Furlough Scheme: How can you protect your finances when support ends?
Written by Zoe Bailey, Chartered Financial Planner and Director at Tilney
Despite the fact that it has always been explicit that the furlough scheme would end on October 31st, it will still feel abrupt for some. The new Jobs Support Scheme, part of the Chancellor’s Winter Economic Plan (WEP), will cushion some of those who may have been braced for potential redundancy. And while this will no doubt save some jobs, many employers will be pushing ahead with redundancy programmes in anticipation of long-term financial impact. A lot of employees will be feeling anxious about their job security and disheartened about how they’ll navigate the tricky waters that lie ahead. It’s important that people take stock of their situation and prepare financially for any redundancy, reduced hours or lower pay. We can all make life easier for ourselves by looking ahead to the future and preparing accordingly.
Here, Zoe Bailey from Tilney looks at the options available to people who find themselves faced with possible redundancy, reduced hours or receiving lower pay:
- Look at your notice period
For anyone facing redundancy, it is obviously a huge shock, but there are a number of points you need to address sooner rather than later. You should receive payment in lieu of notice, so it’s important to dig your original employment contract out and look at what your notice period is. If you don’t have the contract to hand, speak to your HR department. If you’re faced with redundancy and it hasn’t been offered already, you may be able to ask for gardening leave. Having this time off is a great opportunity to update your CV and focus on making the most of your redundancy package until a new job opportunity arises.
- Find out your redundancy pay entitlement
It’s important to make sure you know exactly what your redundancy pay entitlement is. There are rules around the amount of statutory redundancy pay you should be given, which are set out clearly on the government’s website, but many companies go above this figure. It’s always worth considering if you are in a position to negotiate a better redundancy package, especially if there is a precedent. If you’re planning on doing so, it might be beneficial to speak to an employment solicitor to discuss your options beforehand.
- Consider the impact to your financial situation
When times are tough, it’s sensible to take stock of your financial situation.
No matter your age, it’s vital to work out how many months your redundancy package and your existing savings can support you for, and maybe your family, whilst needing to look for a new job. Look at your monthly outgoings, which right now might also be slightly less than normal given people’s reduced travel and leisure expenses. Having a clear budget while you job hunt will not only keep your household spending in line but will relieve some of the pressure on your job search.
Depending on how far away you are from retiring, you might need to push forward or back your retirement date or consider a small career break to get you back on your feet. In some cases it might be appropriate to draw on your pension tax free cash now if you’re over 55, which may help you cover the loss of income from your employment temporarily until your find new employment. There can be pitfalls with this, therefore speaking to a professional before making any changes to your pension plans is always best.
- Make changes to your outgoings
You can often make some changes to your outgoings quite quickly and easily that will help you save. Check your bank statements carefully to look out for any regular payments and subscriptions that can be paused, reduced or cancelled. Many people don’t even realise they have some of them, so cancel these where you can. Shop around for better deals on your essential expenditure on things like energy bills and car insurance. There are plenty of cost comparison websites so it’s worth taking a look. Anyone facing a reduction in their monthly income can benefit from cutting costs and retaining a little bit extra each month.
When it comes to big payments like your mortgage, look at the available options for Government-backed mortgage holidays, or contact your mortgage provider immediately for more help and support if you’re worried.
- Be realistic and open about what the future may bring
UK unemployment is now at 4.1% – it’s highest level in two years. While many people are suffering in this tougher job market, coming off furlough to reduced working hours, lower pay or even redundancy is still upsetting. It’s important to be open with friends and family about your current financial situation so they can best support you and point you in the direction of sound resources and advice. While you might want to keep your lifestyle and outgoings exactly how they were before, you should look at how feasible this is, especially if you have a mortgage, rent to pay, or children to support.
Speaking to a financial planner will help you understand your long-term personal situation and all the options available to you at this time.