How to prepare financially for the possibility of being made redundant: Sarah Coles

Meanwhile, employment fell by 207,000 – to 32.88 million – which the Resolution Foundation says was the biggest drop in employment outside of a recession.

Right now, unemployment is still relatively low, but the change of direction is significant.

Over the past couple of years, although we’ve been battered by the cost-of-living crisis, we’ve at least known our income is secure. Now we need to consider what would happen if that was to change.

If you think there’s a risk your employer would let you go, you don’t need to wait for the bad news before you take action. It’s worth considering some steps now so you’re in the best possible position to find a new job.

Think about whether your CV needs updating and polishing. Are there any new jobs to add in, or any things you’ve achieved at work that a new employer might want to know about? You might want to sign up to job sites too, so you have an idea of what else might be out there.

You can also try to make the most of your time with your current employer, and see whether there’s any way to make yourself more employable in the coming months.

There may be bits of training or experience you can get under your belt, so take advantage of what’s on offer while you can.

Consider your professional network too. For some people this will mean more time on Linked In, making new contacts and raising their profile.

For others it involves catching up with people they used to work with, and for some it will mean asking around to see what the situation is like at similar workplaces.

You need to plan for your finances at the same time. It’s worth drawing up an emergency budget so you know exactly how to cut your costs if you lose your job. You should also use this time to get your finances into the best possible shape.

This means addressing expensive short-term debts, and paying them down wherever possible. The last thing you need is to be made redundant with credit card debt hanging over your head.

It pays to consider emergency savings too. Ideally, we should all have three to six months’ worth of essential spending in a competitive easy access account for precisely this kind of eventuality.

If this kind of sum has been impossible to build, don’t panic, your aim should be to put aside as much as you can afford, as soon as you can afford to do so.

If you do lose your job, you need to swing into action with a few more steps. At work, you should keep a close eye on what your employer does when they let you go. Your rights will depend how long you worked for them, and the basis on which you left.

If you’re being made redundant, there may be redundancy pay due. Your employer should also go through a specific process to make sure the redundancy is done fairly.

If you don’t think it’s fair, you can speak to a union or staff representative if there is one. If not, you can approach Acas for advice. In any case, you should be able to work your notice period and be paid for any holiday you haven’t taken.

Your emergency budget will need to kick in now. Don’t assume any financial commitments are set in stone at this stage. If you’re worried about running out of money, you can talk to people you pay regularly to see if there’s any wiggle room.

Your mortgage lender, for example, may consider a payment holiday or a switch to interest only in the short term, so don’t be afraid to ask.

It may also be worth exploring any available help sooner rather than later. If you’re unable to work for a period, you may be able to get some support from the government - both through payments and through help finding work.

There will be a gap between claiming and receiving any benefits’, so it’s worth starting as soon as possible. If you’re not sure where to start, organisations like Citizens Advice and Money Helper have lots of information online.

If all your preparations pay off and you find work quickly after being made redundant, it’s worth thinking carefully about your redundancy pay. Some people will need it to pay off expensive short-term debts and supplement their income while they job hunt.

Others will have some left over, and can use it to make a significant difference to their overall financial resilience.

You can consider using it for things like rebuilding emergency savings and boosting a pension. If you already have work to go to when you’re made redundant you can consider redundancy sacrifice.

The first £30,000 of redundancy pay is tax free, but after that, your employer may be prepared to pay some of the taxable portion as pension.

This is not only tax free, but they’ll also save National Insurance, and may agree to pay this into your pension too. If they won’t consider redundancy sacrifice, you can pay into a pension yourself, and claim any additional tax relief that may be due.

None of these tips are intended to make light of losing your job. It can be a bitter blow to your career, finances and emotions, and can be incredibly difficult to start again.

However, by making plans, you can protect yourself, and at a time when you might feel powerless, it can make a difference to take control in some areas of your life.

More misery for house sellers

August is always quiet in the property market, but according to the estate agents surveyed by the Royal Institution of Chartered Surveyors, this August was deathly.

Higher mortgage rates chased buyers out of the market, and those who remained sat on their hands in the hope that house prices would keep dropping. They’re likely to get what they wish for.

Some buyers are waiting for prices to drop before they make a move, others are negotiating hard.

Sellers are having to accept serious discounts to secure a sale, and where they refuse to budge, the market runs a real risk of drying up entirely. In this environment, we can expect prices to keep falling.

There is some hope that the usual pick-up in demand in September will make a difference. However, with prices still high, it’s likely to take a more significant drop in mortgage rates to reinvigorate the market completely.

The question is how long we have to wait for those rates to fall, and how much damage will be done to house prices in the interim.

Sarah Coles is Head of Personal Finance for Hargreaves Lansdown and Podcast Host for Switch Your Money On