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Spend & Save

Beginner's guide to: Dealing with redundancy

Why should I be concerned?

UK unemployment figures have topped two million and with the recession set to continue for several more months, businesses will continue for some time to make cuts to their staff. Losing your job has an immediate effect on your household income and can mean you are instantly unable to pay everyday bills such as rent, mortgage, food or utility costs.

What are my rights?

Redundancy is not the same as being sacked. When you're made redundant, it's the job that has been cut, not you. You have to be consulted in advance and your employer should work with you to find alternative roles within the company if possible. If your job does go, look for a redundancy clause in your contract of employment which stipulates how much you would get. Meanwhile, if you've been a member of staff for at least two years you are entitled to a redundancy payment by law. Your basic entitlement is usually one week's pay for every year of service, to a maximum of £350 per week, though those under 22 or over 40 will be entitled to different statutory pay amounts.

What else can I do?

Everyone, regardless of the risk of unemployment, should build up an emergency savings fund worth at least three months' salary to tide you over if you run into difficulties. Try to find a high interest rate account to park these savings in, but one that offers instant access. There are also a number of relevant insurance policies on the market, some of which are more worthwhile than others. Payment protection insurance has had a suitably bad press and should generally be avoided, but accident, sickness and unemployment cover – or, for the longer term, an income protection policy – can offer comprehensive cover if you lose your income either because you lose your job or become unable to work. Bear in mind these policies are unlikely to cover you if you take voluntary redundancy.