How to move forward when you've been made redundant

Updated: October 10, 2018

Losing a job is something many people will face in their lifetime. Dealing with a redundancy can be difficult but if you're made redundant it's important to stay calm and practical so that you come out the other side in the best possible position.

Whether you're offered a voluntary redundancy or given no choice it's important to know your rights and what your entitlements are.

The minimum payout depends on a number of factors, including what award you are under, your position, your salary and how long you have worked for the company. As a rough guide you can expect four weeks' pay plus two weeks for each year of service but it could be less or more generous.

You should also get your benefits such as long service and holiday pay, as well as your superannuation entitlements. You may also try to negotiate career planning advice as part of your package. If you feel you might be getting ripped off contact your union or the Industrial Relations Commission for advice.

Your employer is required to give you notice before terminating your employment but how long the notice is depends on how long you have worked for the company. Employees over 45 may be entitled to extra notice.

Redundancy payment

It's also important to understand how your redundancy payment will be taxed. Part of your payment will be tax free. For the 2018-2019 financial year, for example, the tax-free limit is $10,399, plus $5200 for each completed year of service. For example, for 10 years of service, you would be eligible to receive up to $62,399 tax-free.

The amount over the tax-free limit will form part of your "employment termination payment" on which you will have to pay tax. The good news is there may be tax concessions on ETPs depending on the amount of the ETP and your age.

For the 2018-2019 financial year, for example, if you are under the preservation age, any amount you receive up to $205,000 will be taxed at a maximum 32% (including Medicare levy) and if you're over the preservation age it will be taxed at a maximum 17%.

There is more information at ato.gov.au.

Keeping an emergency fund

If you get a big lump sum in your hands it can be tempting to pay off your credit cards, pop it all on the mortgage or even buy a new car, but it's important to be practical.

Don't rush into anything - remember that money is supposed to help tide you over until you get a new job.

If you really want to put it on the mortgage then make sure you have a redraw or offset facility linked to your home loan. That way if it takes you longer than expected to get a job, you still have access to that money.

You should sit down and work on a family budget. This will help you work out exactly how much money you'll need to get by until you get a new job. It's also a good time to take a good look at your spending habits and look for areas where you can cut back - even if the reduction is only temporary.

Who knows, it might even be a good thing and help you reassess your spending in the future as well. If you think you'll have trouble keeping up with bills and payments, you should get in touch with the institution to see if you can come to some form of arrangement.

You may also want to register with Centrelink. You may not be eligible for benefits immediately but at least you'll know when to expect them, which will help you budget accordingly.

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