Just because the job could disappear, it doesn't mean your cash must stop work

Many people live in fear of redundancy, but they can take steps to protect their finances
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The Independent Online

So much for job security - many of us believe we could soon suffer the trauma of being pushed out of work. A recent survey by careers consultancy RightCoutts revealed that one in four respondents feared they could be made redundant in the next 12 months.

The statistics support these fears. Some 151,000 people were made redundant in the three months to August 2005, according to the latest figures from the Office for National Statistics - a rise of 23,000 on the previous three months.

And continued economic uncertainty means the figure could rise still higher.

Since April, when 6,000 MG Rover workers were made redundant, only one in three have found new jobs - and most of them had to accept a pay cut.

But don't despair if your post is under threat. There is plenty you can do to protect your finances and get yourself back on your feet.

Your payoff

If you belong to a union, it should negotiate a redundancy package on your behalf. Companies axing more than 20 posts have to consult any recognised union, says Sarah Veale, head of employment and equality rights at the TUC.

"If there is no union, they must consult with appointed workplace representatives. If they don't, you can take them to an employment tribunal, and could win compensation."

What you get under statutory redundancy pay rules depends on your age. Between the ages of 18 and 21, you get half a week's pay for every year of service. Between 22 and 41, you get one week's pay. Thereafter, you get one-and-a-half weeks' pay. But these payments are subject to a ceiling of £280 a week, and the maximum you can claim is for 20 years' service.

While many public sector unions negotiate good packages, deals in the private sector vary wildly. If negotiating, remember to include unused holiday, outstanding expenses, employee benefits and salary during your notice period.

If you have a pension, you could either leave it in the company scheme or, when you land another job, transfer it to your new company - although this may incur a fee.

State benefits

If you don't have a new job to go to, trading your salary for benefits can come as a shock. But don't delay your claim, or you could lose out.

You should be able to claim the jobseeker's allowance (formerly unemployment benefit), although this will depend on your level of national insurance contributions over the past two tax years. If you haven't paid enough, you may still be able to claim a means-tested allowance. For more details, visit your local job centre or go to www.jobcentreplus.gov.uk.

You may also be able to claim support for rent, council tax and mortgage costs, plus extra cash if you have children. Contact your local social security office or visit the website of the Department for Work and Pensions: www.dwp.gov.uk.

Your savings

It is vital to build up a contingency fund to cope with periods of unemployment; as a guideline, this should be equivalent to at least three months' income. However, almost half the working population has less than £1,000 in savings, according to research from Sainsbury's Bank.

Mortgage cover

Nearly one in four homeowners guard against job loss with a type of cover known as payment protection insurance (PPI). This will protect your mortgage for the first 12 months, and sometimes 24 months, after you lose your job.

Most people buy cover from their mortgage lender, but it's usually cheaper to go to a specialist insurer, like Burgesses or Payprotect.

David Hollingworth at broker London & Country says you shouldn't leave it to the last minute to buy cover, as any claim will be rejected if you knew redundancies were on the way.

PPI has come under scrutiny from the Financial Services Authority. But early findings suggest that PPI linked to mortgages is often correctly sold - in contrast to PPI sold in other areas of the financial industry.

Getting a new job

For many, redundancy can work out for the best. "More than half the people we help end up moving to a more senior position," says Tony Martin, director at RightCoutts. He recommends having an exit strategy before the threat looms - so you can refresh your CV, retrain and target new jobs.

"The best way of finding a new job is by networking," he says. "Half the people we deal with find posts through people they know."

Starting a business

Being made redundant might give you the chance to become your own boss.

If you want to go it alone, contact the Small Business Advice Service at www. smallbusinessadvice.org.uk, or the National Federation of Enterprise Agencies at www.nfea.com.

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