Surviving Redundance

Redundancy is a word we hear on an increasingly regular basis and is a reality many of us here in New Zealand face as the recession continues to impact on our economy. Many of us live in fear of it. If and when it happens, the impact financially as well as emotionally for the individual and their whānau is huge.

Financially, redundancy is a really scary thought. Even though you get a payout that will help in the short term, there is the fear of how to pay ongoing bills if you can't get another job. A really important piece of advice – your redundancy payout may make you feel better about losing your job, but make sure you spend it wisely.

If you can, pay off debt, make a lump sum payment on your mortgage or invest the redundancy payment. If you need to live off it, budget wisely. Review your expenses and work out how long you and your whānau can live off your payout.

There are positives about redundancy. If you are able to get another job straight away, it is an opportunity to get ahead. If you have always wanted to own your own business, this may be the opportune time to do so – setting up a business from home can be a cheap option and will save on the travel costs of going to work.

Alternatively, consider working as a contractor. If you have considerable experience in an area, it may mean that you are able to earn more money as a contractor than as a full-time employee. Further, if you have been contemplating a change of career or even upskilling in your current one, some time out after redundancy may be just what you need to make it happen.

Important information about redundancy

(1) You may be entitled to a redundancy tax credit
In 2007 the IRD introduced a redundancy tax credit to protect against you being overtaxed because your payout pushes you into a higher tax bracket. The tax credit is based on a flat rate of six cents in the dollar, up to $60,000 per redundancy. If you were to receive a payout of $20,000, you could claim a $1200 rebate. Generally the rebate is paid on redundancy payments paid because the position is considered surplus to requirements or as compensation for loss of employment. It isn't paid out for retirement, loss of seasonal employment, fixedterm contract or employment, employment after notice of termination or a redundancy paid directly or indirectly paid by an employer who is related. For more information, visit the Inland Revenue website: www.ird.govt.nz

(2) Restart Programme
 In December 2008, the National Government introduced the Restart Programme – a transitional relief package for those impacted on by the economic crisis. Restart offers assistance for up to 16 weeks for those whānau with low to moderate incomes and children, and to those with high housing costs who have been made redundant. The programme has three parts: a payment for those no longer eligible for the In-Work Tax Credit, an Accommodation Supplement boost and employment and job services. For more information visit the Department of Labour website: www.dol.govt.nz

(3) Outplacement Services
Most organisations will offer redundant staff access to outplacement services. If you find yourself in this position, take advantage of everything on offer. The great thing is, it's a professional service offered for free. Outplacement will help you deal with your emotions through counselling, updating or writing a CV, setting goals, teaching skills to market yourself, and refining your skills for future career options.

(4) Mortgage Holidays
If you find it really tough and feel like you don't have any other option, go to your bank and talk about your options for taking a mortgage holiday. All major banks are offering three-month mortgage holidays, but you need to be aware that they come at a significant long-term cost. Use this as a last resort.

Congratulations to Arya Sciascia who won Catriona MacLennan's book, Survive the Crunch.