Article written for The Australian – Redundancy not the end of world
From: The Australian January 28, 2012 12:00AM
Written by JAMES GERRARD
REDUNDANCY can stir up a hornet’s nest of emotions; working through them and focusing on the light at the end of the tunnel is the key.
With Europe, the US and Asia on shaky ground and the outlook for the Australian economy filled with speculation, redundancies in the workforce may increase and, as the old proverb goes, forewarned is forearmed. The following is a reflection on a recent real-life redundancy, the process of working through it and a few tips on how to handle it.
A few weeks ago, a career investment banker told me that he was being made redundant after 10 years of faithful service for the same investment bank. He was given the option to accept a redundancy payment or otherwise apply for other roles internally and hope he was able to secure one. This meeting occurred just before Christmas. Rather than plan for their annual family holiday over the Christmas break on the North Coast of NSW, they were now weighing up their options of whether to spend Christmas in their own family home or rent it out to keep the minimum mortgage payments going.
A redundancy can have far-reaching financial and emotional consequences on the family unit. Imagine the thoughts that would be running through your mind if you were told that the next pay packet you received would possibly be your last, forever. How would you continue to pay the mortgage, the children’s schooling costs, even little things like filling the car with petrol, paying the phone bill or buying groceries?
Experiencing a sense of helplessness and a tendency to focus on the worst-case scenario are common after being made redundant. After discussing the range of options and the financial implications of each option to the banker, the discussion veered towards his doomsday scenario.
This was the scenario where he was never able to secure a comparable job again and he (and his wife) would have to work full-time jobs on minimum pay and rent a small unit in a far-away suburb.
To highlight the irrational thinking of the banker, a bell curve was employed as a visual aide. He was asked where on the bell curve would his worst-case scenario lie. He eventually agreed that it was an outlier and very unlikely to occur. We agreed that he and his family would have a break for a few weeks, then he would find a job in the new year on similar pay. If it took a little longer than anticipated to secure a new role, we provisioned for this through budgeting and projections on their financial position over the coming 12 months.
In the end the banker was offered another role internally, so it resolved itself, but if faced with a redundancy, here are a few points to keep in mind:
Although a redundancy may feel like a crushing blow and a real game changer, it is only an event that is occurring at one particular point in your life. Although it may seem significant, remember that five years down the track you will probably forget that you were ever made redundant.
Seek advice from a certified financial planner. When a life event like a redundancy occurs, due to the stress, you may act irrationally. This is not useful, especially when you are likely to be required to make several significant financial and lifestyle decisions following a redundancy. Clarity is required and it pays to get advice from a professional who has experience in the area and can provide an unbiased viewpoint, taking into account every pertinent consideration.
Work through the numbers. If receiving a redundancy payment, check that your correct level of entitlements are paid out to you and that the right amount of tax has been deducted from the payment.
Contact Centrelink to see what benefits you are entitled to and when you may be able to receive them. Centrelink has specific rules about redundancies and waiting periods may apply, depending on your redundancy payout and your level of liquid assets.
Remain positive and don’t take it personally. All companies go through good and bad times and need to react by having a flexible workforce. Advances in technology and changing consumer trends unfortunately at times mean employees need to be made redundant. Take the philosophical view that everything happens for a reason. Focus on the positives of the redundancy and view the future as a new opportunity into greener pastures.
James Gerrard is a certified financial planner with PSK Financial Services, Sydney