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Strategies and advice in case of redundancy Substantial redundancy payment is, in a way, a consolation for losing your job. You could receive the largest cash amount you ever had in your hand during your entire life. However, you have to carefully choose an option after a deep analyse. Use your money wisely As redundancy payment can represent the biggest lump sum you ever get, it represents a great opportunity to radically change your life. On the other hand, this money is expected to last a number of years and not to be spent all at once. If you expect benefits, there are some constraints on how you spend your redundancy payments. Pay off your debts Repaying your most expensive debts, those with highest interest rates, is perhaps a good move before starting to look for investing in other opportunities. Also consider reducing or paying off your mortgage. This should grant you a certain relief in the future. Search for qualified financial advice It is wise to consider taking qualified financial advice. There is a large choice of advisors. You could choose a person who is paid from commissions on products you buy or you could choose someone to whom you have to pay a fee. Some people think that commission payments are a sign that those advisers are not fully independent. This is due to some companies paying more in commissions than others. You have to know that the advice from independent financial advisers who are paid by commission is free of charge to the client. Most people think fee based advisers, are more likely to provide genuinely independent advice. Also be aware that many financial advisors, and we are talking about many bank managers, building societies and others, are tied agents, which means they are only able to sell a particular product of the respective company. Your emergency fund Make an emergency fund if what you are getting as redundancy payment is a decent sum. If the sum is smaller, make sure your savings are at hand in case they will be needed to pay bills. Consider this option rather than borrowing money, which is more expensive. Put the money in the best-paying account and easy accessible you can find. Probably three months expenditure will be enough for many people. Investment options These are many options for investments and they need to be carefully considered to find the perfect solution for you. Although you may feel somehow under pressure to make fast decisions, do not hurry. Take your time because it is very easy to make bad investment decisions and it is much more difficult to make good ones. Analyze your options carefully and only invest when everything is clear to you, i.e. you are sure to understand what you are investing your money in. Investing your redundancy money in setting up a home based business is considered by a lot of people having lost their jobs. There is also a risk that your business fails and you may lose everything, so be careful. General advice is to keep any redundancy payment lumps in accounts that are easily available until you decide to use them elsewhere. Once your debts are cleared and a new job is found, you can consider tax-efficient investments for your lump sum, such as ISAs or National Savings. |
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Invest your redundancy in yourself |
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How to invest your redundancy money Redundancies often come with the consolation of a substantial payment. For many people, this may be the largest cash amount ever had in their lives. Should you resist the temptation to spend your redundancy money on a luxury car or a completely new wardrobe, you can think about investing it. Think to boost your pension You always have to remember that only the first £30,000 of your redundancy money is tax-free. If you have an agreement with your employer and are expecting a payment in excess of this sum, there is a way of avoiding payment of bigger taxes is to ask your employer to pay a part of your redundancy payment into your pension fund instead of giving it to you directly. It is not mandatory that your employer does agree to do this, but most employers will. A certain amount can also be paid by you directly into your pension fund and it is tax-free also. Later on, you can take a lump sum back out of your pension, and it is again tax-free. This option is to be considered only if you need a part of this money, otherwise it is better to let them in the pension fund. Pay your debts using your redundancy payment Before thinking of investing in shares or anything else, consider first using your redundancy payment to cancel any debts you have. It does not make any sense to put your money into a savings account earning you 6% per year while you are paying 18% per year for substantial credit card debts, for example. If you have a mortgage, consider paying it off. Paying off debts does not have to be always the best thing to do. You should always think about whether you are going to need some money as working capital in the near future, to start a home based business. Or maybe you have to relocate to find another job and will need some money for this purpose. Opportunities to invest your redundancy money in First of all, you should put your lump money into a high interest savings account. Then you can think about what else to do with that money. If the sum is significant enough, you should talk with an independent financial adviser to recommend you the best investments possible. Such opportunities still exist, although interest rates are low these days and investments do not look better either. Qualified advice is needed due to numerous risky opportunities where you could easily lose your money. Independent Savings Accounts (ISA) is excellent tax-efficient savings instruments, and is available in a variety of forms that suit your requirements. Sums you is however limited. If your redundancy payment is large enough, you may think to invest in shares or property. Prudence is the key Temptations of spending your redundancy money on things like luxury cars or cloths will certainly haunt you, but you have to be rational and not risk your future and your family’s. There are certainly far better ways to invest your money. Consider your options attentively, and perhaps consult an adviser, in order to find out what opportunity fits your best. |
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What next after redundancy? |
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Is franchising after redundancy a real option? To face recession, your employer has decided to make you and other people redundant. You have probably chosen to get your redundancy payment and now have to think how to use that money the best way you can. Consider continuing to have an active living Being made redundant is not necessarily the end of your working life, unless you really don’t want to work anymore and have enough money to spend for the rest of your life. In most cases, redundancy comes unwanted and you have to think how you can efficiently use your lump money even before you get it. Therefore, you have to consider second business opportunities as an option in order to avoid financial troubles. Finding a new job after redundancy could prove really challenging, as a million people are supposed to enter the UK unemployment market this year. As a result, you may want to choose a home based opportunity and try to make as profitable as possible, so that you and your family can make a living from it. Is franchising viable? The answer to this question cannot be black or white since it is your personal choice whether to buy a franchise or not. It is however wise to make sure that you have enough funds as reserve when investing in any business. Your reserve has to cover at about six month’s expenditure or so in case your business takes longer to become profitable. If you make the decision to approach a bank for support you have to be able to repay any borrowing and interest from your own reserves until the business runs properly. It is often wiser to borrow from a bank when you begin and keep your own funds for reserve rather than going to the bank after several months of poor performance when your reserve is exhausted and you need additional capital. As you pay interest and have to make capital repayments on your loan your ability to service the commitment you are assuming is essential. Every franchise has specific financial requirements, so the costs to start a franchise are not the same; they are different from a franchise company to another. In most cases, the payment of a franchise fee is required and also all build-out costs that your location needs, including furniture, equipment and fixtures, professional fees, stock and signage. Working capital is also needed until the business is finally going. Redundancy to franchise – a success story There are many examples of people who made a success story from their franchise businesses. Numerous cases are known of individuals or even couples who have been made redundant and afterwards have succeeded to buy a franchise and made it profitable. All of them have followed a few simple but very important steps, such as making a business plan, learning and researching the industry, collecting a group of advisers and setting achievable goals. Following these steps thoroughly gives you the chance to transform a business opportunity into a great success and forget the inconveniences of losing your first job. |
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Redundancy rights and opportunities |
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Do you know what your redundancy rights are? When employers gear up to cut jobs in order to face recession, you may find yourself in the position of being made redundant. If this is the case, you have to know what your legal rights are and how you can handle this situation. What does redundancy mean? You may be made redundant as a consequence of two main reasons: whether your employer needs to reduce its workforce or your job is simply no longer required. Both reasons are caused by the necessity of slashing costs or by new technology making a job or a person unnecessary. On the other hand, a business could be forced to recur to redundancies because it is closing down permanently or moving elsewhere. The result is that people lose their jobs via redundancies because their jobs cease to exist. Protection for being made redundant or being fired unfairly is provided by the Employment Act 1996. What if you are made redundant? In case you are made redundant, you have three options: to work out your entire notice period, go on paid “garden leave”, or receive pay instead of notice. Before deciding which option to choose, you are advised to carefully read your written contract of employment and find out exactly how long the notice period is. If you decide to leave early as a result of an agreement with your employer, you are still eligible to receive your pay. Redundancy remuneration is also due for employees with a fixed-term contract that is not renewed when it comes to an end. Employers have to follow a legal procedure, which means they have to explain in writing the reasons of their action, hold a meeting with the employee assisted by a representative, and even hold an appeal meeting if you decide to contest the redundancy. When more than 20 people are made redundant within a period of 90 days the trade union or another representative has to be consulted before any notice is given. You should receive money, but how much? Although a particular employer may have its own terms with respect to redundancy, all employees have the right to redundancy pay if they have worked for that employer for at least two complete years. Employers usually have a redundancy policy that in many cases is superior to the legal minimum. While most employers offer two weeks or more for every complete year of service, some of them offer more and it is important that you negotiate the best offer you can. What comes after redundancy? Assuming you have received your pay does not necessary mean your troubles are gone. They may just begin. You are unemployed, no money comes in any more, but you have a lot of payments to make. What you need is to look at a second business opportunity, if you feel comfortable with continuing to work or expect your retirement income to match your working income. As a second income, you may think to start a home-based business on your own or to look for another employer and hope to get and keep that job for a longer time. |
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