notice before reaching that age and be given the chance to ask to work for longer, a request which the employer must consider. These rules are still being tested in the courts.
BENEFITS
Once you lose your job you should consider signing on as a jobseeker at the local Jobcentre Plus. You will be expected to be actively seeking work and sign up for a jobseeker's agreement. After six months you can sign up for New Deal 50 Plus, which is designed to help older people get into work more quickly.
If you have paid enough National Insurance contributions you can then get Jobseeker's Allowance (JSA) for six months. The basic amount is £64.30 a week. There is also a means-tested version which can be paid for longer and can include extra for a dependent partner and housing costs — including mortgage interest after 13 weeks' unemployment. It is reduced if you — or a partner — have any other income or any savings above £6,000.
CREDITS AND REBATES
If you have children your tax credits should increase. Make sure you tell the Revenue about your changed circumstances.
If you are actively seeking work you can get your National Insurance contributions credited even if you do not get Jobseeker's Allowance. Men over 60 currently get contributions credited anyway. Anyone who reaches pension age on April 6, 2010 or later will only need 30 years' contributions to get a full pension.
If you have been unemployed you may be due a tax rebate. Contact your tax office to claim any overpaid tax. Once you reach 60 you will almost certainly be better off claiming pension credit than JSA. It is means-tested but is twice as much as JSA at £130 a week if single and £198.45 for a couple. The savings limits are more generous and you do not need to be seeking work.
Women may be able to claim their state pension at 60. At 60, men and women can get free travel on buses and sometimes on other public transport systems.
LOOKING FOR WORK
Trying to find a job in your fifties has always been hard. Even though it is now unlawful to reject you on grounds of age, there is no doubt that many employers do still choose younger people over older ones at interviews. If you feel you have been discriminated against on grounds of age, sex, race, disability, religion or sexual orientation, then you could consider a complaint to an employment tribunal. You may be given compensation.
* Further information - www.direct.gov.uk — enter 'redundancy' or 'jobseeker' in the search box.
Written by Paul Lewis. Paul is the editor of Saga Magazine's Money News section. Paul's opinions are his own and for general information only. Always seek independent financial advice. This article was first published in the May 2009 edition of Saga Magazine.
