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With the economy slowing as higher interest rates bite, job cuts are likely to accelerate. Layer on top of this the potential impact that artificial intelligence might have on the white-collar workforce of the future, and it’s easy to understand why many people are feeling anxious about their employment future.
With that in mind, let’s look at some ideas to empower you to take control if you do find yourself facing redundancy.
A portion of your redundancy payout will be for leave, so recharge your batteries.Credit: AFR
A payout: If you are made redundant, you will receive a payout from your employer. This will consist of unused leave entitlements and also a redundancy payment determined by your years of service.
These payments receive very favourable tax treatment. The first $11,591 of a redundancy payment is tax-free, plus there is an allowance of almost $5800 for every year of completed service.
As an example, if you had completed 10 years of service, you would have a tax-free redundancy limit of $69,561.
The amount you receive from your employer will be a function of your current wage and employment conditions. However, likely the majority of your redundancy payment – if not all – will be tax-free to you.
The next step is to determine how many months that money could support you.
Commonly, we see clients with payouts that would cover their expenses for six to 12 months. With that sort of runway, it’s rare not to find a new employment opportunity.
Often, a new role is found relatively quickly, and therefore the redundancy payout is just a handy lump sum mortgage repayment, or investment nest egg.
If your estimated redundancy payout won’t provide you with much of a cushion while you search for your next job, consider where expenses could be cut. You might be able to shift your mortgage repayments to interest-only temporarily, or drop them down to the minimum required.
Other living expenses might be able to be reduced in the short term, to help ensure that your redundancy payout stretches as far as possible. The most important thing is you have clarity on how things might look financially, and a plan on what you would do should the redundancy axe fall.
Reflect on what’s next: Next, it’s time to go for a few long walks and reflect on what you’d like for your future. Do you want to stay in the same industry or profession? What do you enjoy, and what makes you miserable?
Depending on the size of your redundancy payout, there could be an opportunity to make a significant change.
The payout might enable you to accept a new position at a lesser rate of pay, or take some time to complete studies and make a career pivot. Perhaps you could become self-employed, with all the challenges and flexibility that can provide.
Many of the best jobs are never advertised, so brush up on your LinkedIn presence and reach out to past work colleagues.
Finally, if you feel you need a rest before taking on the next challenge, go right ahead. A portion of your payout will be for leave, so recharge those batteries before throwing yourself into your next adventure.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Paul Benson is a Certified Financial Planner, and the host of the Financial Autonomy podcast.
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