Friday, 10 February 2012

Beating the recession!

 If your company looks like it may be making redundancies, what can you do ?
1 Know the procedure
If your firm has announced a redundancy program, it has to follow certain procedures. Make sure you know what these are, because if your employer does not follow them you can sue for unfair dismissal and could be awarded up to 90 days in compensation.
Sophie Whitbread, right, employment lawyer at Charles Russell, said: "Many employers will not be aware of or will choose to ignore what the law says about your rights, so if you do not know what your rights are, you could find yourself unfairly dismissed and without adequate compensation."
If your employer is getting rid of 20 or more staff, it has to consult more than 30 days before any redundancies, or 90 days if more than 100 employees are being axed.
Staff should also be consulted individually by their employer. There should be a "dismissal meeting'' where severance pay is discussed. Those whose job is going should be paid at least one week's pay for every full year of employment, and may get additional compensation if they do not work out their notice period.
2 Consider employment insurance now
It is still possible to take out an insurance policy against unemployment, as long as your company has not announced redundancies or possible job losses.
It's important to get the right policy, however, since some contain a number of exclusions and will not allow you to claim until you have been out of work for a long time.
British Insurance can provide you with a policy that would cover £1000 of income every month for £39 a month – which could give you peace of mind on continuing with your mortgage payments.
The policy will pay out if you are unemployed for 30 days or more, and there is no excess,
3 Check you are not being discriminated against
If you are an older worker, it is often more difficult to find a new job. That's why it is important to ascertain that your company is following the law and not selecting you for redundancy on the basis of age. Since October 1 2006, employers should no longer select for redundancy on the basis of age. The criteria should instead be based far more on merit – achieving targets, getting good appraisals, turning up to work on time and avoiding disciplinary problems. If large numbers of the people selected for redundancy are older, then you may be able to bring a claim for discrimination.
If you fear this may happen to you, check whether you have legal expenses insurance added to your home insurance policy. This could be invaluable if you end up bringing a claim.
Most insurers, including Norwich Union, Direct Line and Liverpool Victoria, sell this cover for about £20 a year. This will provide up to £50,000 towards legal fees if you decide to bring a case against your employer, be it for unfair dismissal or sexual, racial or age discrimination.
Those who successfully win a case of age discrimination will find that payouts are uncapped, while those who win an unfair dismissal claim could be awarded a maximum of £72,900.
4 Negotiate a tax-efficient payoff
If you do lose your job, check you are not paying too much tax. Only the first £30,000 of any redundancy payment is tax-free. Anything above this is taxed at your highest rate. So if you are still on your company's payroll then full PAYE deductions will be made on payments of more than £30,000. However, if this money is paid after you have left the company and received your P45, then only 20 per cent tax will be deducted immediately.
Employees will be required to account for the additional tax in their annual tax return, but as this will not have to be made for another year, this will give them a temporary cash flow advantage in the interim. Even with interest rates as low as they are, this money could be working for you, rather than Revenue & Customs.
5 Try to retain benefits
Ask your employer whether transitional benefits can be included in your leaving package. From the day you receive your P45 you may have six months or more with no life cover, medical insurance, or family income protection. It may be possible to at least retain this cover until the normal renewal date.
You would probably end up paying significantly more for the same cover if you tried to obtain it individually than the cost to the company – so this is particularly pertinent if you are unlikely to obtain another job with similar benefits in the near future.
6 Check your pension
Try to make sure pension accrual is included in your severance pay, as this can be worth significant sums. You could consider asking for part of your redundancy payment to be transferred into your pension. This will not attract National Insurance contributions, so you may be able to negotiate a higher payment without it costing your employer anything.


Home repossession is rising, and even those with relatively sensible mortgages may struggle if circumstances change. There is help if you come close to losing a home, and action you can take to avoid being in that position.
1 Take advantage in the good times
With interest rates at historic lows, monthly mortgage rates could be more than manageable. If your lender allows, you could overpay on your mortgage every month, which could provide a cushion if times get tough. Most lenders will allow some overpayments, often 10pc of the total you have borrowed every year. If your circumstances change, you might then be able to take a "mortgage holiday" to deal with the fallout. Overpaying can give you more equity in your home, meaning you could qualify for better deals when remortgaging.
2 Seek out good deals now
If you know you are coming to the end of a mortgage deal and fear you would not cope on your lenders' standard rate if rates rose, start researching deals. Use financial comparison sites or a mortgage broker such as London & Country to find the best.
3 If you are struggling, talk to your mortgage lenders
It is in no one's best interest for your house to be repossessed. Most lenders have procedures to help you if you are struggling, and may change your mortgage to interest-only for a period or consider reduced payments.
Michael Coogan, CML director general, said the first step for anyone struggling to pay a mortgage would be to contact their lender and get advice. "If you take positive action to contact your lender, pay what you can, and show up to court and make your case, you are more likely to reach an agreement with your lender that allows you to stay in your home," he said.
4 Know what help is available
The Government is in the process of launching three schemes to help home owners stay in their homes, although not everyone will be eligible. Those who are out of work may be eligible for income support for the unemployed, which is already up and running. You will be able to apply for this at the same time as other benefits if you are eligible.
At the really desperate end of the scale, the Mortgage Rescue scheme will buy back people's homes and lease them back to them.
Almost every local authority has signed up for this scheme, so this may be an option for people who have no chance of paying their mortgage.
We are still, however, waiting for final details of the mortgage support scheme, which may be the most useful. This scheme would allow those who lose their jobs (even if another member of the household is working) to defer mortgage payments for up to two years. It is expected to be launched next month pending further discussions with lenders.
Adam Sampson, head of housing charity Shelter, said it was still not clear how many lenders would sign up or how many households would be accepted. "People need this help now," he said. "The predictions are that 81,000 families a month will have their homes repossessed in 2012."
Further information on these schemes is available from advice services such as Citizens Advice, National Debtline, Shelter, and your local authority.
5 Don't bury your head in the sand
If you can't pay your mortgage, don't try to forget about it. A mortgage should be the first thing paid, ahead of credit card bills and other debts. "Ignoring your debt problems will only make them worse. Positive action will help you find ways to solve them," said David Harker, head of Citizens Advice. "Don't ignore letters or telephone calls from your lender; if you are not sure what they mean ask your lender or a debt adviser."
6 Don't just hand the keys back
In the early Nineties, stories abounded of home owners running away from their homes and posting the keys through their lenders' doors. Do not assume you can walk away like this. If the mortgage lender then sells your property for less than your mortgage, you could still be responsible for the extra debt and may be pursued years later. You will also still be responsible for the mortgage until the bank sells the home.
Better to prepare that be left trying to deal with a situation when you are reeling from the shock of redundancy and struggling to make sense of the situation you find yourself in.

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