We all like to think our job is secure, but it’s hard to be certain when the employment market is constantly changing. Here’s how to future-proof financial matters so you, or a friend or family member can stay on track if made redundant.
In the past, workers could expect to have a job for life, but this is rarely the case in the 21st century. In fact, 2.3% of Australian workers are made redundant every year due to business closures and downsizing.1
With the increased casualisation of the workforce, and as technological advances continue to make many professions obsolete, it makes sense to be prepared for whatever might be around the corner.
Here are some ways to help your finances absorb the shock if your employment situation changes.
Protect your income
Income protection insurance pays you a regular benefit if you’re unable to work due to illness or injury, but does your policy cover you for redundancy? Some insurers are now starting to offer involuntary unemployment cover, which can provide up to 85% of your usual income for a specified period if you’re made redundant.
These types of policies usually only cover you if you’re actually laid off, not if you quit or get fired. You’ll also need to have worked for your employer for a certain length of time before you can make a claim, and during the payment period you can’t work at all.
To review your insurance options or make sure your income protection plan is up to date for your circumstances, it’s best to talk to your financial adviser.
Upgrade your skills
If you’ve been in the same role or with one organisation for a long time, it might be a while since you last did any formal training. So to maximise your chances of re-employment, it may be worth investing in some professional development and upskilling. Naturally, you’ll need to weigh the costs of any training against the potential benefits, so explore your options thoroughly before forking out for an expensive course.
Redundancy can also provide a great opportunity to reflect on your career path and goals. For example, you may decide it’s time for a career change, or you might strike out on your own and start a business. Just make sure you fully understand the costs involved and the skills or qualifications you’ll need before making any life-changing decisions.
Use your payout wisely
If you land a redundancy package, you’ll want to make your payout stretch as far as possible while you consider your next steps. It’s tempting to splurge when you receive a lump sum, but be careful if you need to rely on that money until you’re earning a regular income again.
Your financial adviser can discuss options to stabilise your finances while you’re not working, taking into account your bills, debts and regular expenses. If there’s cash to spare, they might encourage you to invest it for the future so you don’t burn through it all at once.
Consider your retirement plan
Redundancy isn’t easy for anyone, but it can be particularly challenging if you’re in the final stages of your working life. So if you’re approaching retirement, you might consider retiring early rather than dealing with the stress of job hunting.
Another option could be to take on some part-time work while drawing a pension from your super to supplement your reduced income. If you’re over 60, your pension payments are usually tax-free.
There are plenty of other rules around this kind of transition-to-retirement strategy so it might not suit everyone. Your financial adviser can help you decide if it’s the right option for you.
Helping you stay on track
No matter what stage of life you’re at, becoming redundant is bound to shake up your finances to some extent. So even if you’re currently secure in your job, you might want to ask your financial adviser to tailor your financial plan so that you’ll have a safety net in case your situation changes.
And if you’re facing redundancy right now, talk to your financial adviser as soon as possible. They’ll help you make the most of your payout so you can stay on course towards achieving your financial goals.
1 OECD, Back to Work: Australia: Improving the Re-employment Prospects of Displaced Workers, 2016.
Disclaimer: This article has been prepared by Count Financial Limited ABN 19 001 974 625, AFSL 227232, (Count) a wholly-owned, non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.
Information in this article is based on current regulatory requirements and laws, which may be subject to change. While care has been taken in the preparation of this document, no liability is accepted by Count, its related entities, agents and employees for any loss arising from reliance on this document.
This document contains general advice. It does not take account of your individual objectives, financial situation or needs. You should consider talking to a financial adviser before making a financial decision.