Voluntary redundancy: Should you take the money and run?

Taking a voluntary redundancy during COVID-19, or at any time, needs careful consideration.

There are the financial implications, future employment prospects in your industry and the emotional and lifestyle aspects to think about. Often it will mean talking to a professional - an accountant, financial adviser or counsellor - to discuss your options.

The money can be enticing; generally, if you're made redundant after five years or more with the company, you're entitled to part of your long service entitlements, paid pro rata.

In addition, you have set entitlements which, for many people, are listed on the Fair Work Ombudsman site.

Crunching the numbers

You might see the redundancy figure you are receiving but how does it match with the amount you need to live on?

People need to know about the numbers - what their cost of living is now and into the future.

There are also considerations of health and longevity or how long the money needs to last, he says.

It’s important people understand their own budget before taking a voluntary redundancy.

Understand what your budget is - what you spend, what your cash buffer is and how the payment fits with that.

If you are retiring early, know if you are able to access your super and whether you are eligible for Centrelink payments.

She says it's also important to have an idea of how long it will take you to find another job.

Victoria is now facing 10% unemployment which is likely to go a lot higher, so look at how long it is likely to take to find work - three, six or 12 months,.

And age is another factor - generally, the older you get the longer it takes.

It's about more than money

Executive career coach and strategist Heidi Winney says the most important consideration for anyone thinking about taking voluntary redundancy is the financial implication, and the next consideration is whether someone really dislikes working for the company and/or the manager.

"If they find that the "pain of staying is greater than the pain of leaving" then voluntary redundancy is ideal," says Winney.

"Having said that, there is no one perfect company or perfect manager and often people think that by leaving they're going to be in a much happier situation, which isn't always the case."

Consider the current job market

Winney says that in the current state of the labour market, with unemployment expected to rise further from around 9%, the competition when applying for jobs is very high and you can expect many hundreds of applicants for each role.

"With voluntary redundancy it can be tempting to take a large payout and take a risk in finding a new job and surprisingly many people are actually finding jobs in this market," she says.

However, finding a job is not always through job ads.

"The most important activity anyone considering voluntary redundancy needs to be comfortable with is the networking - those who are finding jobs in these more challenging times are finding them mostly through their network," she says.

People should also pay attention to changes in the economy.

Winney says if you're an employee who's considering taking voluntary redundancy yet have a role or are in a profession that's in demand (i.e. IT, healthcare, government, infrastructure, construction, and some parts of retail), you may be taking less risk in finding a new role.

"People have a better chance of finding a new role if they are up to date in their skills, particularly in the technology area," she says.

"For anyone in a professional role, it's essential to be on LinkedIn and have an interesting and compelling profile."

Emotions around redundancy

One of the biggest considerations around redundancy is the mindset.

People think about the numbers but not the mindset - what's the feeling about the whole situation, are you ready and what's your next chapter?

People sometimes don't stop and think about the broader aspects - they might like the idea about the money but don't think about how they might feel, particularly if they're getting close to retirement.

Some people don't have the money they wanted to retire with but they are over their job and burnt out from the job, so they've made it work and are happy; others have had plenty of money, took an early retirement but didn't know what to do with themselves and ended up miserable.

The best scenario is often to have another job or career lined up - not somewhere just because you need a job but somewhere you wanted to go.

If redundancy is on the cards for you and you have questions, get in contact and connect with Bright Wealth.

Source: moneymag.com.au